Market Insights

[music] Hello I'm Greg Bonnell and welcome to MoneyTalk Live, brought to you by TD Direct Investing. Coming up on today show: were pretty much of the halfway point in the US earnings season and also while big tech bellwethers of missed expectations, some other sectors of surprise on the upside. We're going to take a closer look at what's going on with Damian Fernandes, Portfolio Manager at TD Asset Management. And he was also a big week for the Bank of Canada, its key interest rate did go higher putting up a 50 basis point hike. But that smaller than 75 basis points it was expected. James Orlando, Senior Economist at TD Economics will tell us more. Plus in today's WebBroker education segment, we learn all about the benefits of using a divided rather dividend reinvestment plan also known as drip investing. Bryan Rogers, Senior Client Education Instructor TD direct investing will tell us more. And now for some market updates. Up about 52 points for the TSX Composite Index, a little more than 1/4 of a percent. Pulling back in energy prices today, but we are holding in positive territory. Let's check out what's happening with Air Canada, revenue doubling for the airline, a strong travel demand of course with putting COVID further and further behind us we hope in terms of lockdown restrictions. People are travelling. So you have a large percent jump. Checking on Shaw Communications, a bumpy ride this week, with the competition Bureau… Apparently has failed to resolve the Bureau's key concerns. A bit of a pullback for the name today. 34, 21. A check in the S&P 500, that broader read of the American market, in positive territory despite the fact we've had some big tech hits this week. the tech heavy NASDAQ, up almost 2 points, and Intel, earnings for the chipmaker and $10 billion of cost-cutting initiatives are announced, that stock is almost up at 10%. And that's a market update. As we mentioned off the top, quarterly results from the likes of Apple and Meta, just to name a few, one of the themes emerging is at the current environment is proving to be a challenge for big tech names. Joining us now with more is MoneyTalk Live's Anthony Okolie. Anthony. >> Yes and what we are seeing is a bit of a mixed bag. Forcing the markets, these two different companies doing well. On one hand you've got big tech companies that signal the end of the big tech movement. Warning of more trouble ahead. On the other sense, you've seen non-tech companies who have done relatively well. These are sort of names that are more sensitive to the economy and people are looking at those saying "perhaps this is… The way". >> This can be an economic bellwether. Names like Visa of course that rely on all this spending. They have had some impressive reports. Even Intel was pretty impressive in terms of what they plan to do going forward. For all these worries about the chipmaker's… But we did have the Meadows of the world. The Amazons. So Apple really stood up and stood out for me in terms of bucking the trend. A big week of mega-tech earnings. Thinking you don't like the top of that bottom but Apple suddenly beats it. >> People look at the big tech companies and they've always sort of done well. We did see Apple buck the trend. They seem to be the lone Star among the big tech companies. While they did slightly miss their earlier revenue, when you look at the numbers overall, they are pretty decent. When you look at some of the other big tech names as you mentioned, Meta, Amazon, they had a big Q4. Microsoft. I think people are focusing on those big tech names and saying perhaps it was not what used to be in the past. But certainly, Apple impressed with its numbers today. >> I have continued my online shopping habits. Amazon has been a beneficiary through the pandemic. Even up to now, of my dollars. But at the same time those currency effects. Perhaps my Canadian dollars on the Amazon platform, when they bring it back home, so many other tech names really is not worth as much as it used to be. >> Exactly that's the impact of technology stock. It has impact on profitability. Many of these companies doing a lot of revenue from outside of the United States. So that has certainly been an impact on margins. Looking past to the fourth quarter, I think Wall Street is already pricing a much lower stock and estimating for the economy. It's interesting to see what earnings will look like in the fourth quarter but certainly I think as the third quarter was a bit of it disappointment for investors in big. >> Thank you will so much Anthony. >> My pleasure. >> MoneyTalk Live's Anthony Okolie and he will join us a little later on this program to talk about GDP is that we saw. And the upcoming fed meeting of next week. Let's stick with the earnings the right now. Earlier this week, we were joined by Damian Fernandes. He is a portfolio manager at TD Asset Management. I asked him about the market reaction to all these results. >> The market is kinda flat. But Facebook, large CAP tech companies. Facebook was off, Google is off 10 yesterday, it's interesting that you have these really large MegaCap companies that are all on significantly degrees of justifiably, the rest of the market is flat. Because there's a lot of good things happening. In this reporting season, we talk about earnings broadly. But there has been a few surprises. Caterpillars up seven, 8% this morning. Better-than-expected sales and