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[music] >>hello, I'm Greg Bonnell and welcome to MoneyTalk live bridge by TD direct investing.
Joined by guests across the world you only see here. We'll take what is moving the markets and answer questions of investing.
Coming up on today show will discuss the help of the Canadian consumer as we now enter the holiday shopping season and TD economist Maria Solovieva joins us.
And on today's WebBroker segment Kaitlin Cormier will join us on how investing works and how you can find funds on the platform.
Here's a can get in touch with us, IMO MoneyTalk live it TD.com or you can fill at the of your response box during the video player on WebBroker. Forget all that, let's get an update on the market.
We'll get to that his next competent set, recent price of gold today, the price of oil looks a bit for my slow Scotiabank kicks off the season.
For the top line though, where 40 points in the green and voted for the percent but of course us within the names and up from Scotiabank was check on that.
A big mess on earnings expectations, putting aside more money for potential use are loans and is been expected by the street for 6775 and Scotiabank going back a little more on 4% at this hour.
We are seeing affirming and the price of gold in the US dollar week once the fit is done in the market wondering what cuts may come sometime next year.
As for the gold names going up a bit today, such as B-2 at 44 share and up almost 5%.
South of the border, for check out the S&P 500 and look at the American market.
Looking in positive territory with 15 points and about 1/3 of a percent.
In checking on tech heavy NASDAQ and looking at the market, a little bit stronger, 60 points the upside and almost half a percent.
We did notice weakness in the chipmakers including an Nvidia and only a couple days ago it was sitting new all-time highs with 480 bucks today down about two bucks, not much for just 1/2%.
The consumer still spending despite the higher concept of living.
How does this affect the holiday shopping season?
Joining us to discuss this is Maria Solovieva, returned to back on the program.
>> Great to be back!
>> Things are looking good on headline numbers, but what are we releasing here?
>> If we look at the sales report, was driven by auto sales.
If you, and also sales at the gas station.
If you're one of those effects, the core measures are actually quite weak and especially on the volumes basis. basis.
Consumers are really feeling the pinch and are not feeling that great and the main reason is inflationary pressures. Not everyone wants to spend more and buy less.
I think that this is really driving the sentiment of the consumer, but we are expecting it to persist because the pressure is not going away completely at least for the time being.
And another reason is the fact that the cost of borrowing is raising and in Canada is particularly affecting the mortgage holders, some who borrowed or purchased houses or have a mortgage.
That is been driving the sentiment as well because consumers are seeing the impact of about 50% of consumers thought she see this impact of high interest rates by the end of this year.
in anticipation of these rising costs, we are also cutting back on spending and we can't blame them for that.
>> This is the month were coming into December were expected to spend. It's the holiday season.
Busy households in a tough situation.
Does it make a hard moving into December to exactly gauge how the Canadian consumer will react?
Personally, I'll say, discipline, you rein in for one year and then you lose your mind every year!
>> You want to spend for your loved ones, but I think Canadians are going to be looking for the bargains.
Some items at a discount, potentially.
We will see probably coming at Black Friday that there will be some discounts and I'm sure retail will be changing where consumers are spending, pension increasing this discounts as well.
We will continue to spend but not at the same pace as before.
>> I got a $25 scarf's got really cold and trotted past couple days! With high household debt and with high borrowing costs and there are some concerns.
What about the US? It seems to resilience not economy when it comes to the consumer.
>> This a resiliency in the US. When it comes to holiday spending which excludes auto and trade at the gas stations, but does include e-commerce, sales have been fairly strong or stronger in the US. Even just in the last couple of years, it has been almost twice as strong as in Canada.
I think US consumers spent a little bit more we are expecting more momentum in sales for the US consumer going forward in Q4 as well.
Your and your expecting about 4.5% of growth rates for Canada roughly half of that.
special-interest expectations for Q4.
That is typically what the cases the difference between Canadian and the US consumer. But there's more pressure on the Canadian consumer in terms of the cost of borrowing, because Canadians do have the impact of rising interest rates much sooner.
And their higher levels of debt also which will suppress spending going forward.
>> So household debt and other consumer levels will keep us a little more less spending during the season. If I'm not persuaded to spend big in December and into the holidays, I'm definitely spending big in the first couple months of the year.
Maybe sheltering at home kind of months?
>> Yes, the first month of 2024 be fairly weak both in Canada and the US. But in Canada, that much weaker because of those debt levels.
You think that the higher cost of borrowing plus the hard that will have that difference and drive the difference between the Canada and US consumer.
If you look at the very common measure of leverage and income ratio between Canada and the US, Americans have been deleveraging since the financial crisis was in Canada we saw those levels drive-up and now because you have higher cost of borrowing as well, it is the same factor for the US, but the sensitivity is a little bit more for Canada just because of the way that the mortgage market is.
If you deducted from incomes and drives the denominator lower, it kind of keeps the levels of the leverage ratios kind of elevated.
That's the main reason that we have that wedged between Canadian and US consumers as well.
>> How do we bring you back to monetary policy? It is been a year or half or more of aggressive rates. In the economy, the Canadian consumer seems to be tapped out and as you said this would be into next year.
Is the bank of Canada done, really done?
If they are, what we seek in the next year?
>> We do think that they are done. First of all, the slowdown in consumer spending is fairly obvious and it is with the Bank of Canada wanted to see.
We also do have changes in the labour market.
The number of unemployment has increased from the lowest level by about 175,000.
Also, job postings declined by about 25%.
Those are the kinds of things at the Bank of Canada will be looking at.
Inflationary pressure still remains, but hasn't called to the same level as the Bank of Canada would like to see.
There still more work. The Bank of Canada remain hawkish in their tone and they want to keep those financial conditions fairly restricted.
The same time, no reason to have another hike. We do expect that the Bank of Canada will start cutting in the second quarter 2024.
So, looking for that.
