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[theme music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
coming up on today's show, we are going to discuss how the US presidential race is shaping up and the potential impact on the markets and the economy. We will hear from TD Cowen's Chris Krueger.
TD Asset Management's Anthony Imbesi is going as his view on the potential opportunity and high-yield bonds as interest rates trend lower, and MoneyTalk's Anthony Okolie is going to break down the latest Canadian GDP reports and some fresh inflation data out of the states. Plus in today's WebBroker education segment, Caitlin Cormier will give us and explain on Canadian Depository Receipts and where you can find on the platform.
Before we get all that, let's get you updated on the markets. Last trading day of the week, not a lot happening out there but it's a moneymaking week when you look back on the past five days, including the TSX Composite Index. Closing yesterday about 24,000. We got past that line at the close yesterday, 24,038 today, we are up a modest two tics, still holding about that line.
Noticing some bounce back and the energy shares today, they got hit yesterday on the retreating price of crude, not the crude is making any big moves today, it sort of study but a little bit of money coming back into the names after the cell of yesterday, $3.96 per Baytex, up 2.5%.
Metals were performing strongly across the board yesterday, left a lot of the minors.
A little bit of giveback today. At $27.63, Barrick is down about 2.5%.
South of the border, Anthony is gonna break down the Fed's preferred gauge of inflation in just a few moments time.
Investors are chewing on that. It's been a moneymaking week but right now we are pretty subdued on the S&P 500, up two points or four tics.
The tech heavy NASDAQ, saw some weakness there, nothing dramatic but not keeping pace with the broader market. Pull that up, it's down modestly… There we go. The NASDAQ, down 52 points, a little more than 1/4 of a percent. There is some money moving in the direction of Ford.
Earlier this week, there was concern on Wall Street about how the automakers, particularly Detroit automakers, GMO or Ford, are going to fair in this economy with consumers pulling back on spending and increased Chinese competition. Those stocks got hit earlier in the week, a little bounce back there. At $10.96, you are up 2.6% on Ford Motor.
And that's your market update.
We have some fresh economic data here in Canada. In July, the economy grew more than expected but early indications suggest it may have stalled out to the end of the summer. MoneyTalk's Anthony Okolie has all the numbers and breaks them down for us.
>> Some resilience in the GDP for July. It came in at +.2% month over month in July after a flat read in June. It landed ahead of stats Canada's estimate. Some early guidance for August, it seems to be a bit softer, points to no growth in August.
TD Economics notes that third quarter GDP is tracking just north of 1% on 1/4 over quarter annualized basis. That's well below Bank of Canada's 2.8% forecast.
Let's break it down, we will look at some of the details.
When we look at where growth was, the retail sector contributed most to July GDP, the second straight rise sectors biggest monthly gain since January 2023.
When we look within retail, it's really the motor vehicle and parts dealers that sell the most growth. Cars have been generally pretty strong in the last year, boosted by the pent-up demand coming out of the pandemic and also the moving population. The biggest laggards, as you can see in the chart, construction, transportation and warehousing with rail transport taking a hit from those wildfires in Jasper Alberta. Overall, a pretty strong number for July although when we look at the third quarter it seems to be coming in weaker than expected.
>> We how, after seeing the fight come out of the gate with a half-point cut, people are starting to rumble about whether the Bank of Canada needs to go 50 basis points. We take a look at this GDP report, what is the thinking there on the next BOC meeting?
>> In terms of where markets are, 60% probability that they believe that the Bank of Canada will cut 50 basis points, a little bit more than a coin flip. We know that the Bank of Canada is expecting growth to slow in the coming months below their June forecast but we don't know by how much I think that's what's leading to some of the uncertainty about whether it's going to be 25 or 50 basis points. TD Securities does not believe that this report favours the potential for the 50 basis point rate cut. Since the economic data has been pretty strong on balance, TD Securities is looking for a 25 Basis Point Rate Cut in October.
>> Now we also have some information from south of the border.
This is the US Federal Reserve's preferred gauge of inflation, PCE.
>> All quiet on the inflation front. The PCE came in at +.1% for August, that's marginally lower-than-expected, it's up to .2% from a year ago. That's the lowest level since February 2021 and it was also in line with Wall Street's estimates. When we exclude food and energy, the court PCE up again .1% versus .2% expected, year-over-year, +2.7%, due to base effect.
Overall, the Fed's core measures are heading in the right direction.
>> Interesting times indeed. It feels like the market is saying, we have tamed to the inflation bees, now we have to worry about the labour market but of course, the central bank is still a little cautious.
They are not signalling all clear, all done. They are saying that they think we are on track.
>> That's the key. They believe that inflation seems to be under control, moving towards the 2% target. I think the big focus will be next Friday September jobs report as the Fed calibrates a future rate cuts. We will be focusing on the job market because we have seen the job market we can since last year.
>> Interesting stuff. Thanks for breaking it down.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now for an update on the top stories in the world of business and a look at how the markets are trading.
Costco falling short of Wall Street's expectations in its most recent quarter, cash-strapped households are pulling back on discretionary spending.
Groceries and other staples are in high demand at the retailer but customers are delaying purchases appraiser items such as furniture and sporting goods. Costco same-store sales, acute metric in the retail space, also pressured by lower prices at the pumps as motorists have been paying less for gasoline.
Let's check in on shares of BlackBerry, they are under pressure today following the company's latest earnings report.
Investors appear to have some concerns about challenges at the Waterloo, Ontario-based companies cybersecurity division, as well as delays with his automotive software and development programs.
Right now the stock is down about 7.5%.
Got shares of Bristol-Myers Squibb on the move today. The US Food and Drug Administration has approved the drugmakers treatment for schizophrenia in adults.
This twice-daily pill is the first new type of treatment for that chronic mental disorder in more than 70 years. You've got Bristol-Myers Squibb stock up a little more than 30%.
Quick check in on the markets. It has been a moneymaking week on Bay Street and Wall Street. The TSX getting about 24,000 for the first time," for the first time yesterday.
We are starting to fade a little bit, down 16 points or seven ticks, we will see if we hold that line until the close, we are just about 24,000. South of the border, up a fraction of one point on the S&P 500, statistically flat on that broader read of the US market.
Got the US election just about five weeks away in the presidential race between Democrat Kamala Harris and Republican Donald Trump remains very close, but there are some interesting trends emerging.
Still a lot of campaigning days ahead.
Chris Krueger, managing director at TD Cowen Washington Research Group joined our Kim Parlee to discuss how he sees things shaping up.
>> Where we are is we are effectively doing a 100 day snap election. This is totally unprecedented.
It's never happened before. We're not going to have any more debates between Harris and Trump. So that's where we are.
Looking at the battleground states, there are really two regions, right?
Because in the US, we don't have a national election. We have a handful of state elections, the goal being 270 electoral votes. That's how you're elected president.
So you've got two regions, the Sun Belt states, that's North Carolina, Georgia, Arizona, Nevada.
And then you've got the so-called blue wall or the Rust Belt of Michigan, Pennsylvania, and Wisconsin.
Harris is best-- Harris can go both ways.
So can Trump.
Trump is a little bit better on that Sun Belt track.
But hopefully, we'll get some clarity on November 5 when the election is supposed to end.
But voting is underway in a lot of states, right?
Probably as much as 80% of the vote will be in by November 5. So stay tuned.
>> That's remarkable. And I know I keep quoting you, by the way, on the stat that 80% is happening before November 5 because it's extraordinary and helps people understand the importance of polling right now. One question I have, and I'm curious because from people I've spoken to, some Americans, how effective is polling if someone who is being polled doesn't want to reveal, perhaps, that they are supporting Donald Trump?
Because that's got to be something you have to manage.
>> Sure. The last two cycles, people probably should have given Trump something like 200 basis points.
The nuance with this election, I think, as well, though, is that typically, pollsters aren't picking up newly-registered voters.
And since Biden dropped out, a number of younger voters have registered for the first time.
So perhaps Harris's numbers are being under reported. We don't really know.
We'll hopefully know on November 5.
Some of the metrics we can look at, though, fundraising numbers, crowd size, on-the-ground efforts, the Get Out the Vote efforts. And since the debate, Harris is pretty much winning on all those fronts.
Having said that, this is Trump's third presidential run.
And he just has this well of support that is really unmatched in American politics.