orders. You know, we had McDonald's up. So I think broadly, people are so focused on what's been working for the last few years: technology, Google, Facebook and so on. But, under the surface, you actually have this move where earnings delivery is now coming from a sector outside of tech. Just looking at yesterday's report between Google and Facebook, there earnings are off high single digits year-over-year. Revenues are just low single digits. So there is actually decline, fundamental decline. Where is the rest of the market, this is benefiting from this inflationary backdrop. I could give you some numbers and earnings rate happy to take it in the direction you want. >> It does sound like it's that kind of market. We had so many macro concerns guiding the traits or the year. You get into an earning season and it is shocking right? A name like Meta and the influence it wields. Down this much today and still the broader market is not feeling all that pain. >> Yes and I think, specific to Meta and just broadly, these very successful technology companies, they have had a wonderful. These past few years where, because of the pandemic and so on, you've had increased usage on their platforms. And they have never actually had to adjust to a slower economic environment. What they are facing right now: Meta, Google, advertising. Meta yesterday today said it's going to keep increasing capital expenditure. It's good to keep growing. Google is talking about increasing headcount. This is not conventionally what you do if you have your topline slowing but they've never had to face it. Where is a lot a lot of the rest of the market had to go through the last decade of slower, much more challenging economic backdrop has had to adjust. So, I think, do I think at this point that we should be rushing in and Meta down 20%? No because we have no clarity on the outlook. We have no clarity of how much more advertising spending can go before Meta decides to take an about turn in its capital expenditure. >> When it comes to those broader macro themes, I imagine they come again probably as early as next week. When the Fed has its meeting. And comes out with his next decision. A bit of a push and pull market. Trying to decide if you want to focus on the fundamentals of the companies or do we want to focus on trying not to fight the Fed? >> So few things: the Federal Reserve is likely going to raise 75 basis points within the next week. But we are closer to the finish line for rate increases. Right? When you think about the market pullback this year, globally, we have had… It's because central bank is globally, we are behind the curve in addressing and tackling inflation. They have ramped up quite significantly. In fact, we've had one of the highest, I'm not talking about the actual level of rates, the change in rates, as it's been going on is the fastest change in rates in the last two or three decades. Depending on the country right? In the US, you go from 25 basis points and expected to peak at 475 next year. That's a phenomenal level of increased and tightening of financial conditions in a very short period of time. But we are closer to the end. Then we are. So, that obviously is going to lead to slowing growth likely, a recession. But that's not, that shouldn't surprise people at this point. That pain that we've seen in markets is being a realization that we are going to see earnings slow, economic growth will slow. So we can try and time markets to the Fed, I'd much rather advocate balance. Having a diversified portfolio where you have cash flow compounding companies. I think right now, given the pullbacks to date, we are seeing a lot of value in that. >> We talk about the fact of the Fed's endgame is to slow the economy, as the BOCs endgame is to slow the economy, goes from avoiding a recession to wondering how bad a recession will be. We think about earnings and forecast, are we actually sing companies prepare investors? Even and admit to themselves that a slowdown is coming and maybe we need revisions? >> We definitely need revisions. Going into the expectations going into the third quarter has still people had marked $230 and earnings for the S&P, that's down to 223. Probably had lower. I think, where there's going to be a surprise and this is the expectation for next year is still sitting at 240, 237 and earnings. That factors in an eight or 9% earnings growth. If we are discussing recession, and actually economic growth being negative: that's what a recession is, calling for high single digits earnings growth, you know something doesn't feel right. You can't make lemonade without lemons. If you don't have economic growth, you're not can get the earnings delivery. So I think, and what happens is most of the analysts adjust their numbers after Q4 reporting. So I think as the year progresses and we are almost there… You will see sequential bringing down of earnings numbers. I don't know where were going to end up. I just do know that the earnings numbers as they are right now are almost make-believe. You have to really believe like in a "no recession" scenario… >> The best case scenario, everyone is happy and we keep our jobs. >> And China announces a massive stimulus program. >> Let's have another one of those. >> We are talking about sequential growth. We are earning of the growth is slowing in a real-time basis. You look at the metrics, the two of the sphere of rate