>> You're going to get to your questions about the economy in a moment's time. And you can get in touch with us any time by emailing MoneyTalk life@td.com or filling out the viewer response box on WebBroker.
We'll get you updated the top stories in the economy.
First, quantum is been dealt another setback in Panama.
The country Supreme Court ruling that the contract for the companies Coppermine there's unconstitutional. For the mass protests in Panama putting a blockade that shut down production last week and they said they lacked me to say need to run the mine.
Install coming off the lows of the session, but it is fitted with a tough fall for the stock considering what is happening in Panama.
You can look at the shares of the Bank of Nova Scotia under pressure today as investors are reacting to the latest earnings report.
Scotiabank missing prospect expectations provisions potential bad loans to $1.6 billion. That is much more than analysts were expecting.
Scotia is also expecting to announce a revamp under CEO Scott Thompson a little bit later next month, but it takes away.
They up to 57 and down about 4%.
We also want to check in on TC energy which says that it expects to grow earnings by up to 7% next year.
Pipeline says it is a strong performance in the business and favourable foreign-exchange conditions.
This updated forecast came ahead of TC energy's annual investor day today.
I know the stock is 5077 and up about 1.7%. A quick check on the markets, start here in Bay Street with the S&P index. The gold hire, oil higher, with the top line of the TSX moderate really higher up 34% and a benefit of a percent.
And since the order in the US, being pulled back in the US block in bond yields.
13 points on the table, but 34%.
We are back with Maria Solovieva, taking your questions about the economy. A big one at the top, with striving inflation Canada right now?
>> Both the levels of inflation, let's step back for a second.
We get inflationary pressure cool, with some core measures.
So that's kind of celebrate that, but of course more needs to be done and the Bank of Canada is looking for that. Number one, with what we would have sympathizing persistently higher core inflation is the housing and the cost of housing.
Lately, more attention to this, with the rent inflation and the peace of rent inflation that surpassed that of the owners inflation.
This is something to keep in mind for going forward.
But going forward overall, if you look at the chart that we're showing now, shelter inflation is definitely keeping the overall inflation services elevated in like to see more cooling in that sense.
In the second part, that is leeches and wages are driving services inflation directly because you have to pay for labour and on the services side, the share of labour market is much more maker and that is keeping out those pressures and we see wages going up 5% in order for the Bank of Canada to get to the Target we want to see that in the range of 2 to 3%.
And that is a sizable change, right? In that case and lately what is driving that is the wage drive in the unionized sectors because seeing a lot more activity there.
And that is not to say that it is not fair because those union workers have seen less increase in their wages relative to nonunionized labourers.
So they are catching up at this point.
And potentially, that will keep the pressure in the upward levels.
Until we see wages come down to those levels more consistently to the Target level, we probably are going to see some services inflation continuing to be fairly hot.
>> On the top the show we're talking the old bucket and the Bank of Canada into next year, but of course recommended to separate the end of the week and we wanted to know what we should expect from the BOC in December?
What are we going to get?
>> We expect no action, the still maintaining the hawkish tone.
No rate cuts or rate hikes at this point.
The Bank of Canada does want to see that inflation to conclude come down and so there's no reason for her to step down the tone.
>> I think about what the Bank of Canada is trying to do now, that to watch the data and watch inflation job numbers felt that.
There is a concern with how we will react?
I want to think about the housing market in the spring, and we have this pause in these hiking cycles, and they're all done and they come back and start hiking again, is our behaviour that could derail their plans next little while to get a little too excited?
>> Saw the behavioural change of it at the beginning of showing us in the breezes of the Bank of Canada started hiking again in the middle of the year it and that has an inflation that were seeing is definitely a pain to a lot of households but it also a, creates activity again and see us definitely that behaviour is very important it is one of the reasons that the bank will keep that hawkish tone.
In terms of the housing market has been showing some weakness and we have revised our forecast and we are not expecting a deeper decline in prices, and housing prices and an average housing crisis between Q3 and early 2024 and we expected a 5% decline but never expecting double that.
One of the reasons for that is definitely tighter financial conditions.
Bond yields have come up and that is caused a coolness activity.
In the second reason that we've seen an increase in sales to new listing ratios especially in British Columbia and in Ontario, so in Ontario they have come down in October to 29% versus 63% from early May and that is a fairly large depreciation or decline in activity.
And that is creating those largest two markets, Ontario and BC, and that is creating an increase in average home prices as well.
>> Another question from the audience, the outlook for the Canadian dollar?
Good question reviewer last week which is why Canadian dollar so strong today?
Immersing US dollar weakness, what is relation here?
>>it's more of the US dollar weakness.
What is driving it fundamentally, not on a day-to-day changes and fluctuations, the fundamentally it is the interest rate differentials.
The Bank of Canada has caused already and we think they are done.
Do you think that the Fed may hike at another time, probably next year, not into this year.
There is a possibility right now of reassessing it.
The difference in interest rates is already something that will create weakness in the Canadian dollar.
We do expect it to be more in the lower 70s around $0.70 and that is where to straightening out right now, in that range for the Canadian dollar.
And as for the can continue into mid next year of 2024.
And another reason for that is that we are expecting the Fed to stay on hold for a little bit longer than a lot of participants as well.
2025 we expect the Canadian dollar to balance out and going to the range of about 78 or $0.80 by early 2025.
>> The Canadian dollars her reputation and the correlation seems to fall in and out of favour whether expect your currency are not.
Will right now, is a petro currency or not?
>> The oil prices have less impact on Canadian dollar recently and one of the reasons is that the US is a big exporter as well.
If you compare the two countries, there is a very balanced view from the oil perspective on both currencies.
It is mostly the interest rate differentials that we are pricing in right now.
>> Make sure to do your own research before any investment decisions.
We'll get back to your questions on the economy just moments time.
A reminder they can get in touch with us anytime, to MoneyTalk life@td.com.
Educational segment of the day next.
we have Caitlin Cormier.