>> You mentioned the fact that President Trump has said no more debates.
I know that some people have been asking Kamala Harris why she's not doing more media interviews.
We do, though, have a scheduled debate coming-- I think it's October 1-- between the vice president candidates. Does it matter in this election?
>> Probably not, but perhaps. We're going to be on the margins.
I think when you look at 2020, more than 150 million votes were cast in that election.
Joe Biden got more votes than any candidate ever.
Donald Trump got the second most votes for any candidate ever. Right?
Both of them eclipsed Barack Obama's numbers.
When you boil that down, though, that race, over 150 million ballots cast, came down to fewer than 45,000 combined votes in three states.
So this is a race that is within the margin of error. So the margins matter.
Could a great debate performance or a poor debate performance move the needle a little bit? Perhaps.
Would also note, on October 7, it sounds like-- or October 6. It's a little unclear.
But both candidates might appear on 60 Minutes.
>> And I think the one thing you keep saying-- and anyone who watches your research, which I highly recommend. It's great stuff. But you keep saying, it's 2024, expect the unexpected. You've had Biden bow out. You've had not one, but two assassination attempts, and of course, Kamala Harris coming. There's so many things that can happen.
>> There are so many things that can happen. We're not going to have any criminal trials or sentencing. That's been pushed out. But that's a whole component of the race, too, that I think has just fallen by the wayside. Did it move the needle with with the four separate criminal trials or the indictments? No, but that's just another completely unprecedented issue and topic in the cycle.
>> Let me ask you-- and I want to get into what we might expect. And we've talked about this before, but I think-- and there's, I'll say, an unusual outcome that I'm going to save for the end of the conversation because there's some complexity in it and I think they'll have to be schooled in US politics to understand it. But when you look at-- a number of people I've spoken to are expecting a split Congress.
>> Yeah.
>> But again, we'll see.
And then you have to weigh on the president, who will come in.
What, do you think, can Canada expect as an outcome of this election? And I know the problem is, the spectrum of possibilities are still quite wide at this point.
>> Incredibly wide. We do have the USMCA review process underway. And candidly, a lot of the contention within that three-country process that's underway, it's not on the northern border. It's on the southern border.
So when you have the trade reps discussing USMCA right now, the deadline being July 1, 2026, it's on issues like southern border enforcement, fentanyl, the perception of Chinese trans shipment into Mexico to get around tariffs.
So the US-Canada relationship will continue to thrive under either.
You have that USMCA review process to keep an eye on them.
>> Do you think, though, if we do see a Harris presidency, will it be perhaps, more of the same?
With where there's a Trump presidency, things will be different.
>> I think that the big question with a potential Trump presidency in the second term is that blanket tariff.
He's talked about a 10% blanket tariff.
That's increased to 20% in the last few weeks.
He doesn't talk about carve outs within that. I do think because of USMCA, you would have a carve out for Canada and Mexico.
That's obviously a huge variable that you wouldn't have to worry about with a Harris presidency.
>> Have you ever had to-- when you think about predicting what's going to happen-- I shouldn't say predicting, but just giving people information as they go-- it really has never been, I think, harder to really forecast, given what's going on.
>> It's surreal. You mentioned a great point, though. And that is the undercard in this election, which is the race for the Congress. And that's always critically important. The reason it's very important next year is that in the US, we have $5 trillion worth of debt and fiscal cliffs on the horizon, which happen regardless of election outcome.
Sometime next spring or summer, we have the debt ceiling to deal with.
Then at the end of next year, in the US, all of the 2017 Tax Cuts and Jobs Act, individual rates, they all sunset.
That's the largest tax increase in American history.
That's the purview of Congress and the White House, of course. But that's just a huge delta on the horizon.
>> I have two questions I would like to understand. I've heard some comments from some folks about how the narrow casting that's happening right now from the candidates, either during Kamala Harris, during the DNC speech, or others, but really trying to get at specific populations to convince them because that's how tight the election is.
>> Yeah. Absolutely. This is called micro targeting. There's so few undecided voters.
Then there's also, what's really going to drive the base. On the undecided voters, probably the best example of this is now that both candidates, Harris and Trump, want to not tax tips. Where did they both endorse that? In Nevada. Even more so than that, in Las Vegas.
So it's really trying to fit the policy for the politics. And you're going to continue to see that because when you're in the margin of error, again, anything on the margins can be determinative.
>> OK, let's talk about the margin of error and how close this can be because in your last note, you came out-- and again, you have to explain this to a Canadian audience, that to win, you needed 270-- >> Electoral votes.
>> --electoral votes. Thank you. But there's a scenario where neither side can get the 270. How does that even happen?
And what happens?
>> This is, without question, the worst-case scenario for anybody. So this made a lot of news recently because there was a push in the state of Nebraska. So within the US, it's winner take all.
Right? if you win the state, you win all the electoral college votes, with two exceptions, Nebraska and Maine.
So Maine, if you win the State of Maine, you get two electoral votes. But then the two congressional districts can split.
That happened before. Trump won northern Maine and Joe Biden won the Portland-based district, and Nebraska, overwhelmingly Republican state, save for that Omaha-based district, where Biden won.
Now, there was a push to change the rules.
They said, we're not going to do that.
So we still have this proportional allocation-- >> By the Republicans, if I'm not-- >> There was a push from Trump, Trump allies, and Republicans in the state.
And it lost by one, by one Republican vote.
That still doesn't resolve the issue in that you could have a scenario where neither candidate gets 270 and/or they actually tie.
If they tie-- well, so December 17 is when all the counting stops.
January 3 is when the new Congress is sworn in.
January 6 is when the new Congress certifies the presidential election.
If we're in the event of a tie, the new House of Representatives determines the presidential.
Even more so than that, though, each state delegation gets one vote.
So the 50-plus Congress members of California get one vote, state of Wyoming gets one vote, vice versa. Currently, Republicans have more state delegations.
So in a tie, Trump would very likely win.
Kim, it gets a little weirder, though, because the Senate determines the vice president. But net-net in a tie likely goes to Trump.
>> And was there some scenario too, if they couldn't decide the president, then-- because you had all the scenarios planned out.
>> There's that as well, because there a handful of delegations that are split delegations.
There's not a majority. So what would happen there?
And there's not a lot of case law on this.
So there are varying statutes that would apply.
In all likelihood, the new speaker of the House would become the acting president until this was resolved, likely at the Supreme Court.
This situation is completely surreal.
Hasn't happened since before the Civil War.
But you look 24 years ago, the Supreme Court decided Bush v. Gore.
So it's not completely unprecedented. But I think this is certainly what keeps me up at night.
>> That's an understatement. Let me ask then-- there's just about a minute left-- what are you watching between now and November 5?
And going to be-- and again, I know you said a lot of votes have already been cast. But as we go, what are you watching?
>> Where are the candidates spending their time?
And are they drawing new and unique people to those rallies?
And what does their ground game look like?
Are they knocking on doors? How many volunteers do they have in the state?
>> Do they have Taylor Swift?
>> Do they have Taylor Swift? Shout out to my daughter Clementine.
Also, fundraising numbers.
That's a pretty important metric to watch.
And the Harris campaign out raised the Trump campaign by a factor of 4 last month.
>> That was Chris Krueger, managing director at TD Cowen Washington Research Group.
Now, let's get our educational segment of the day.
If you are looking to invest in foreign companies but don't want to worry about currency conversions, you may consider Canadian Depository Receipts. Caitlin Cormier, Senior client education instructor with TD Direct Investing has more.
>> CDRs or Canadian Depository Receipts, you might be curious about what these are when you see them on the platform.
They represent shares of global companies but they are traded on the Canadian stock exchange in Canadian dollars.
Companies like Costco, Alphabet, Amazon, Disney, Microsoft, lots of these companies have CDRs available. They have a built-in currency hedge. They are actually traded in Canadian dollars.
Your return though depends on the underlying shares. So it's essentially like holding that underlying company in Canadian dollars.
Typically, these CDRs, their initial price would be $20. When we think about the price of some of those companies are listed, they are well over $20 in share price so even above $3000 US. This means that the CDRs allow you a more accessible way to purchase these underlying companies.