increases, auto loans, housing activity : that's a train wreck. Right now in real time. All of the earnings are pulling back. I think it's a little bit of fantasy. Does that make me bearish? No because we've already had a 20% correction. There has been a realization that those earnings numbers are probably going to get revised down. >> That was Damian Fernandes, Portfolio Manager at TD Asset Management. Now let's get you updated on some of the top stories in the world of business and take a look at the market for traiApple is standing out among the big tech companies, with the beat on both the top and bottom lines in its most recent quarter. Although iPhone sales came in lighter then the streets estimates, they were up almost 10% compared to the same period last year. And while the strong US dollar did hit the revenue line, sales were up 8% annually. It's a different story for online retail giant Amazon. The company is warning investors that sales will disappoint for the all-important holiday season. And Amazon's cloud business saw its lowest quarterly growth since it started breaking out Amazon Web services sales in 2014. ExxonMobil is reporting record quarterly profit as surging energy prices power earnings for the oil major. Exxon booked $19.66 billion in profit for the three months ended September 30. Strong natural gas earnings, high oil prices and strong fuel sales were all drivers in the next in the quarter rather. Right now the main benchmark index in Canada training. TSX index, A lot of heavyweight earnings out this week in the S&P 500 continuing to build off some of the gains it's made this week. 3861, up 50 points right now rather 54 points. Taking a nice look at the equity markets, let's turn around and look at the bond space. It's been a challenging year for that market. We spoke earlier with Anna Castro, Senior Portfolio Manager at TD Asset Management who says even some of the most conservative investors are wondering where they can find opportunities. >>… Yes it is the worst bond market this century, in history, practically. So this year, the bond market has been down an index of Canadian bonds has been down 15%. The worst part of this year is down, low single digits. Mid single digits, I mean. Down 7%. Even high-quality debt from the US government, US treasuries over 20 year term is down 30%. So that's a landscape that bond investors have faced the selloff. The other thing that has been challenging is there has been no diversification. What does that mean? So in the past, when it was a growth shock that people were worried about, with equities following, fixed income would be positive, especially government bonds. In this case, because the focus has been inflation, to your point, the selloff, in March when the US Federal Reserve started hiking rates, inflation was already 7%. So that's the highest since 1988. When they started the last six hiking cycles. And then, from zero interest rate, practically easy money, six months later, we are up 3% in terms of interest rates. And because of that, that's what pushed fixed income down. And also equities. US equities are down 20%. Canadian equities have fared basically better. Mainly because they have a higher stake in equity energies and energy prices have benefited from this inflationary environment. >> Was going to take and it's been a painful year for the pain to start to subside and perhaps some opportunity to start presenting itself? > So first of all, in the near term, we expect bond volatility to remain. Because this tug-of-war for the growth outlook as well as inflation will continue. And so a good thing, the positive thing, you asked for opportunity. The positive thing is a hiking cycle, the Federal Reserve, central banks around the world are starting to increase rates. So we are maybe two thirds past that. We are now talking about where they might pause next year. And so, we've also started to see some economic indicators that their effort to tone down inflation or have it in control is working. So we've had slow down and demand of activity, as well as, you know, we've seen commodity prices come down. But where this gets sticky has been wage increases and the strength in the labour market. What it would take is that they need to see inflation back to the level that they are more comfortable with. 32% target and no will stay there. So that's the tricky part. Because before, we were so used to one institution, the central bank doing something to ease an economic challenge or market condition. But here we have millions of people, companies and we need to address higher interest rates, slowing into the system for employee, employment market, the labour market to slow down for wages to calm down and rent prices to go down. So once you have that, you would have some stability in how the Federal Reserve and central banks will approach inflation. And so, when you ask about what it would take? For equity investors, what you would need to see his earnings revisions go lower. Earnings growth estimates to show that slower economic growth or even negative economic growth is reflected there. And on the fixed income side, it's an interesting setback. Rather an interesting set up because this bond volatility impacts prices. So where are we right now? Yields of increased and so fixed income investors can now get higher income from higher interest rates. >> That should make bonds more attractive right? >> Exactly. So