>> Past investing is a great way of investing in terms of making market returns.
Which of the past investing, the goal that is to mimic the returns of the market as of this kind of beat the market. Do not try to perform necessarily, you're assuming that the market is in a position were able to invest in marketing at the best possible returns as far as that goes instead of trying to beat the market. So, it is a strategy that aims to minimize buying and selling of securities by creating a buy-and-hold portfolio.
One comment from a past investing his income investing in the subversive method, through investing in the performance of the market.
That's one way of doing it and when I say buy-and-hold, goes on to bring balance every once in a while.
But the general idea is that we are building a portfolio based on securities and well diversified based on the market.
And then buying and holding for a period of time.
>> So that we understand, and if someone wanted to understand how to put this in portfolio and find index funds, how do you find those on WebBroker?
>> Index funds are great on the strategy, so let's go to WebBroker and will use our screening tool in order to see it we find these funds.
What are the top left-hand side under research click on the screen option there.
And once we get to this page we are actually go to the PF tab you can choose ETF or mutual funds in the both offer index type funds, but also for ETF's day.
One of the far right hand side to create custom screen. There are some pre-created screens, but for today… Create our own with their specific criteria that we are looking for.
There were going to go on this list for index and we want to choose index only ETF.
I will choose show only index funds.
All deselected to show mutual funds because they just want to look at ETF's or exchange traded funds.
Next I will choose equity style and began clicking to add criteria in conceiving information appear that shows what that criterion means.
With an equity style choose a large Plan is simple for the larger market capitalization type companies and then finally I went to choose the fund category.
For today, let's look at US. I'm going to scroll and will go alphabetically down to the bottom here.
And I will do Canadian US, US equities will choose.
We are down to 51 exchange-rate funds to look at and that's a relatively reasonable number assist look at matches here.
Once in here I can look at all the different funds that meet the criteria and all index funds there all large And they're all US equity funds.
On the left-hand side I can see the names and we can see a few here such as S&P 500 and the companies in the US and the types of index funds we have both Canadian and US dollar funds and these ones are all on the side of Canada these different managers would be within Canada.
And you can see that there are several pages of results are that I can go through and if I wanted a bit more information to our bunch of tabs along the top that I can click and there's a salary that can show more star ratings and management expense ratios and if they paid a distribution and of course I can rearrange the information based on what is important to me.
If I want to see the highest distribution yield, I just need to click there until I see the highest to lowest listed there and lots of information here to dive into.
Even greater watchlist if you found a few different funds that you want to do your own research into.
you just go through here and put, for example, index ETF is her watchlist name new click save screen and I think I have too many to save this one, once you click save it will make sure that when you come onto the ETF page for the screen it will show up in the right hand side with your personal save screens.
>> Great stuff as always, Caitlin! Thank you.
>> Thank you!
>> Make sure to check the WebBroker educational videos for upcoming webinars and educational classes.
Back to the questions, some people argue that the Bank of Canada will low interest rates lower than the Fed.
Will this cost the Canadian dollar to fall?
This is from Jeff, Jeff thanks for the question.
>> If the timing is correct, our view is that the Bank of Canada will start putting rates in the second quarter 2024 but the market is pricing in a little bit sooner than that.
The difference is the surprise element and if there is, in fact, faster than priced in cuts it will have an impact on the Canadian dollar in terms of the down pressure.
Need to be careful in terms of assessing that because daily inflation is already impacting us.
>> Will the market say, we were expecting that will this affect prices?
Great, another one now, any big takeaways from last week's fall economic statement?
Feels like a million years ago but if they say is last week, I'll believe them!
>> The biggest take away for us is that the deficit remains the same for this year, for the fiscal year projected.
But we do see a wider gap Going into the later years.
there is new funding of 21 billion. But if you spread it out, it is not going to affect inflation which was one of the criticisms of the federal government with all the spending that it could raze inflation as well.
It's not going to be impactful from that point of view.
We are expecting from the new funding, about 30% if it will be going toward housing and creating a bigger stock in hissing which is a great thing.
And the government is introducing 13 billion in new loans funding 30,000 new homes.
It will take a while so it's not something in which you see a supply increase right away.
And another interesting thing is that $1 billion is going toward the new social housing, about 7000 new units totally constructed by 2028.
In about 40% of the new funding will be going toward green energy transition, so supporting production EV, the battery plants, constructing new plants.
So this also very impactful from the green energy transition.
Overall I think we felt a little bit uneasy about was that despite the deficit being the same for this year, over the coming years we see it rising in the GDP ratios actually to be a little bit higher than was projected initially.
>> Right, the debt to GDP was high, so we should expect this?
>> Yes, the sustainability will be longer flat perspective.
so, we didn't really feel good about that portion of the economic statement.
>>the stitching of the question now, we talked a bit about the housing market earlier, when he was asking is the housing market in trouble?
>> We're looking at right now is rebalancing.
Even with expectations, there will be a decline in average home prices of 10%.
The prices will still be higher than pre-pandemic by about 15%.
It's really hard to call it trouble from the perspective of this decline in housing prices.
It's more of a rebalancing and I think a lot of it has to do with judging with what's driving it, things like new sales listing, there is the condo market and some of the investors are feeling the pressure from the rising interest rates and they're trying to balance it out and see if it makes sense for them to keep those mortgages.
If the cost is higher than the put the property on the market.
This rebalancing is with his driving it so far and we are expecting that housing activity will rebound once the Bank of Canada starts cutting rates next year and so in anticipation of that, I would really say that this is not troubling.
>> What is interesting that we start bringing it down to geography, bring this chart up again, as you said earlier, BC and Ontario are the biggest markets, but it's a different story across the market.
>> If you look at other provinces, you don't see that rebalancing happening.
And a lot of that is that we see in Ontario that it's more investor half a and this rebalancing means more affordable housing for Canadians as well.