The difference between these impartial shares which we have recently launched on the platform is that in this case, you are actually good to be investing in Canadian dollars and these international companies as opposed to whatever currency they are in, so Canadian or US. The CDR is actually similar in that it's a partial representation of whatever the underlying share is.
So there are a lot of similarities to partial shares but really the key differences you are investing in Canadian dollars and that hedge is built-in. Let's help into WebBroker and see where we can find these CDRs and what they might look like. We are going to click on research, stocks, and once you to this page we can type in the name of any company we might be looking for. Let's go ahead and type in Apple.
You will notice here, it looks exactly like the regular Apple we have up on the screen except it has a Canadian flag.
I'm and click on that.
You'll notice it says CBOE, that's the exchange the securities trade on, it's Canada, so we can see this is a Canadian dollar version. We can see the share price at $33 is significantly lower than the AppleShare price on the US stock exchange so those are some of the things that will indicate that this is one of these CDRs.
When we are ready to go ahead and purchase, we go ahead and click the buy button likely would for any other stock.
It's going to pre-fill some of the information in here. We are not able to do fractional for these particular securities. We would just after purchase full units so we could put in how many shares we would like to purchase, for example 10, how long we want to leave the order open for and we can go ahead and submit the order for processing. We also were able to do limit orders on these types of securities if we so choose. A couple of different ways to be able to invest in companies that have large share prices if you are just trying to get in with a smaller amount in these types of companies, these CDRs or partial shares can both be great options to be able to get invested at a lower dollar cost.
Don't forget, we have investor education month coming up in October, looking forward to seeing you all at lots of our events.
>> Our thanks to Caitlin Cormier, Senior client education instructor with TD Direct Investing. As Caitlin mentioned, Octobers investor education month. You can use this QR code to navigate to TD Direct Investing's investor education month for more info. Speaking of education, Caitlin is going to join us on Tuesday of next week telling us more about how to get more out of the WebBroker platform.
Tune in for that one.
In addition to CDRs, Caitlin mentioned that TD Direct Investing also recently launched partial shares. Here's an explainer.
>> To buy or sell partial shares also known as fractional shares in WebBroker, open a trade ticket and then select your account. You can trade partial shares in Canadian and US dollars using a cash account, margin account, TFSA, RRSP, RIF, RESP or our DSP. Next, enter the symbol or name of the stock or ETF you want to trade and check out the quote for the current price. Partial trading is available on many stocks and ETFs listed on the Canadian and US exchanges.
You will see the list of options here.
The fractional icon will be green. You can only buy and sell partial shares as a market order, meaning your trade will execute the best available price. If you switch to another order type such as limit, stock market or stop limit, the partial quantity will round to a full share quantity. You can place a buy order in one of two ways. Number one, enter the dollar amount you want to invest. The calculator will estimate how many shares you can buy, including fractions up to five decimal places. Or number two, enter a whole or partial quantity and the calculator will estimate the dollar value.
Cell orders are always quantity base. The dollar amount will be estimated. You can enter quantity based orders at any time but the dollar-based order ticket is only available during market hours.
For all partial orders, the good till date will be set today.
Click preview order to review the details of your trade ticket. When you trade less than a share, you will pay a flat fee of 199. Otherwise, standard commissions apply. Your order is placed as soon as you click agree and send and executed in real time during market hours.
To check the status of your order, under the trading tab, select order status.
Here, you will find the details of your partial shares order and that's how you trade partial shares on my broker.
For more information on partial shares, check out the homepage for educational resources on how treating partial shares can work for you.
Have more questions? Browse your on-demand videos, live webinars and interactive master classes on the learning centre.
>> In a falling interest-rate environment, investors may be considering the potential opportunities in fixed income. Anthony Imbesi, VP and Dir. for high-yield portfolio management at TD Asset Management joined his earlier to discuss the potential opportunity in his coverage universe.
>> Well, the high yield market is essentially any debt, whether it's bonds or loans, that's rated below investment grade. So anything with a Triple B-minus rating or lower is considered high yield or leveraged credit.
And it's quite a big market. The US dollar market is about $1.3 trillion in size.
If you include a euro denominated high yield, and emerging markets, and leveraged loans, you can get to $3 and 1/2 trillion.
And if you throw in private credit or direct lending, it gets to about $5 trillion or greater. So that's a pretty big market.
It's significant. And it's one that shouldn't be ignored.
>> When people refer to the high yield market, a common term that we hear-- >> You might know it by a different name, right?
>> Exactly, junk. Junk bonds. Right?
It's thrown out by the media a lot. But essentially, it can be misleading because a lot of these companies, every asset class has good quality companies and lower quality companies. High yield is no exception.
And within that space, I think what's important to know is you can find good companies that might be rated high yield that can make perfect sense for a fixed income portfolio.
So when we look at the high yield market, one of the things we do is we screen out all these potential lower quality names and do our analysis. But effectively, it's a market that should be considered for any investors in their high yield portfolio.
And when we-- again, talking about junk bonds-- it's an important market for issuers. If you can issue in the investment grade market, this is the market where companies can access capital and grow their businesses.
Some companies have actually grown to become investment grade over time, while others have remained high yield.
And there's nothing wrong with that. For example, when we look at-- I'll name some companies for you.
Ford Motor Credit, or Ford Motor, for example, Kraft, Heinz, T-Mobile, Netflix, Uber, Tesla in the US and in Canada, National Bank, Laurentian Bank, Air Canada, Bombardier, Rogers, Quebecor, all these companies have or have had at one point high yield.
>> I'm actually surprised to hear that. I mean, these are some big name companies on both sides of the border.
>> Exactly. So if you paint the entire asset class with the same brush, you're really missing out on these opportunities.
Because if you think about it, a lot of investors might own some of the equities, either directly or indirectly.
Institutions own the equities of these companies. And yet if things went really badly, if you got into a bankruptcy or a restructuring scenario, you would much rather be a bondholder than an equity holder because bondholders get paid off first before any residual value gets allocated to the equity holders.
And don't forget, this high yield market, it's a market that's invested by institutions such as pension funds, sovereign wealth funds, insurance companies.
They do it to enhance their income, improve their returns.
>> All right. Let's talk about nice breakdown of what the space is, a better understanding of the space.
Probably people in the audience would be saying, I had no idea some of those companies either are or used to be. Let's talk about the opportunity there are. I believe you have some charts for us in terms of how the space has performed.
>> Yeah, there's definitely opportunities in high yield. I'll highlight some quickly here.
Obviously, return is the big one. High yield has had compelling returns historically.
It has outperformed pretty much every major fixed income asset class that we've seen. The bars on the left, I guess, of that graph, just show you how it compares with the more safer or deemed safer investment grade corporate bonds or even treasuries or government bonds, which you can see here.
Let's just look at investment grade compared to high yield. Over time, over 20 years, an annually, you can get up to 200 basis points or more or the market has delivered 200 basis points or more of excess returns than those asset classes.
And when you compound that, that can really make a difference in the outcomes of investors portfolios. And a lot of people say, well, what about the risks? Or yes, you can get certain returns but the price volatility.
So I guess this graph here, we indicate-- we adjust for that.
So what we're doing is we're showing the returns for the asset classes, for a few asset classes.
And we're showing the volatility. And then, we're just taking the ratio between that.
And you can see loans and high yield, again this is leveraged credit, comes out ahead of the other asset classes.
So in other words, you're getting more return for that given amount of volatility, which again makes it a more compelling argument to consider, high yield or leveraged credit, as part of your fixed income solution.
>> Do we have one more picture for the audience? I can't remember if we had two or if we had three.
>> I think that was it.
>> That was it?
>> That was-- >> Yeah, they were nice pictures.
>> Yeah, the best benefit, I guess, is returns.
But there's other benefits, like diversification. So when you compare-- if you just limit yourself to Canadian investment grade corporates, you're really limiting yourself to a much smaller market. But if you start including high yield into that, you're giving yourself access to a market that's four and a half times the size, actually over it's over times the size, but four and a half times more companies to choose from and over 25 different industries.
For example, Canadian IG, 35% of the market is just financials, financial related companies. Financials and utilities make up 50% of the market. And then if you throw in energy, that's almost 2/3 of the Canadian corporate investment grade market. You can't really diversify your portfolio with those three sectors.
Bringing in high yield gives you that opportunity.
Another thing is duration. Duration is much lower in high yield than it is in your investment grade bonds.