going back to the basics. If it's an income investor, what does it mean? They literally have a contract and then you have a borrower, a contract and then a borrower and this borrower has to pay an interest rate and eventually pay the principal. So now that interest rates are higher, as an investor, you are getting a higher income. There could be bond volatility prices on market to market or on paper. What you are getting that income and if you do your due diligence, you're going to get your money back at that point in the future. >> Okay the due diligence in terms of getting your money back in the future… Are we talking about government bonds, were talking about corporate bonds or high-yield bonds… Were talking about opportunity in this space. It is something looking more attractive or anything else or is it a matter of doing your homework? >> First of all we have to do our homework of course whether it's government or corporate bonds who are the borrower will be. In this case, I will share what we are doing in the portfolios. We have great a great out asset-allocation team and a great fixed income team helping us. We are seeing opportunities into categories. With what happened to interest rates, yield is picking up on the two-year basis. Rather the two-year bonds both in government, the government of Canada in the US, you see 4% yields. Yields that you have not seen before. And you can see corporate bonds, so high-quality debt from high-quality issuers at the 5 to 6% level. And this is debt that you can get, the principal back in two years. So we have a team doing their due diligence to make sure there is quality. This is models and cash flows behind castles behind it to make sure whatever happens, you have economic slowdown etc. You're going to get paid that interest as well as that principal back in two years. That's one bucket of opportunity in the short term. The other packet of opportunity you're seeing is there has been an increase in yields as well on the long end. So US and Canadian long dated bonds are at 3 1/2, 4% levels. Again, levels you have not seen before. And so the value of this set up is all your waiting, you get that higher income, but the interesting thing with long dated bonds is they are sensitive to long-term expectations and growth. At inflation. So if we believe that central banks are very aggressive in reducing rates and they will eventually slow down the economy to tame inflation, then you have growth come down and inflation come down. So, going back to the bond map, when yields come down, bond prices go up. So these long dated government bonds will provide your recession insurance as well during that time. As well as opportunity to get maybe three or 4% while you wait. So that is, those combinations, I would want to give us an example of how we are using active management and we are being very selective to make sure that we preserve capital. You also flexibility. Because you can sell this. >> You can sell your position right? Exactly. > Exactly. For example, you are seeing indicators showing the earnings revisions of come down and the recovery is about to start and investors are forward-looking. So you can actually sell these bonds and these liquid instruments in position to buy into quality equities that have also sold off as well as high-yield credit. >> What's the biggest risk here in terms of saying things are setting up from whatever you're saying? That can be quite advantageous for a fixed income investor. Opportunities in the bond market. What is the biggest risk? Is it waiting for the right conditions? >> So the biggest risk, I would highlight two of them: I started off saying that we probably are, the biggest risk it, if you have another shock in the system that causes inflation to spike up, it will be stickier, again. Harder to push down. Then you have central banks needing to be more aggressive from where we think they would be to raising rates. That's one. The second part is, with the estimation I gave on those long bonds, US and Canadian, if you don't have an economic slowdown soon, you might be waiting for a bit and we believe that the recession is a matter of when. Not and if. So that would be the risk for that. Like, you would be waiting and then you have more negative news, more bad news for to be good or better for that. >> That was Anna Castro, Senior Portfolio Manager TD Asset Management. Now if it were educational segment. If you're someone who likes to reinvest your money after getting a return then this segment is for you. Today we will learn about dividend reinvestments, also known as a drip. Joining us with more is Bryan Rogers, Senior Client Education Instructor at TD Direct Investing. Always great to have you with is Bryan. Let's talk about this dividend reinvestment plan called "drips" in which investors know about them? >> Thanks Greg. Most investors realize that they are paying regular dividends usually on a quarterly basis. So in terms of stock holding, consistently paying dividends, it will result in periodic cash deposits in and over time, that cash is going to build up. Often times investors and not really sure what to do with those funds. Most brokerages kind of salt that problem. Most brokerages do offer an automatic plan. So we like the term "drip" we like our acronyms. But it will allow you to automatically reinvest those cash dividends the you're getting on a quarterly, it could be monthly