People were renting right now may potentially decide to go and buy those and so there is some positive in that. Of course, mortgage rates are higher as well, new portability perspective, it is interest rates as well as the pricing that affects the market.
>> Will get back to comments and questions in just a moment's time. As always, do your own research before you make investment decisions.
Get in touch with us at any time.
Do you have a question about investing, or what is driving the markets? Send it to us here at MONEYTALK LIVE. You can send your questions two ways: You can send us an email anytime at MONEYTALK LIVE AT TD-DOT-COM. Or you can use the question box at the bottom of the screen right here on Web Broker. Just type it out and click submit.
We'll see if one of our guests can get you the answer right here at Money Talk Live.
With the bulk of earnings season behind us we can take a look at the power utilities companies.
They fell year-over-year whereas pipeline companies posting mixed results.
Anthony Okolie is joining us right now to go for this. Anthony?
>> Will start with power utilities and the coverage which reported a decrease of 3% year-over-year growth, but at the top TD: expectations.
Utilities topped due to a number of factors that TD points to and what of course was the higher rates charged to the customers.
Your rear growth for pipeline and mainstreaming the flat must commune over the estimates in the third corner.
TD did notice since nations from transportation volumes compared to TD accounts conservative assumptions.
TD did say that the coverage with liquid businesses such as natural gas utilities and they benefited disproportionately wears companies with market businesses had mixed contributions.
The key observation during the third quarter was that they notice that management teams continue to emphasize couple things and one is a resiliency of the core businesses and second, relatively stable cash flows.
And third, steady performance of the central infrastructure and finally, significant long-term growth opportunities linked to the energy transition of clean energy.
He also noticed that some companies tighten their 2023 growth rate with the higher and what others reiterated their expectations for the year.
Similar observations, the opportunistic approach to sharing purchases and commitment to modest dividend increases.
PD said that sector re-evaluations continue to trend below their tenure historical average and he remain attractive.
That is backed by supportive industry from the mantles and resilient business models which continue to benefit from this energy transition toward clean energy.
TD did say that they expect large bond yields going forward. And they note that the increased activity in the third quarter is likely to continue as companies seek organic growth through strategic operations and increasing skills to economy.
>> Interesting insights going forward.
Forcing the risks to the sectors?
>> Some risks include the impact of natural disasters, weaker economic growth, higher input commodity and also weaker energy prices and also interest costs remain key risks for this group.
In looking for the pipeline industries, similar risks there is well which include higher costs and government regulation as well as natural disasters and refinery adages.
>> Thanks Anthony! Now for an update on the markets.
Apart from design for TD investors through TD investing and this is the map which gives us a nice view.
TD in the TSX and a mentalist increase of the tent for percent and you can see that the rising price of gold is an increase as well as here in the green we see energy prices rise and hire to and is a lot of back-and-forth it does mean a higher price of crude oil and what is holding us back?
That is clearly these heavyweight financials led by Scotiabank which are the first of the gate with these earnings in the first of the season and we have a lot coming at us this week, down to 4% right now.
The bigness and expectations in the bottom line putting aside more money for potentially sour loans and assessing investors concerned.
So that the portals of the S&P 500 saw some weakness and some of the chipmakers earlier and I'm not sure if that's still the story right now.
Cindy coming off the lows of the session and now if Tesla coming to about 1/3 of a percent and up in the mix picture or the S&P 500.
You can find more information on TD dashboard visiting TD.com advanced dashboard.
And we're back now with Maria Solovieva, and with another question now.
How the financial market returns for hire for longer rates?
>> Put out a report for long-term return to what our expectations are.
But we have to be careful with that.
We have seen so far in this report really highlights it is the fact that cash returns have been very strong especially for this year and which are tracking at 4.5% of those who decided to put their savings in cash for this year we are not expecting not to last us to shoot the Bank of Canada cutting rates and extra will cool off to something like 4% and going into 2025 about 3%.
And that is staying in the range of the neutral rate that we think the Bank of Canada is in.
That's a bit of a hypothetical concept, but there some upward pressures and down her precious for that for the long term yield.
We expect about 2 to 3%.
And for bond investors, there are two things that are driving returns on bonds and that is the path of interest rates, the monetary policy route and this is a bit more hypothetical and constructed looking backwards, with the Bank of Canada cutting we are expecting please rates to be a little bit lower next year but the path itself is going to be relatively higher to the previous years and the term premium we are expecting also could be a little bit elevated around .5 or .75% and that consists arrange a 3.5 or 4.
5% over the next 10 years.
Finally equity markets, we were just saying about how the TSX impacted by energy and very energy heavy heavy indexes and those keeping the TSX within this for a period of time and within the last year as well.
And that kind of keep you a bit of a high performance relative to some of the international indexes when compared to the US, the US was much higher in returns and within his performance in the last few years.
Going forward and looking at the next 10 years again, what we tracking returns on the equity market and again, breaking it down by factors you have the risk-free returns which is these returns within Canada and then you have the equity return premium and with this, roughly around 4.5% is overestimating currently and expected to be about the same range but there are some nuances between these different markets fell so in Canada there might be some expectation that it is cyclically adjusted in the level P ratios as their little bit lower right now.
Whereas in the US they are actually higher than average and so currently, the elevations are such that investors are now paying more for the US and we see this suggesting in the ear pupils and go down to roughly between 2 to 3% but if it stays elevated them expected to be about 4.5% as well.
So, relatively speaking we think that the TSX will yield potentially higher returns but you have to factor in the Canadian economy as well and potential underperformance going forward as well.
For Canadian investors is important to keep in mind the Canadian dollar because if you investing on the side of Canada inflation in the Canadian dollar will also affect your returns.
>> Always a pleasure to have you here Maria, it always goes by so fast!
>> Thank you.
>> Always make sure to do your own research before making investments and stay tuned for tomorrow's show.
If you have questions please email moneytalk@td.com. That's all the time we have heard today's show, take care and see you tomorrow!