The reason is, typically, high yield bonds have a 5- to 10-year maturity.
And they're also callable. So they never really get to that maturity, which means you have a shorter duration period and therefore less sensitivity to interest rate risk.
>> Let's talk about some of the risks there. Because obviously, I mean, yield usually reflects risk and risk premiums.
So the yields are higher.
What do we need to be aware of on the risk side?
>> Right, good point. Like every asset class, there's always risks involved. With high yield, particularly, I think credit risk is the big one. I mean, you are taking on credit risk by investing in high yield. And when we talk about credit risk, there's different components of it. The big one is default risk. Default risk is just really when a company misses a coupon payment or just can't pay its principal back at maturity.
Other types of default risk are that we're seeing more these days are distressed debt exchanges.
And that occurs when a company offers to exchange its existing bonds, again, this company is in distress.
The bonds are trading at the stress levels for new bonds.
And it entices bondholders to kind of accept that deal with the alternative being, well, if you don't, we can go through a restructuring, a chapter 11 bankruptcy, and take your chances there.
Sometimes the outcomes are worse out of a chapter 11 bankruptcy. Sometimes they're better.
But what it gives the bondholders the option of is to value the proposal and say, well, OK, fine, we can take a bit of a discount or a haircut today, keep the company alive. We extend the bond maturity. The company lives to operate another day and continues as a going concern for the benefit of not going through chapter 11 restructuring.
>> That was Anthony Imbesi, VP and Dir.
for high-yield portfolio management at TD Asset Management.
Now, let's get you updated on the markets.
We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
Let's jump into the map function, nice view of the market movers. You will go through the TSX 60. On the top line competent, we are pretty much flat on the day but it is a moneymaking week and we are about 24,000, we closed the buffet yesterday for the first time ever, still about it right now.
What's going on? We have a bit of movement in some of the oil and gas names, whether it's CNQ, Suncor, Cenovus all showing some upside. They sold off yesterday with the price of crude yesterday.
TransCanada PipeLines down about 1%. You can see minors in the basic materials group giving back a little survey. They gain quite handsomely yesterday as metals were up across the board and then in the financial space, there's green on the screen across some of the insurers and the big bank names.
Now south of the border, I want to check in on the S&P 100. Same story with the S&P 500. Basically just flat but it's been a moneymaking week and it's interesting, when I take a look at the past month, September has a reputation.
September was volatile in the first couple of days, it has a reputation for not being kind to equities, but after today, we have one more day of September, knocking on this desk, it looks like a moneymaking month as well. Nvidia pulling back about 2.3%. Across the board, a bit of a mixed picture with a little bit of green on the screen, a little bit of red.
The rally that we have seen in big US tech stocks has pushed markets to record highs this year, but of course, the question becomes, cannot really continue? Jennifer Martin, global equity portfolio specialist at T. Rowe Price joined his earlier to discuss.
>> I would say AI has been definitely one of those themes you've had to responsibly navigate and capture that alpha for clients. And right now, if you think about AI, we think it has the possibility to be the biggest productivity enhancer since electricity. So I would say we're very constructive on this next generation technology. And we feel that we still have room to go.
But let me break down where we kind of see the areas of opportunity.
You have to kind of understand where you are in the cycle. And we know that we're, right now, in a very large infrastructure build.
And one of the things that we've looked at over the last year and a half is just the tremendous amount of capex those large hyperscalers have gone and really spent into building their AI infrastructure.
It almost seems unlimited. And I think the insight for us is appreciating the motivation of that spend. It's definitely offensive.
They want to produce some really great applications.
But it's also defensive, because GPUs create contestable markets.
For the first time, we're talking about, could there be a competitor to, for example, Google Search.
So we have to responsibly navigate where we are. One of the areas that we're looking for our guidepost on that is just, where are we on year-over-year acceleration in capital expenditures?
And what you're seeing is that we might be nearing peak year-over-year growth.
Absolute growth will still be quite large year-over-year, but that year-over-year deceleration might start happening. And so that means that you have to be a little bit more selective maybe in the next period of time for infrastructure.
But I would say we're still at the beginning of the AI cycle. And one thing that most of us are really thinking about is, what are the killer applications, like what that is. And I would say we're still looking for those right now.
But I'll pause there. But I would say that's kind of our summary. We still feel it's a very defining technology paradigm.
And we know where we are in the infrastructure build.
And we're really excited to find out what's next.
>> You know I want to talk to you about the potential for killer apps, because there's a huge amount of spendage you've outlaid, it's not just to have a really cool room full of computers saying it's filled with all kinds of crazy chips.
Don't you worry. They want to produce something in the end. Is that the next leg for this, that someone finally comes up with that killer app that everyone says, I have to have this?
>> Well, I definitely think the killer apps are on the horizon. I always like to remind, though, individuals that when Apple launched the iPhone, none of us knew what the killer app was. I laugh now. I reflect like I never thought in a million years I'd be in the back of someone's Honda going to the airport.
And I think that we're going to have that moment with a gen AI app. But I would say the debate around AI, particularly related to the infrastructure cycle, is the idea that, what's that return on investment?
And I think we have a few tangible examples already.
One area I would point you to is just the engagement uplift in the social media platforms, whether it's Meta or Alphabet.
And the other area that's really easy to look at is in Microsoft for Copilot. I know, at least at our firm, our developers have a very high productivity. I recently got Copilot for Microsoft Teams. It summarizes some of the chats. It's incredible.
And so I think these killer apps might actually be evolving into more table stakes to existing applications. And then there probably still is that killer app down the horizon. But we just don't know what it is.
>> The hardware spend has been big looking for that killer app down the horizon. You talked about the growth cycles. Do we imagine there's still going to be demand, though? I don't think they're done building those centers.
>> Well, I think the infrastructure cycle-- you're correct. I think right now, we're estimating-- so the capex budget for the four largest hyperscalers has gone from $100 billion to $200 billion at the end of this year.
And it's probably growing again in 2025-- not at the same growth rate, but it's still absolute dollars going higher.
So that will benefit the chip ecosystem.
But what the interesting thing is about this cycle, particularly for hardware and chips, since you brought that up, is Nvidia, just because of law of large numbers, will see some deceleration in revenue. But all these other companies that we own in our portfolios related to semis are troughing on fundamentals.
And a good example is AMD. Their CPU is sort of bottoming. And a lot of that's just the end market of PC kind of coming out of that COVID normalization. You're also seeing, possibly, some next generation AI chips, their MI360 chips.
And then you get the added bonus, possibly, of some market share gains with the challenges that Intel-- >> I was going to say, does it all have to be in Nvidia all the time? I can't imagine that they're sitting back saying, well, you won. We're just going to sit here.
>> So I think, and Lisa Su, we trust-- I think that's a really interesting name, particularly on the fundamentals. But I would also expand that to other parts of technology. ASML is really troughing on orders. We see those accelerating in '25.
And there's a lot of areas, particularly in analog semiconductors and semis that sell into electronics, where they sell into the end market of industrials. Those have troughing and hopefully improving fundamentals. So there's actually some really interesting areas just in, since you mentioned it, the hardware side that still show some life.
>> Now, of course, AI has been the big macro theme for the space. But in the here and now, in the world, lots happens, including a US presidential election.
What impact could that have on the tech space?
>> Well, I think one thing that we've been sharing with our clients is that regardless of who wins a US election, we don't think austerity is in the plan. And what I mean by that is both parties likely will continue to spend. And so that will be the backdrop.
And that benefits an industry like technology where we're building redundancy in supply chains.
The other area that both parties seem to be coalescing on is being a little bit more coalition of protectionist vis a vis China.
And so that won't change. Now, some have conjectured that under Harris, it could be more of the same, particularly from a regulatory standpoint.
And that would actually benefit large cap tech.
Some have conjectured under Trump, with less regulation, that could benefit small and mid-cap stocks, potentially small and mid-cap technology. And that would maybe spur maybe a little bit more either innovation or M&A. So it depends. But, regardless, we don't think spending is going to happen in both, and generally we are supportive of protecting US technology.
>> That was Jennifer Martin, global equity portfolio specialist with T. Rowe Price.