but typically it's a quarterly basis. To automatically reinvested into a stop at paying a Commission. So there's no transaction fee. So the first step you want to do, I want to jump into WebBroker really quickly. You want to see your stock pay a dividend and how regular if it doesn't pay back. Just using TD as a quick example. We pull up any stock any dividend paying stock. If you just pull up a symbol like TD as an example and you scroll down on the overview page, you will see down here there is your "dividend yield" showing it this number, then your annual dividend rate, $3.56. It doesn't right now show your frequency but it does show your most recent ex dividend date. That's the day that it stops training training with the dividend. We have one coming up actually on Monday. And then, if you want to see the actual frequency, go to "events". Click there are the social earnings events and things like that. On the second tab, you can see "dividends". These are dividend specifically for TD. And you can see that we have August 25 was an announcement date, this is the most recent dividend, this the payment date right here… There is our annual date. So we know that just dividing this by four, and see that TD pays quarterly. We can also see the history on its dividend and it did come up more recently as well. It's come up over the years as well. So the dividend is increasing and now you can know the frequency and know some of those key dates here you need to know. Before you decide to get into that dividend reinvestment plan. >> Okay. So now we understand exactly what we're talking about here, you have an example for us about how a drip program would work for the long term? >> Absolutely. Have an example. Looking over TD. I will actually use one with TD as well. If we go to that screen, I will share my example here. If you look at this, this is actually a four year, roughly about a four year time period. These are actual numbers using TD. You can get the stuff on WebBroker as well. You can go to the chart and there is usually historical data available under the quotes that you pull up. If you want to do the same thing yourself. But this is just an example. If you were to look right here, there is 400 shares and if you look at this first quarter, if you want 400 shares to start with back in 2018, the dividend at the time was $0.60 on the first quarter. It did come up a little bit to $0.67. Usually TD has a different fiscal quarter so they will usually change it at that point. So you can see it went from $0.60-$0.67. If you notice that you afforded shares, you can sell the far right-hand side, $240 worth of stock. The key thing to remember for dividend reinvestment is a will only let you buy a whole numbers of shares. So we had $240, you can see TD at the time was trading at about 70, just under $75. That's enough to buy three shares. You can see that in the third called here. So as you go along, if you go along each quarter, you can see that you're buying a similar amount of shares but we can see her shares are strong to starting to climb. Because each time we are buying three, four shares. This is at no cost. No Commission right? So with each quarter you can see, now five shares in 2020. It did dip due to the pandemic. So now there is almost a dollar cost averaging effective we talked about last week. Now we are seeing that we are buying more shares, we are buying five shares this time, back to four, and this is the more recent quarter right here. We did not include the one coming up next week we could do that in our analysis as well. Just in this, and about a little under five years, you can notice that we now have 58 additional shares without doing anything. Just sitting there and that's a beauty to investors. We didn't have to buy anything or do anything. Just sitting there and rolling into the dividend reinvestment which you could call TD Direct Investing anytime and they will and roll your entire account of the specific stock that you want. Anything you want in a drip program, you get those additional shares pretty much for free. >> Powerful information their brine. Thanks for that. >> Thanks Greg. >> That was Bryan Rogers, Senior Client Education Instructor TD Direct Investing. Make sure to check out the learning centre and WebBroker for more educational videos, live, interactive master classes and upcoming webinars. Let's take another look at the markets to see how are trading in this last day of the week. It's been a moneymaking week overall for the TSX and for Wall Street. We will start here on band Wall Street. 19,412 from 16 points, building on the earlier gains, a little shy the third of a percent. Imperial oil, senior quarterly profit double at 73, 30. That stock is up a little more than 8 1/2%. Checking in on Shopify. A big boost in the name off the back of their latest earnings. At 4613 today, they are off the lows of the session. A bit of a giveback earlier in the session. Right now almost at the breakeven line just down modestly. South of the border, let's check the S&P 500, holding up despite the fact that we've had some MegaCap tech names this week. Soundly disappoint and individually, those names have come under pressure. I'm thinking of the metas and the Amazons. But the broader market has been holding in. Making some fairly decent gains today. The S&P 500 up almost 2%. Let's check in on the tech heavy NASDAQ. Again, a big week for tech earnings and for the most part, some of those names have come under significant pressure after earnings. Apple, as we said earlier, bucking the trend in putting points on. NASDAQ, 1. 