[music]
Joined by guests across the world you only see here. We'll take what is moving the markets and answer questions of investing.
Coming up on today show will discuss the help of the Canadian consumer as we now enter the holiday shopping season and TD economist Maria Solovieva joins us.
And on today's WebBroker segment Kaitlin Cormier will join us on how investing works and how you can find funds on the platform.
Here's a can get in touch with us, IMO MoneyTalk live it TD.com or you can fill at the of your response box during the video player on WebBroker. Forget all that, let's get an update on the market.
We'll get to that his next competent set, recent price of gold today, the price of oil looks a bit for my slow Scotiabank kicks off the season.
For the top line though, where 40 points in the green and voted for the percent but of course us within the names and up from Scotiabank was check on that.
A big mess on earnings expectations, putting aside more money for potential use are loans and is been expected by the street for 6775 and Scotiabank going back a little more on 4% at this hour.
We are seeing affirming and the price of gold in the US dollar week once the fit is done in the market wondering what cuts may come sometime next year.
As for the gold names going up a bit today, such as B-2 at 44 share and up almost 5%.
South of the border, for check out the S&P 500 and look at the American market.
Looking in positive territory with 15 points and about 1/3 of a percent.
In checking on tech heavy NASDAQ and looking at the market, a little bit stronger, 60 points the upside and almost half a percent.
We did notice weakness in the chipmakers including an Nvidia and only a couple days ago it was sitting new all-time highs with 480 bucks today down about two bucks, not much for just 1/2%.
The consumer still spending despite the higher concept of living.
How does this affect the holiday shopping season?
Joining us to discuss this is Maria Solovieva, returned to back on the program.
>> Great to be back!
>> Things are looking good on headline numbers, but what are we releasing here?
>> If we look at the sales report, was driven by auto sales.
If you, and also sales at the gas station.
If you're one of those effects, the core measures are actually quite weak and especially on the volumes basis. basis.
Consumers are really feeling the pinch and are not feeling that great and the main reason is inflationary pressures. Not everyone wants to spend more and buy less.
I think that this is really driving the sentiment of the consumer, but we are expecting it to persist because the pressure is not going away completely at least for the time being.
And another reason is the fact that the cost of borrowing is raising and in Canada is particularly affecting the mortgage holders, some who borrowed or purchased houses or have a mortgage.
That is been driving the sentiment as well because consumers are seeing the impact of about 50% of consumers thought she see this impact of high interest rates by the end of this year.
in anticipation of these rising costs, we are also cutting back on spending and we can't blame them for that.
>> This is the month were coming into December were expected to spend. It's the holiday season.
Busy households in a tough situation.
Does it make a hard moving into December to exactly gauge how the Canadian consumer will react?
Personally, I'll say, discipline, you rein in for one year and then you lose your mind every year!
>> You want to spend for your loved ones, but I think Canadians are going to be looking for the bargains.
Some items at a discount, potentially.
We will see probably coming at Black Friday that there will be some discounts and I'm sure retail will be changing where consumers are spending, pension increasing this discounts as well.
We will continue to spend but not at the same pace as before.
>> I got a $25 scarf's got really cold and trotted past couple days! With high household debt and with high borrowing costs and there are some concerns.
What about the US? It seems to resilience not economy when it comes to the consumer.
>> This a resiliency in the US. When it comes to holiday spending which excludes auto and trade at the gas stations, but does include e-commerce, sales have been fairly strong or stronger in the US. Even just in the last couple of years, it has been almost twice as strong as in Canada.
I think US consumers spent a little bit more we are expecting more momentum in sales for the US consumer going forward in Q4 as well.
Your and your expecting about 4.5% of growth rates for Canada roughly half of that.
special-interest expectations for Q4.
That is typically what the cases the difference between Canadian and the US consumer. But there's more pressure on the Canadian consumer in terms of the cost of borrowing, because Canadians do have the impact of rising interest rates much sooner.
And their higher levels of debt also which will suppress spending going forward.
>> So household debt and other consumer levels will keep us a little more less spending during the season. If I'm not persuaded to spend big in December and into the holidays, I'm definitely spending big in the first couple months of the year.
Maybe sheltering at home kind of months?
>> Yes, the first month of 2024 be fairly weak both in Canada and the US. But in Canada, that much weaker because of those debt levels.
You think that the higher cost of borrowing plus the hard that will have that difference and drive the difference between the Canada and US consumer.
If you look at the very common measure of leverage and income ratio between Canada and the US, Americans have been deleveraging since the financial crisis was in Canada we saw those levels drive-up and now because you have higher cost of borrowing as well, it is the same factor for the US, but the sensitivity is a little bit more for Canada just because of the way that the mortgage market is.
If you deducted from incomes and drives the denominator lower, it kind of keeps the levels of the leverage ratios kind of elevated.
That's the main reason that we have that wedged between Canadian and US consumers as well.
>> How do we bring you back to monetary policy? It is been a year or half or more of aggressive rates. In the economy, the Canadian consumer seems to be tapped out and as you said this would be into next year.
Is the bank of Canada done, really done?
If they are, what we seek in the next year?
>> We do think that they are done. First of all, the slowdown in consumer spending is fairly obvious and it is with the Bank of Canada wanted to see.
We also do have changes in the labour market.
The number of unemployment has increased from the lowest level by about 175,000.
Also, job postings declined by about 25%.
Those are the kinds of things at the Bank of Canada will be looking at.
Inflationary pressure still remains, but hasn't called to the same level as the Bank of Canada would like to see.
There still more work. The Bank of Canada remain hawkish in their tone and they want to keep those financial conditions fairly restricted.
The same time, no reason to have another hike. We do expect that the Bank of Canada will start cutting in the second quarter 2024.
So, looking for that.
>> You're going to get to your questions about the economy in a moment's time. And you can get in touch with us any time by emailing MoneyTalk life@td.com or filling out the viewer response box on WebBroker.