As always, make sure you do your own research before making any investment decisions.
on a programming note, we are going to be off on Monday as we mark truth and reconciliation day. We will be back on Tuesday with Caitlin Cormier, Senior client education instructor with TD Direct Investing. She's going to take your questions about how to get part of the WebBroker and Advanced Dashboard platforms. A reminder that you can get those questions in ahead of time. Just email MoneyTalkLive@TD.com. That's all the time we have for the show today. On behalf of me, Anthony and came in front of the camera and everyone behind the scenes that brings you our daily shows, thanks for watching and we will see you next week.
[theme music]
coming up on today's show, we are going to discuss how the US presidential race is shaping up and the potential impact on the markets and the economy. We will hear from TD Cowen's Chris Krueger.
TD Asset Management's Anthony Imbesi is going as his view on the potential opportunity and high-yield bonds as interest rates trend lower, and MoneyTalk's Anthony Okolie is going to break down the latest Canadian GDP reports and some fresh inflation data out of the states. Plus in today's WebBroker education segment, Caitlin Cormier will give us and explain on Canadian Depository Receipts and where you can find on the platform.
Before we get all that, let's get you updated on the markets. Last trading day of the week, not a lot happening out there but it's a moneymaking week when you look back on the past five days, including the TSX Composite Index. Closing yesterday about 24,000. We got past that line at the close yesterday, 24,038 today, we are up a modest two tics, still holding about that line.
Noticing some bounce back and the energy shares today, they got hit yesterday on the retreating price of crude, not the crude is making any big moves today, it sort of study but a little bit of money coming back into the names after the cell of yesterday, $3.96 per Baytex, up 2.5%.
Metals were performing strongly across the board yesterday, left a lot of the minors.
A little bit of giveback today. At $27.63, Barrick is down about 2.5%.
South of the border, Anthony is gonna break down the Fed's preferred gauge of inflation in just a few moments time.
Investors are chewing on that. It's been a moneymaking week but right now we are pretty subdued on the S&P 500, up two points or four tics.
The tech heavy NASDAQ, saw some weakness there, nothing dramatic but not keeping pace with the broader market. Pull that up, it's down modestly… There we go. The NASDAQ, down 52 points, a little more than 1/4 of a percent. There is some money moving in the direction of Ford.
Earlier this week, there was concern on Wall Street about how the automakers, particularly Detroit automakers, GMO or Ford, are going to fair in this economy with consumers pulling back on spending and increased Chinese competition. Those stocks got hit earlier in the week, a little bounce back there. At $10.96, you are up 2.6% on Ford Motor.
And that's your market update.
We have some fresh economic data here in Canada. In July, the economy grew more than expected but early indications suggest it may have stalled out to the end of the summer. MoneyTalk's Anthony Okolie has all the numbers and breaks them down for us.
>> Some resilience in the GDP for July. It came in at +.2% month over month in July after a flat read in June. It landed ahead of stats Canada's estimate. Some early guidance for August, it seems to be a bit softer, points to no growth in August.
TD Economics notes that third quarter GDP is tracking just north of 1% on 1/4 over quarter annualized basis. That's well below Bank of Canada's 2.8% forecast.
Let's break it down, we will look at some of the details.
When we look at where growth was, the retail sector contributed most to July GDP, the second straight rise sectors biggest monthly gain since January 2023.
When we look within retail, it's really the motor vehicle and parts dealers that sell the most growth. Cars have been generally pretty strong in the last year, boosted by the pent-up demand coming out of the pandemic and also the moving population. The biggest laggards, as you can see in the chart, construction, transportation and warehousing with rail transport taking a hit from those wildfires in Jasper Alberta. Overall, a pretty strong number for July although when we look at the third quarter it seems to be coming in weaker than expected.
>> We how, after seeing the fight come out of the gate with a half-point cut, people are starting to rumble about whether the Bank of Canada needs to go 50 basis points. We take a look at this GDP report, what is the thinking there on the next BOC meeting?
>> In terms of where markets are, 60% probability that they believe that the Bank of Canada will cut 50 basis points, a little bit more than a coin flip. We know that the Bank of Canada is expecting growth to slow in the coming months below their June forecast but we don't know by how much I think that's what's leading to some of the uncertainty about whether it's going to be 25 or 50 basis points. TD Securities does not believe that this report favours the potential for the 50 basis point rate cut. Since the economic data has been pretty strong on balance, TD Securities is looking for a 25 Basis Point Rate Cut in October.
>> Now we also have some information from south of the border.
This is the US Federal Reserve's preferred gauge of inflation, PCE.
>> All quiet on the inflation front. The PCE came in at +.1% for August, that's marginally lower-than-expected, it's up to .2% from a year ago. That's the lowest level since February 2021 and it was also in line with Wall Street's estimates. When we exclude food and energy, the court PCE up again .1% versus .2% expected, year-over-year, +2.7%, due to base effect.
Overall, the Fed's core measures are heading in the right direction.
>> Interesting times indeed. It feels like the market is saying, we have tamed to the inflation bees, now we have to worry about the labour market but of course, the central bank is still a little cautious.
They are not signalling all clear, all done. They are saying that they think we are on track.
>> That's the key. They believe that inflation seems to be under control, moving towards the 2% target. I think the big focus will be next Friday September jobs report as the Fed calibrates a future rate cuts. We will be focusing on the job market because we have seen the job market we can since last year.
>> Interesting stuff. Thanks for breaking it down.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now for an update on the top stories in the world of business and a look at how the markets are trading.
Costco falling short of Wall Street's expectations in its most recent quarter, cash-strapped households are pulling back on discretionary spending.
Groceries and other staples are in high demand at the retailer but customers are delaying purchases appraiser items such as furniture and sporting goods. Costco same-store sales, acute metric in the retail space, also pressured by lower prices at the pumps as motorists have been paying less for gasoline.
Let's check in on shares of BlackBerry, they are under pressure today following the company's latest earnings report.
Investors appear to have some concerns about challenges at the Waterloo, Ontario-based companies cybersecurity division, as well as delays with his automotive software and development programs.
Right now the stock is down about 7.5%.
Got shares of Bristol-Myers Squibb on the move today. The US Food and Drug Administration has approved the drugmakers treatment for schizophrenia in adults.
This twice-daily pill is the first new type of treatment for that chronic mental disorder in more than 70 years. You've got Bristol-Myers Squibb stock up a little more than 30%.
Quick check in on the markets. It has been a moneymaking week on Bay Street and Wall Street. The TSX getting about 24,000 for the first time," for the first time yesterday.
We are starting to fade a little bit, down 16 points or seven ticks, we will see if we hold that line until the close, we are just about 24,000. South of the border, up a fraction of one point on the S&P 500, statistically flat on that broader read of the US market.
Got the US election just about five weeks away in the presidential race between Democrat Kamala Harris and Republican Donald Trump remains very close, but there are some interesting trends emerging.
Still a lot of campaigning days ahead.
Chris Krueger, managing director at TD Cowen Washington Research Group joined our Kim Parlee to discuss how he sees things shaping up.
>> Where we are is we are effectively doing a 100 day snap election. This is totally unprecedented.
It's never happened before. We're not going to have any more debates between Harris and Trump. So that's where we are.
Looking at the battleground states, there are really two regions, right?
Because in the US, we don't have a national election. We have a handful of state elections, the goal being 270 electoral votes. That's how you're elected president.
So you've got two regions, the Sun Belt states, that's North Carolina, Georgia, Arizona, Nevada.
And then you've got the so-called blue wall or the Rust Belt of Michigan, Pennsylvania, and Wisconsin.
Harris is best-- Harris can go both ways.
So can Trump.
Trump is a little bit better on that Sun Belt track.
But hopefully, we'll get some clarity on November 5 when the election is supposed to end.
But voting is underway in a lot of states, right?
Probably as much as 80% of the vote will be in by November 5. So stay tuned.
>> That's remarkable. And I know I keep quoting you, by the way, on the stat that 80% is happening before November 5 because it's extraordinary and helps people understand the importance of polling right now. One question I have, and I'm curious because from people I've spoken to, some Americans, how effective is polling if someone who is being polled doesn't want to reveal, perhaps, that they are supporting Donald Trump?
Because that's got to be something you have to manage.
>> Sure. The last two cycles, people probably should have given Trump something like 200 basis points.
The nuance with this election, I think, as well, though, is that typically, pollsters aren't picking up newly-registered voters.