6%. Amazon, let's check on the online retailer behemoth. Not only disappoint for the court of his past, warning investors that things are going maybe not going to look much better for the holiday season, that stock you can see 99, 82 down 10% at this hour. Earlier this week, we heard from the Bank of Canada. We did get a rate hike as expected. 50 basis points. The street, and a lot of economists and a lot of pundits have been looking for 75. So they took their foot a little off the gas pedal. Shortly after the decision was made, I spoke with TD Senior Economist James Orlando about this change in tone for the central bank. >>We talked before but have now is not the time to be flexible in interest rates. Nothing is really changed to include the improve the inflation stories since the last time we spoke. But will be sought today is that the bank is going from what's been happening with inflation, because inflation is very much a lagging data point to what the future is looking like for the Canadian economy. It's looking for a very weak stagnant growth for now right up until the end of 2024. So that's not looking very positive. So, as a result, the Bank of Canada is moving from the state of hiking rates until things turn to thinking things will turn in knowing that interest rates work with a lag so as a result they might be nearing the end of the sighting cycle. >> Nearing the end… That does suggest that there are more hikes to come. Already a hike that was less than expected. What you think we get out of this bank in the next couple of months? If we are closer to the end, where is the end? >> It's interesting when you think of where we came from. We started this year with zero interest rate, we move to 3.75. Maybe 4.5% in the next meeting. We think that will be peak level policy rate. We think the impact of past rate hikes, we think heading to that level of interest rates, we've seen it in the real estate sector, were starting to see with the consumer right now and remember, the consumer is the most important part of the Canadian economy. We are starting to see consumer confidence Wayne and the spending start to ease off. When you have that, you know it's can result in weak demand going forward. It's going to cause below trend growth and that really is the precursor that we need to get inflation coming back down. So the banks are going from what's been happening to what is going to happen. What's going to happen is looking pretty bleak right now. >> Taking questions for the decision, it still seems like they're trying to find that magical place to slow demand to the point where inflation starts to come down but they don't throw the entire economy over a cliff into a deep recession. We have had conversations. I've had conversations with her colleagues in recent weeks. It's a harder and harder mission to accomplish. We still seem to have some sort of hope? >> Answering the question that we think GDP growth is going to get pretty close to zero. So, into positive territory. It could slip into negative, whether that's a recession or not? We don't know. The idea of going into a soft landing is just that. We going to this period of stagnation or where demand is lessened. Able to catch up with some of the supply that we have right now high-level supply. We are hoping that… That's the story they're going with. How long they will keep doing that with higher and higher interest rates, I think they are realizing that they are getting to that point where if they keep going, if they go to 5%, can they actually achieve that soft landing? I think they are starting to doubt that and that's why they're slowing the rate hikes. They don't want the economy to go into recession then one have a severe contraction. If you keep pushing on rates, eventually you will get to a point where they throw in the towel. So, I think that's where your seeing rates pullback and slow down in pace. >> Now, you have a smaller than expect and rate hike. Is it too much for some market participants, I don't know their minds, perhaps extrapolating what might happen next with the US Federal Reserve? Other central banks? As they say perhaps the same inflationary situation put together although they do have different situations? >> Usually south of the border for some guidance it doesn't usually come in the opposite direction. But one thing to know is that, just last week we've had some fed members talk about that they are going to debate at the next meeting when peak policy rates will happen. So they are talking about it. Most central banks, when they get to what they call restrictive levels and policy, they know they are slow in demand. They know they're slowing and growth. They know they will cause this tight labour market to loosen. So they are realizing "okay, 4% interest rates… Maybe this is the end point for us. So it's not just the Bank of Canada. The Federal Reserve members are saying they will have this discussion at their next meeting. So, whether or not they slow down based rate hikes as well, I think the Bank of Canada maybe opened the door for the Fed but they will do what they think is right and they are talking about doing the exact same thing with the make of Canada today. >> Imagine around the table the Fed, the Bank