We'll get you updated the top stories in the economy.
First, quantum is been dealt another setback in Panama.
The country Supreme Court ruling that the contract for the companies Coppermine there's unconstitutional. For the mass protests in Panama putting a blockade that shut down production last week and they said they lacked me to say need to run the mine.
Install coming off the lows of the session, but it is fitted with a tough fall for the stock considering what is happening in Panama.
You can look at the shares of the Bank of Nova Scotia under pressure today as investors are reacting to the latest earnings report.
Scotiabank missing prospect expectations provisions potential bad loans to $1.6 billion. That is much more than analysts were expecting.
Scotia is also expecting to announce a revamp under CEO Scott Thompson a little bit later next month, but it takes away.
They up to 57 and down about 4%.
We also want to check in on TC energy which says that it expects to grow earnings by up to 7% next year.
Pipeline says it is a strong performance in the business and favourable foreign-exchange conditions.
This updated forecast came ahead of TC energy's annual investor day today.
I know the stock is 5077 and up about 1.7%. A quick check on the markets, start here in Bay Street with the S&P index. The gold hire, oil higher, with the top line of the TSX moderate really higher up 34% and a benefit of a percent.
And since the order in the US, being pulled back in the US block in bond yields.
13 points on the table, but 34%.
We are back with Maria Solovieva, taking your questions about the economy. A big one at the top, with striving inflation Canada right now?
>> Both the levels of inflation, let's step back for a second.
We get inflationary pressure cool, with some core measures.
So that's kind of celebrate that, but of course more needs to be done and the Bank of Canada is looking for that. Number one, with what we would have sympathizing persistently higher core inflation is the housing and the cost of housing.
Lately, more attention to this, with the rent inflation and the peace of rent inflation that surpassed that of the owners inflation.
This is something to keep in mind for going forward.
But going forward overall, if you look at the chart that we're showing now, shelter inflation is definitely keeping the overall inflation services elevated in like to see more cooling in that sense.
In the second part, that is leeches and wages are driving services inflation directly because you have to pay for labour and on the services side, the share of labour market is much more maker and that is keeping out those pressures and we see wages going up 5% in order for the Bank of Canada to get to the Target we want to see that in the range of 2 to 3%.
And that is a sizable change, right? In that case and lately what is driving that is the wage drive in the unionized sectors because seeing a lot more activity there.
And that is not to say that it is not fair because those union workers have seen less increase in their wages relative to nonunionized labourers.
So they are catching up at this point.
And potentially, that will keep the pressure in the upward levels.
Until we see wages come down to those levels more consistently to the Target level, we probably are going to see some services inflation continuing to be fairly hot.
>> On the top the show we're talking the old bucket and the Bank of Canada into next year, but of course recommended to separate the end of the week and we wanted to know what we should expect from the BOC in December?
What are we going to get?
>> We expect no action, the still maintaining the hawkish tone.
No rate cuts or rate hikes at this point.
The Bank of Canada does want to see that inflation to conclude come down and so there's no reason for her to step down the tone.
>> I think about what the Bank of Canada is trying to do now, that to watch the data and watch inflation job numbers felt that.
There is a concern with how we will react?
I want to think about the housing market in the spring, and we have this pause in these hiking cycles, and they're all done and they come back and start hiking again, is our behaviour that could derail their plans next little while to get a little too excited?
>> Saw the behavioural change of it at the beginning of showing us in the breezes of the Bank of Canada started hiking again in the middle of the year it and that has an inflation that were seeing is definitely a pain to a lot of households but it also a, creates activity again and see us definitely that behaviour is very important it is one of the reasons that the bank will keep that hawkish tone.
In terms of the housing market has been showing some weakness and we have revised our forecast and we are not expecting a deeper decline in prices, and housing prices and an average housing crisis between Q3 and early 2024 and we expected a 5% decline but never expecting double that.
One of the reasons for that is definitely tighter financial conditions.
Bond yields have come up and that is caused a coolness activity.
In the second reason that we've seen an increase in sales to new listing ratios especially in British Columbia and in Ontario, so in Ontario they have come down in October to 29% versus 63% from early May and that is a fairly large depreciation or decline in activity.
And that is creating those largest two markets, Ontario and BC, and that is creating an increase in average home prices as well.
>> Another question from the audience, the outlook for the Canadian dollar?
Good question reviewer last week which is why Canadian dollar so strong today?
Immersing US dollar weakness, what is relation here?
>>it's more of the US dollar weakness.
What is driving it fundamentally, not on a day-to-day changes and fluctuations, the fundamentally it is the interest rate differentials.
The Bank of Canada has caused already and we think they are done.
Do you think that the Fed may hike at another time, probably next year, not into this year.
There is a possibility right now of reassessing it.
The difference in interest rates is already something that will create weakness in the Canadian dollar.
We do expect it to be more in the lower 70s around $0.70 and that is where to straightening out right now, in that range for the Canadian dollar.
And as for the can continue into mid next year of 2024.
And another reason for that is that we are expecting the Fed to stay on hold for a little bit longer than a lot of participants as well.
2025 we expect the Canadian dollar to balance out and going to the range of about 78 or $0.80 by early 2025.
>> The Canadian dollars her reputation and the correlation seems to fall in and out of favour whether expect your currency are not.
Will right now, is a petro currency or not?
>> The oil prices have less impact on Canadian dollar recently and one of the reasons is that the US is a big exporter as well.
If you compare the two countries, there is a very balanced view from the oil perspective on both currencies.
It is mostly the interest rate differentials that we are pricing in right now.
>> Make sure to do your own research before any investment decisions.
We'll get back to your questions on the economy just moments time.
A reminder they can get in touch with us anytime, to MoneyTalk life@td.com.
Educational segment of the day next.
we have Caitlin Cormier.
>> Past investing is a great way of investing in terms of making market returns.