And since Biden dropped out, a number of younger voters have registered for the first time.
So perhaps Harris's numbers are being under reported. We don't really know.
We'll hopefully know on November 5.
Some of the metrics we can look at, though, fundraising numbers, crowd size, on-the-ground efforts, the Get Out the Vote efforts. And since the debate, Harris is pretty much winning on all those fronts.
Having said that, this is Trump's third presidential run.
And he just has this well of support that is really unmatched in American politics.
>> You mentioned the fact that President Trump has said no more debates.
I know that some people have been asking Kamala Harris why she's not doing more media interviews.
We do, though, have a scheduled debate coming-- I think it's October 1-- between the vice president candidates. Does it matter in this election?
>> Probably not, but perhaps. We're going to be on the margins.
I think when you look at 2020, more than 150 million votes were cast in that election.
Joe Biden got more votes than any candidate ever.
Donald Trump got the second most votes for any candidate ever. Right?
Both of them eclipsed Barack Obama's numbers.
When you boil that down, though, that race, over 150 million ballots cast, came down to fewer than 45,000 combined votes in three states.
So this is a race that is within the margin of error. So the margins matter.
Could a great debate performance or a poor debate performance move the needle a little bit? Perhaps.
Would also note, on October 7, it sounds like-- or October 6. It's a little unclear.
But both candidates might appear on 60 Minutes.
>> And I think the one thing you keep saying-- and anyone who watches your research, which I highly recommend. It's great stuff. But you keep saying, it's 2024, expect the unexpected. You've had Biden bow out. You've had not one, but two assassination attempts, and of course, Kamala Harris coming. There's so many things that can happen.
>> There are so many things that can happen. We're not going to have any criminal trials or sentencing. That's been pushed out. But that's a whole component of the race, too, that I think has just fallen by the wayside. Did it move the needle with with the four separate criminal trials or the indictments? No, but that's just another completely unprecedented issue and topic in the cycle.
>> Let me ask you-- and I want to get into what we might expect. And we've talked about this before, but I think-- and there's, I'll say, an unusual outcome that I'm going to save for the end of the conversation because there's some complexity in it and I think they'll have to be schooled in US politics to understand it. But when you look at-- a number of people I've spoken to are expecting a split Congress.
>> Yeah.
>> But again, we'll see.
And then you have to weigh on the president, who will come in.
What, do you think, can Canada expect as an outcome of this election? And I know the problem is, the spectrum of possibilities are still quite wide at this point.
>> Incredibly wide. We do have the USMCA review process underway. And candidly, a lot of the contention within that three-country process that's underway, it's not on the northern border. It's on the southern border.
So when you have the trade reps discussing USMCA right now, the deadline being July 1, 2026, it's on issues like southern border enforcement, fentanyl, the perception of Chinese trans shipment into Mexico to get around tariffs.
So the US-Canada relationship will continue to thrive under either.
You have that USMCA review process to keep an eye on them.
>> Do you think, though, if we do see a Harris presidency, will it be perhaps, more of the same?
With where there's a Trump presidency, things will be different.
>> I think that the big question with a potential Trump presidency in the second term is that blanket tariff.
He's talked about a 10% blanket tariff.
That's increased to 20% in the last few weeks.
He doesn't talk about carve outs within that. I do think because of USMCA, you would have a carve out for Canada and Mexico.
That's obviously a huge variable that you wouldn't have to worry about with a Harris presidency.
>> Have you ever had to-- when you think about predicting what's going to happen-- I shouldn't say predicting, but just giving people information as they go-- it really has never been, I think, harder to really forecast, given what's going on.
>> It's surreal. You mentioned a great point, though. And that is the undercard in this election, which is the race for the Congress. And that's always critically important. The reason it's very important next year is that in the US, we have $5 trillion worth of debt and fiscal cliffs on the horizon, which happen regardless of election outcome.
Sometime next spring or summer, we have the debt ceiling to deal with.
Then at the end of next year, in the US, all of the 2017 Tax Cuts and Jobs Act, individual rates, they all sunset.
That's the largest tax increase in American history.
That's the purview of Congress and the White House, of course. But that's just a huge delta on the horizon.
>> I have two questions I would like to understand. I've heard some comments from some folks about how the narrow casting that's happening right now from the candidates, either during Kamala Harris, during the DNC speech, or others, but really trying to get at specific populations to convince them because that's how tight the election is.
>> Yeah. Absolutely. This is called micro targeting. There's so few undecided voters.
Then there's also, what's really going to drive the base. On the undecided voters, probably the best example of this is now that both candidates, Harris and Trump, want to not tax tips. Where did they both endorse that? In Nevada. Even more so than that, in Las Vegas.
So it's really trying to fit the policy for the politics. And you're going to continue to see that because when you're in the margin of error, again, anything on the margins can be determinative.
>> OK, let's talk about the margin of error and how close this can be because in your last note, you came out-- and again, you have to explain this to a Canadian audience, that to win, you needed 270-- >> Electoral votes.
>> --electoral votes. Thank you. But there's a scenario where neither side can get the 270. How does that even happen?
And what happens?
>> This is, without question, the worst-case scenario for anybody. So this made a lot of news recently because there was a push in the state of Nebraska. So within the US, it's winner take all.
Right? if you win the state, you win all the electoral college votes, with two exceptions, Nebraska and Maine.
So Maine, if you win the State of Maine, you get two electoral votes. But then the two congressional districts can split.
That happened before. Trump won northern Maine and Joe Biden won the Portland-based district, and Nebraska, overwhelmingly Republican state, save for that Omaha-based district, where Biden won.
Now, there was a push to change the rules.
They said, we're not going to do that.
So we still have this proportional allocation-- >> By the Republicans, if I'm not-- >> There was a push from Trump, Trump allies, and Republicans in the state.
And it lost by one, by one Republican vote.
That still doesn't resolve the issue in that you could have a scenario where neither candidate gets 270 and/or they actually tie.
If they tie-- well, so December 17 is when all the counting stops.
January 3 is when the new Congress is sworn in.
January 6 is when the new Congress certifies the presidential election.
If we're in the event of a tie, the new House of Representatives determines the presidential.
Even more so than that, though, each state delegation gets one vote.
So the 50-plus Congress members of California get one vote, state of Wyoming gets one vote, vice versa. Currently, Republicans have more state delegations.
So in a tie, Trump would very likely win.
Kim, it gets a little weirder, though, because the Senate determines the vice president. But net-net in a tie likely goes to Trump.
>> And was there some scenario too, if they couldn't decide the president, then-- because you had all the scenarios planned out.
>> There's that as well, because there a handful of delegations that are split delegations.
There's not a majority. So what would happen there?
And there's not a lot of case law on this.
So there are varying statutes that would apply.
In all likelihood, the new speaker of the House would become the acting president until this was resolved, likely at the Supreme Court.
This situation is completely surreal.
Hasn't happened since before the Civil War.
But you look 24 years ago, the Supreme Court decided Bush v. Gore.
So it's not completely unprecedented. But I think this is certainly what keeps me up at night.
>> That's an understatement. Let me ask then-- there's just about a minute left-- what are you watching between now and November 5?
And going to be-- and again, I know you said a lot of votes have already been cast. But as we go, what are you watching?
>> Where are the candidates spending their time?
And are they drawing new and unique people to those rallies?
And what does their ground game look like?
Are they knocking on doors? How many volunteers do they have in the state?
>> Do they have Taylor Swift?
>> Do they have Taylor Swift? Shout out to my daughter Clementine.
Also, fundraising numbers.
That's a pretty important metric to watch.
And the Harris campaign out raised the Trump campaign by a factor of 4 last month.
>> That was Chris Krueger, managing director at TD Cowen Washington Research Group.
Now, let's get our educational segment of the day.
If you are looking to invest in foreign companies but don't want to worry about currency conversions, you may consider Canadian Depository Receipts. Caitlin Cormier, Senior client education instructor with TD Direct Investing has more.
>> CDRs or Canadian Depository Receipts, you might be curious about what these are when you see them on the platform.
They represent shares of global companies but they are traded on the Canadian stock exchange in Canadian dollars.
Companies like Costco, Alphabet, Amazon, Disney, Microsoft, lots of these companies have CDRs available. They have a built-in currency hedge. They are actually traded in Canadian dollars.