of Canada and the central banks, worrying about legitimacy and worrying if they press possible to early and they cannot tamp down inflation expectations and that would be as big of an error on the other side going too far. >> History tells us that that is something that has happened before. We sought in the 1970s and 80s were interest rates rose, slowed in demand, you inflation coming back down from double digits. Central banks decide to pull off the rate hiking cycle. They started to ease policy and then what you get? You have another level up in inflation, causing interest rates to go even higher than they did in the previous time period. See you don't want that. You want to make sure if you raise interest rates, you lock in those high interest rates, you convince people that they will be relating high for quite a bit of time here. Then, you cause demand to slow and inflation to slow as you get that inflation down. Once her at that level, then you can think about easing policy and that's more like a late 2023 story. It's not a "right now" story. >> Imagine when it comes time to ease policy and you think it's a late 2023 story. That will be slow and gradual. But then I think, on the other side of this, ha ha. When it comes time to raise hikes we thought they would slow because that's what central banks do. How much faith can put on the other end about how those moves might look? > Are generally what happens is central banks are pretty gradual because it's a shock to people. It's a shock to businesses. So you want to be a little more prescriptive when you do that sort of thing. Just, you know, easing tensions and making sure things will fall off a cliff right away. Will be due no is that even in the past when central banks have been easy with respect to raising rates, they've been very quick to cover rates. They always say that you take the escalator up and you take the elevator down when it comes to interest rates. We think that's probably what can happen here. When the economy turns, it turns fast. And I think central banks need to react to that really quickly. We are just hoping that inflation, by that time, the economy reacts very strongly and inflation is down and central banks can be confident and not do what you just mentioned before with a cut rates to early and have to raise them again. >> That was TD Senior Economist James Orlando. Sticking with the Canadian economy, growth did edge up again in the month of August and in an early estimate for September's GDP read, indicating another slight increase. So, economic growth, apparently beginning to slow global to slow down mean for the Bank of Canada when it comes to delivering a rate hike to mark our Anthony Okolie is been digging into all this. What is TD Economics have to say Anthony? >> First of all with the data, the Canadian economy continues on the path of modest growth in August. GDP rose 0.1% in August. That top consensus estimate in a flash for September showed a 1% gain. Digging into the numbers, growth in the service producing industries was actually offset a bit by the decline in goods producing industries according to statistics Canada. We did see retail activity rebound in the last month as Canadians are getting on the road again for the end of Summer trips. Sales at gas stations, food and beverage stores, rose in August. Wholesale trade was also up last month. And that was driven really by rising machinery and equipment sales on the back of ongoing construction for natural gas terminals in BC. Now, on the downside, we did see construction slowing. Not surprising. Residential construction was down for the fourth time in five months. Due mainly to the lower construction of single detached homes condominiums and apartments. Now while today's report was positive, TD Economics says they're starting to see the lag impact of higher rates in the goods sector. They expect to see the same in the service sector going forth. Greg? >> The of the central banks all year raising rates on us to try to cool the economy, trying to tamp down or demand, trying to control inflation. So we have signed, as you say, that we are seeing some cooling. What is TD Economics thinking this means for rates going forward? >> TD Economics, again, they see an increased and interest rates feeding its way to the data. But they still think that the make of Canada needs to see more before inflationary pressures ease. So they see the Bank of Canada raising interest rates to 4 1/4%. And that will help achieve a deceleration. That's enough to tame inflation pressure. Now turning to the yes of course, earlier this week, we have some US GDP numbers which came in starter than expected. They rebounded in the third quarter by 2.6%. But again, TD Economics doesn't think this will have any bearing on the Fed's policy with a maintenance week. They think the Fed will hike another 75 basis points as inflation continues to remain high in the United States and the labour market remains really tight as well. > Interesting stuff. That'll be another interesting week next week Anthony. >> Another interesting week. Ha ha. >> We live in pretty exciting times. Anthony Okolie. Stay tuned next week for Derek Burleton, deputy bank taking your questions about the economy and interest rates. Keep in mind you can email us anytime to get a head start by emailing MoneyTalk Live ATU.com. That's all the time we have for today we will see you next week. [music]