Which of the past investing, the goal that is to mimic the returns of the market as of this kind of beat the market. Do not try to perform necessarily, you're assuming that the market is in a position were able to invest in marketing at the best possible returns as far as that goes instead of trying to beat the market. So, it is a strategy that aims to minimize buying and selling of securities by creating a buy-and-hold portfolio.
One comment from a past investing his income investing in the subversive method, through investing in the performance of the market.
That's one way of doing it and when I say buy-and-hold, goes on to bring balance every once in a while.
But the general idea is that we are building a portfolio based on securities and well diversified based on the market.
And then buying and holding for a period of time.
>> So that we understand, and if someone wanted to understand how to put this in portfolio and find index funds, how do you find those on WebBroker?
>> Index funds are great on the strategy, so let's go to WebBroker and will use our screening tool in order to see it we find these funds.
What are the top left-hand side under research click on the screen option there.
And once we get to this page we are actually go to the PF tab you can choose ETF or mutual funds in the both offer index type funds, but also for ETF's day.
One of the far right hand side to create custom screen. There are some pre-created screens, but for today… Create our own with their specific criteria that we are looking for.
There were going to go on this list for index and we want to choose index only ETF.
I will choose show only index funds.
All deselected to show mutual funds because they just want to look at ETF's or exchange traded funds.
Next I will choose equity style and began clicking to add criteria in conceiving information appear that shows what that criterion means.
With an equity style choose a large Plan is simple for the larger market capitalization type companies and then finally I went to choose the fund category.
For today, let's look at US. I'm going to scroll and will go alphabetically down to the bottom here.
And I will do Canadian US, US equities will choose.
We are down to 51 exchange-rate funds to look at and that's a relatively reasonable number assist look at matches here.
Once in here I can look at all the different funds that meet the criteria and all index funds there all large And they're all US equity funds.
On the left-hand side I can see the names and we can see a few here such as S&P 500 and the companies in the US and the types of index funds we have both Canadian and US dollar funds and these ones are all on the side of Canada these different managers would be within Canada.
And you can see that there are several pages of results are that I can go through and if I wanted a bit more information to our bunch of tabs along the top that I can click and there's a salary that can show more star ratings and management expense ratios and if they paid a distribution and of course I can rearrange the information based on what is important to me.
If I want to see the highest distribution yield, I just need to click there until I see the highest to lowest listed there and lots of information here to dive into.
Even greater watchlist if you found a few different funds that you want to do your own research into.
you just go through here and put, for example, index ETF is her watchlist name new click save screen and I think I have too many to save this one, once you click save it will make sure that when you come onto the ETF page for the screen it will show up in the right hand side with your personal save screens.
>> Great stuff as always, Caitlin! Thank you.
>> Thank you!
>> Make sure to check the WebBroker educational videos for upcoming webinars and educational classes.
Back to the questions, some people argue that the Bank of Canada will low interest rates lower than the Fed.
Will this cost the Canadian dollar to fall?
This is from Jeff, Jeff thanks for the question.
>> If the timing is correct, our view is that the Bank of Canada will start putting rates in the second quarter 2024 but the market is pricing in a little bit sooner than that.
The difference is the surprise element and if there is, in fact, faster than priced in cuts it will have an impact on the Canadian dollar in terms of the down pressure.
Need to be careful in terms of assessing that because daily inflation is already impacting us.
>> Will the market say, we were expecting that will this affect prices?
Great, another one now, any big takeaways from last week's fall economic statement?
Feels like a million years ago but if they say is last week, I'll believe them!
>> The biggest take away for us is that the deficit remains the same for this year, for the fiscal year projected.
But we do see a wider gap Going into the later years.
there is new funding of 21 billion. But if you spread it out, it is not going to affect inflation which was one of the criticisms of the federal government with all the spending that it could raze inflation as well.
It's not going to be impactful from that point of view.
We are expecting from the new funding, about 30% if it will be going toward housing and creating a bigger stock in hissing which is a great thing.
And the government is introducing 13 billion in new loans funding 30,000 new homes.
It will take a while so it's not something in which you see a supply increase right away.
And another interesting thing is that $1 billion is going toward the new social housing, about 7000 new units totally constructed by 2028.
In about 40% of the new funding will be going toward green energy transition, so supporting production EV, the battery plants, constructing new plants.
So this also very impactful from the green energy transition.
Overall I think we felt a little bit uneasy about was that despite the deficit being the same for this year, over the coming years we see it rising in the GDP ratios actually to be a little bit higher than was projected initially.
>> Right, the debt to GDP was high, so we should expect this?
>> Yes, the sustainability will be longer flat perspective.
so, we didn't really feel good about that portion of the economic statement.
>>the stitching of the question now, we talked a bit about the housing market earlier, when he was asking is the housing market in trouble?
>> We're looking at right now is rebalancing.
Even with expectations, there will be a decline in average home prices of 10%.
The prices will still be higher than pre-pandemic by about 15%.
It's really hard to call it trouble from the perspective of this decline in housing prices.
It's more of a rebalancing and I think a lot of it has to do with judging with what's driving it, things like new sales listing, there is the condo market and some of the investors are feeling the pressure from the rising interest rates and they're trying to balance it out and see if it makes sense for them to keep those mortgages.
If the cost is higher than the put the property on the market.
This rebalancing is with his driving it so far and we are expecting that housing activity will rebound once the Bank of Canada starts cutting rates next year and so in anticipation of that, I would really say that this is not troubling.
>> What is interesting that we start bringing it down to geography, bring this chart up again, as you said earlier, BC and Ontario are the biggest markets, but it's a different story across the market.
>> If you look at other provinces, you don't see that rebalancing happening.
And a lot of that is that we see in Ontario that it's more investor half a and this rebalancing means more affordable housing for Canadians as well.