Your return though depends on the underlying shares. So it's essentially like holding that underlying company in Canadian dollars.
Typically, these CDRs, their initial price would be $20. When we think about the price of some of those companies are listed, they are well over $20 in share price so even above $3000 US. This means that the CDRs allow you a more accessible way to purchase these underlying companies.
The difference between these impartial shares which we have recently launched on the platform is that in this case, you are actually good to be investing in Canadian dollars and these international companies as opposed to whatever currency they are in, so Canadian or US. The CDR is actually similar in that it's a partial representation of whatever the underlying share is.
So there are a lot of similarities to partial shares but really the key differences you are investing in Canadian dollars and that hedge is built-in. Let's help into WebBroker and see where we can find these CDRs and what they might look like. We are going to click on research, stocks, and once you to this page we can type in the name of any company we might be looking for. Let's go ahead and type in Apple.
You will notice here, it looks exactly like the regular Apple we have up on the screen except it has a Canadian flag.
I'm and click on that.
You'll notice it says CBOE, that's the exchange the securities trade on, it's Canada, so we can see this is a Canadian dollar version. We can see the share price at $33 is significantly lower than the AppleShare price on the US stock exchange so those are some of the things that will indicate that this is one of these CDRs.
When we are ready to go ahead and purchase, we go ahead and click the buy button likely would for any other stock.
It's going to pre-fill some of the information in here. We are not able to do fractional for these particular securities. We would just after purchase full units so we could put in how many shares we would like to purchase, for example 10, how long we want to leave the order open for and we can go ahead and submit the order for processing. We also were able to do limit orders on these types of securities if we so choose. A couple of different ways to be able to invest in companies that have large share prices if you are just trying to get in with a smaller amount in these types of companies, these CDRs or partial shares can both be great options to be able to get invested at a lower dollar cost.
Don't forget, we have investor education month coming up in October, looking forward to seeing you all at lots of our events.
>> Our thanks to Caitlin Cormier, Senior client education instructor with TD Direct Investing. As Caitlin mentioned, Octobers investor education month. You can use this QR code to navigate to TD Direct Investing's investor education month for more info. Speaking of education, Caitlin is going to join us on Tuesday of next week telling us more about how to get more out of the WebBroker platform.
Tune in for that one.
In addition to CDRs, Caitlin mentioned that TD Direct Investing also recently launched partial shares. Here's an explainer.
>> To buy or sell partial shares also known as fractional shares in WebBroker, open a trade ticket and then select your account. You can trade partial shares in Canadian and US dollars using a cash account, margin account, TFSA, RRSP, RIF, RESP or our DSP. Next, enter the symbol or name of the stock or ETF you want to trade and check out the quote for the current price. Partial trading is available on many stocks and ETFs listed on the Canadian and US exchanges.
You will see the list of options here.
The fractional icon will be green. You can only buy and sell partial shares as a market order, meaning your trade will execute the best available price. If you switch to another order type such as limit, stock market or stop limit, the partial quantity will round to a full share quantity. You can place a buy order in one of two ways. Number one, enter the dollar amount you want to invest. The calculator will estimate how many shares you can buy, including fractions up to five decimal places. Or number two, enter a whole or partial quantity and the calculator will estimate the dollar value.
Cell orders are always quantity base. The dollar amount will be estimated. You can enter quantity based orders at any time but the dollar-based order ticket is only available during market hours.
For all partial orders, the good till date will be set today.
Click preview order to review the details of your trade ticket. When you trade less than a share, you will pay a flat fee of 199. Otherwise, standard commissions apply. Your order is placed as soon as you click agree and send and executed in real time during market hours.
To check the status of your order, under the trading tab, select order status.
Here, you will find the details of your partial shares order and that's how you trade partial shares on my broker.
For more information on partial shares, check out the homepage for educational resources on how treating partial shares can work for you.
Have more questions? Browse your on-demand videos, live webinars and interactive master classes on the learning centre.
>> In a falling interest-rate environment, investors may be considering the potential opportunities in fixed income. Anthony Imbesi, VP and Dir. for high-yield portfolio management at TD Asset Management joined his earlier to discuss the potential opportunity in his coverage universe.
>> Well, the high yield market is essentially any debt, whether it's bonds or loans, that's rated below investment grade. So anything with a Triple B-minus rating or lower is considered high yield or leveraged credit.
And it's quite a big market. The US dollar market is about $1.3 trillion in size.
If you include a euro denominated high yield, and emerging markets, and leveraged loans, you can get to $3 and 1/2 trillion.
And if you throw in private credit or direct lending, it gets to about $5 trillion or greater. So that's a pretty big market.
It's significant. And it's one that shouldn't be ignored.
>> When people refer to the high yield market, a common term that we hear-- >> You might know it by a different name, right?
>> Exactly, junk. Junk bonds. Right?
It's thrown out by the media a lot. But essentially, it can be misleading because a lot of these companies, every asset class has good quality companies and lower quality companies. High yield is no exception.
And within that space, I think what's important to know is you can find good companies that might be rated high yield that can make perfect sense for a fixed income portfolio.
So when we look at the high yield market, one of the things we do is we screen out all these potential lower quality names and do our analysis. But effectively, it's a market that should be considered for any investors in their high yield portfolio.
And when we-- again, talking about junk bonds-- it's an important market for issuers. If you can issue in the investment grade market, this is the market where companies can access capital and grow their businesses.
Some companies have actually grown to become investment grade over time, while others have remained high yield.
And there's nothing wrong with that. For example, when we look at-- I'll name some companies for you.
Ford Motor Credit, or Ford Motor, for example, Kraft, Heinz, T-Mobile, Netflix, Uber, Tesla in the US and in Canada, National Bank, Laurentian Bank, Air Canada, Bombardier, Rogers, Quebecor, all these companies have or have had at one point high yield.
>> I'm actually surprised to hear that. I mean, these are some big name companies on both sides of the border.
>> Exactly. So if you paint the entire asset class with the same brush, you're really missing out on these opportunities.
Because if you think about it, a lot of investors might own some of the equities, either directly or indirectly.
Institutions own the equities of these companies. And yet if things went really badly, if you got into a bankruptcy or a restructuring scenario, you would much rather be a bondholder than an equity holder because bondholders get paid off first before any residual value gets allocated to the equity holders.
And don't forget, this high yield market, it's a market that's invested by institutions such as pension funds, sovereign wealth funds, insurance companies.
They do it to enhance their income, improve their returns.
>> All right. Let's talk about nice breakdown of what the space is, a better understanding of the space.
Probably people in the audience would be saying, I had no idea some of those companies either are or used to be. Let's talk about the opportunity there are. I believe you have some charts for us in terms of how the space has performed.
>> Yeah, there's definitely opportunities in high yield. I'll highlight some quickly here.
Obviously, return is the big one. High yield has had compelling returns historically.
It has outperformed pretty much every major fixed income asset class that we've seen. The bars on the left, I guess, of that graph, just show you how it compares with the more safer or deemed safer investment grade corporate bonds or even treasuries or government bonds, which you can see here.
Let's just look at investment grade compared to high yield. Over time, over 20 years, an annually, you can get up to 200 basis points or more or the market has delivered 200 basis points or more of excess returns than those asset classes.
And when you compound that, that can really make a difference in the outcomes of investors portfolios. And a lot of people say, well, what about the risks? Or yes, you can get certain returns but the price volatility.
So I guess this graph here, we indicate-- we adjust for that.
So what we're doing is we're showing the returns for the asset classes, for a few asset classes.
And we're showing the volatility. And then, we're just taking the ratio between that.
And you can see loans and high yield, again this is leveraged credit, comes out ahead of the other asset classes.
So in other words, you're getting more return for that given amount of volatility, which again makes it a more compelling argument to consider, high yield or leveraged credit, as part of your fixed income solution.
>> Do we have one more picture for the audience? I can't remember if we had two or if we had three.
>> I think that was it.
>> That was it?
>> That was-- >> Yeah, they were nice pictures.
>> Yeah, the best benefit, I guess, is returns.
But there's other benefits, like diversification. So when you compare-- if you just limit yourself to Canadian investment grade corporates, you're really limiting yourself to a much smaller market. But if you start including high yield into that, you're giving yourself access to a market that's four and a half times the size, actually over it's over times the size, but four and a half times more companies to choose from and over 25 different industries.