People were renting right now may potentially decide to go and buy those and so there is some positive in that. Of course, mortgage rates are higher as well, new portability perspective, it is interest rates as well as the pricing that affects the market.
>> Will get back to comments and questions in just a moment's time. As always, do your own research before you make investment decisions.
Get in touch with us at any time.
Do you have a question about investing, or what is driving the markets? Send it to us here at MONEYTALK LIVE. You can send your questions two ways: You can send us an email anytime at MONEYTALK LIVE AT TD-DOT-COM. Or you can use the question box at the bottom of the screen right here on Web Broker. Just type it out and click submit.
We'll see if one of our guests can get you the answer right here at Money Talk Live.
With the bulk of earnings season behind us we can take a look at the power utilities companies.
They fell year-over-year whereas pipeline companies posting mixed results.
Anthony Okolie is joining us right now to go for this. Anthony?
>> Will start with power utilities and the coverage which reported a decrease of 3% year-over-year growth, but at the top TD: expectations.
Utilities topped due to a number of factors that TD points to and what of course was the higher rates charged to the customers.
Your rear growth for pipeline and mainstreaming the flat must commune over the estimates in the third corner.
TD did notice since nations from transportation volumes compared to TD accounts conservative assumptions.
TD did say that the coverage with liquid businesses such as natural gas utilities and they benefited disproportionately wears companies with market businesses had mixed contributions.
The key observation during the third quarter was that they notice that management teams continue to emphasize couple things and one is a resiliency of the core businesses and second, relatively stable cash flows.
And third, steady performance of the central infrastructure and finally, significant long-term growth opportunities linked to the energy transition of clean energy.
He also noticed that some companies tighten their 2023 growth rate with the higher and what others reiterated their expectations for the year.
Similar observations, the opportunistic approach to sharing purchases and commitment to modest dividend increases.
PD said that sector re-evaluations continue to trend below their tenure historical average and he remain attractive.
That is backed by supportive industry from the mantles and resilient business models which continue to benefit from this energy transition toward clean energy.
TD did say that they expect large bond yields going forward. And they note that the increased activity in the third quarter is likely to continue as companies seek organic growth through strategic operations and increasing skills to economy.
>> Interesting insights going forward.
Forcing the risks to the sectors?
>> Some risks include the impact of natural disasters, weaker economic growth, higher input commodity and also weaker energy prices and also interest costs remain key risks for this group.
In looking for the pipeline industries, similar risks there is well which include higher costs and government regulation as well as natural disasters and refinery adages.
>> Thanks Anthony! Now for an update on the markets.
Apart from design for TD investors through TD investing and this is the map which gives us a nice view.
TD in the TSX and a mentalist increase of the tent for percent and you can see that the rising price of gold is an increase as well as here in the green we see energy prices rise and hire to and is a lot of back-and-forth it does mean a higher price of crude oil and what is holding us back?
That is clearly these heavyweight financials led by Scotiabank which are the first of the gate with these earnings in the first of the season and we have a lot coming at us this week, down to 4% right now.
The bigness and expectations in the bottom line putting aside more money for potentially sour loans and assessing investors concerned.
So that the portals of the S&P 500 saw some weakness and some of the chipmakers earlier and I'm not sure if that's still the story right now.
Cindy coming off the lows of the session and now if Tesla coming to about 1/3 of a percent and up in the mix picture or the S&P 500.
You can find more information on TD dashboard visiting TD.com advanced dashboard.
And we're back now with Maria Solovieva, and with another question now.
How the financial market returns for hire for longer rates?
>> Put out a report for long-term return to what our expectations are.
But we have to be careful with that.
We have seen so far in this report really highlights it is the fact that cash returns have been very strong especially for this year and which are tracking at 4.5% of those who decided to put their savings in cash for this year we are not expecting not to last us to shoot the Bank of Canada cutting rates and extra will cool off to something like 4% and going into 2025 about 3%.
And that is staying in the range of the neutral rate that we think the Bank of Canada is in.
That's a bit of a hypothetical concept, but there some upward pressures and down her precious for that for the long term yield.
We expect about 2 to 3%.
And for bond investors, there are two things that are driving returns on bonds and that is the path of interest rates, the monetary policy route and this is a bit more hypothetical and constructed looking backwards, with the Bank of Canada cutting we are expecting please rates to be a little bit lower next year but the path itself is going to be relatively higher to the previous years and the term premium we are expecting also could be a little bit elevated around .5 or .75% and that consists arrange a 3.5 or 4.
5% over the next 10 years.
Finally equity markets, we were just saying about how the TSX impacted by energy and very energy heavy heavy indexes and those keeping the TSX within this for a period of time and within the last year as well.
And that kind of keep you a bit of a high performance relative to some of the international indexes when compared to the US, the US was much higher in returns and within his performance in the last few years.
Going forward and looking at the next 10 years again, what we tracking returns on the equity market and again, breaking it down by factors you have the risk-free returns which is these returns within Canada and then you have the equity return premium and with this, roughly around 4.5% is overestimating currently and expected to be about the same range but there are some nuances between these different markets fell so in Canada there might be some expectation that it is cyclically adjusted in the level P ratios as their little bit lower right now.
Whereas in the US they are actually higher than average and so currently, the elevations are such that investors are now paying more for the US and we see this suggesting in the ear pupils and go down to roughly between 2 to 3% but if it stays elevated them expected to be about 4.5% as well.
So, relatively speaking we think that the TSX will yield potentially higher returns but you have to factor in the Canadian economy as well and potential underperformance going forward as well.
For Canadian investors is important to keep in mind the Canadian dollar because if you investing on the side of Canada inflation in the Canadian dollar will also affect your returns.
>> Always a pleasure to have you here Maria, it always goes by so fast!
>> Thank you.
>> Always make sure to do your own research before making investments and stay tuned for tomorrow's show.
If you have questions please email moneytalk@td.com. That's all the time we have heard today's show, take care and see you tomorrow!
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