For example, Canadian IG, 35% of the market is just financials, financial related companies. Financials and utilities make up 50% of the market. And then if you throw in energy, that's almost 2/3 of the Canadian corporate investment grade market. You can't really diversify your portfolio with those three sectors.
Bringing in high yield gives you that opportunity.
Another thing is duration. Duration is much lower in high yield than it is in your investment grade bonds.
The reason is, typically, high yield bonds have a 5- to 10-year maturity.
And they're also callable. So they never really get to that maturity, which means you have a shorter duration period and therefore less sensitivity to interest rate risk.
>> Let's talk about some of the risks there. Because obviously, I mean, yield usually reflects risk and risk premiums.
So the yields are higher.
What do we need to be aware of on the risk side?
>> Right, good point. Like every asset class, there's always risks involved. With high yield, particularly, I think credit risk is the big one. I mean, you are taking on credit risk by investing in high yield. And when we talk about credit risk, there's different components of it. The big one is default risk. Default risk is just really when a company misses a coupon payment or just can't pay its principal back at maturity.
Other types of default risk are that we're seeing more these days are distressed debt exchanges.
And that occurs when a company offers to exchange its existing bonds, again, this company is in distress.
The bonds are trading at the stress levels for new bonds.
And it entices bondholders to kind of accept that deal with the alternative being, well, if you don't, we can go through a restructuring, a chapter 11 bankruptcy, and take your chances there.
Sometimes the outcomes are worse out of a chapter 11 bankruptcy. Sometimes they're better.
But what it gives the bondholders the option of is to value the proposal and say, well, OK, fine, we can take a bit of a discount or a haircut today, keep the company alive. We extend the bond maturity. The company lives to operate another day and continues as a going concern for the benefit of not going through chapter 11 restructuring.
>> That was Anthony Imbesi, VP and Dir.
for high-yield portfolio management at TD Asset Management.
Now, let's get you updated on the markets.
We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
Let's jump into the map function, nice view of the market movers. You will go through the TSX 60. On the top line competent, we are pretty much flat on the day but it is a moneymaking week and we are about 24,000, we closed the buffet yesterday for the first time ever, still about it right now.
What's going on? We have a bit of movement in some of the oil and gas names, whether it's CNQ, Suncor, Cenovus all showing some upside. They sold off yesterday with the price of crude yesterday.
TransCanada PipeLines down about 1%. You can see minors in the basic materials group giving back a little survey. They gain quite handsomely yesterday as metals were up across the board and then in the financial space, there's green on the screen across some of the insurers and the big bank names.
Now south of the border, I want to check in on the S&P 100. Same story with the S&P 500. Basically just flat but it's been a moneymaking week and it's interesting, when I take a look at the past month, September has a reputation.
September was volatile in the first couple of days, it has a reputation for not being kind to equities, but after today, we have one more day of September, knocking on this desk, it looks like a moneymaking month as well. Nvidia pulling back about 2.3%. Across the board, a bit of a mixed picture with a little bit of green on the screen, a little bit of red.
The rally that we have seen in big US tech stocks has pushed markets to record highs this year, but of course, the question becomes, cannot really continue? Jennifer Martin, global equity portfolio specialist at T. Rowe Price joined his earlier to discuss.
>> I would say AI has been definitely one of those themes you've had to responsibly navigate and capture that alpha for clients. And right now, if you think about AI, we think it has the possibility to be the biggest productivity enhancer since electricity. So I would say we're very constructive on this next generation technology. And we feel that we still have room to go.
But let me break down where we kind of see the areas of opportunity.
You have to kind of understand where you are in the cycle. And we know that we're, right now, in a very large infrastructure build.
And one of the things that we've looked at over the last year and a half is just the tremendous amount of capex those large hyperscalers have gone and really spent into building their AI infrastructure.
It almost seems unlimited. And I think the insight for us is appreciating the motivation of that spend. It's definitely offensive.
They want to produce some really great applications.
But it's also defensive, because GPUs create contestable markets.
For the first time, we're talking about, could there be a competitor to, for example, Google Search.
So we have to responsibly navigate where we are. One of the areas that we're looking for our guidepost on that is just, where are we on year-over-year acceleration in capital expenditures?
And what you're seeing is that we might be nearing peak year-over-year growth.
Absolute growth will still be quite large year-over-year, but that year-over-year deceleration might start happening. And so that means that you have to be a little bit more selective maybe in the next period of time for infrastructure.
But I would say we're still at the beginning of the AI cycle. And one thing that most of us are really thinking about is, what are the killer applications, like what that is. And I would say we're still looking for those right now.
But I'll pause there. But I would say that's kind of our summary. We still feel it's a very defining technology paradigm.
And we know where we are in the infrastructure build.
And we're really excited to find out what's next.
>> You know I want to talk to you about the potential for killer apps, because there's a huge amount of spendage you've outlaid, it's not just to have a really cool room full of computers saying it's filled with all kinds of crazy chips.
Don't you worry. They want to produce something in the end. Is that the next leg for this, that someone finally comes up with that killer app that everyone says, I have to have this?
>> Well, I definitely think the killer apps are on the horizon. I always like to remind, though, individuals that when Apple launched the iPhone, none of us knew what the killer app was. I laugh now. I reflect like I never thought in a million years I'd be in the back of someone's Honda going to the airport.
And I think that we're going to have that moment with a gen AI app. But I would say the debate around AI, particularly related to the infrastructure cycle, is the idea that, what's that return on investment?
And I think we have a few tangible examples already.
One area I would point you to is just the engagement uplift in the social media platforms, whether it's Meta or Alphabet.
And the other area that's really easy to look at is in Microsoft for Copilot. I know, at least at our firm, our developers have a very high productivity. I recently got Copilot for Microsoft Teams. It summarizes some of the chats. It's incredible.
And so I think these killer apps might actually be evolving into more table stakes to existing applications. And then there probably still is that killer app down the horizon. But we just don't know what it is.
>> The hardware spend has been big looking for that killer app down the horizon. You talked about the growth cycles. Do we imagine there's still going to be demand, though? I don't think they're done building those centers.
>> Well, I think the infrastructure cycle-- you're correct. I think right now, we're estimating-- so the capex budget for the four largest hyperscalers has gone from $100 billion to $200 billion at the end of this year.
And it's probably growing again in 2025-- not at the same growth rate, but it's still absolute dollars going higher.
So that will benefit the chip ecosystem.
But what the interesting thing is about this cycle, particularly for hardware and chips, since you brought that up, is Nvidia, just because of law of large numbers, will see some deceleration in revenue. But all these other companies that we own in our portfolios related to semis are troughing on fundamentals.
And a good example is AMD. Their CPU is sort of bottoming. And a lot of that's just the end market of PC kind of coming out of that COVID normalization. You're also seeing, possibly, some next generation AI chips, their MI360 chips.
And then you get the added bonus, possibly, of some market share gains with the challenges that Intel-- >> I was going to say, does it all have to be in Nvidia all the time? I can't imagine that they're sitting back saying, well, you won. We're just going to sit here.
>> So I think, and Lisa Su, we trust-- I think that's a really interesting name, particularly on the fundamentals. But I would also expand that to other parts of technology. ASML is really troughing on orders. We see those accelerating in '25.
And there's a lot of areas, particularly in analog semiconductors and semis that sell into electronics, where they sell into the end market of industrials. Those have troughing and hopefully improving fundamentals. So there's actually some really interesting areas just in, since you mentioned it, the hardware side that still show some life.
>> Now, of course, AI has been the big macro theme for the space. But in the here and now, in the world, lots happens, including a US presidential election.
What impact could that have on the tech space?
>> Well, I think one thing that we've been sharing with our clients is that regardless of who wins a US election, we don't think austerity is in the plan. And what I mean by that is both parties likely will continue to spend. And so that will be the backdrop.
And that benefits an industry like technology where we're building redundancy in supply chains.
The other area that both parties seem to be coalescing on is being a little bit more coalition of protectionist vis a vis China.
And so that won't change. Now, some have conjectured that under Harris, it could be more of the same, particularly from a regulatory standpoint.
And that would actually benefit large cap tech.
Some have conjectured under Trump, with less regulation, that could benefit small and mid-cap stocks, potentially small and mid-cap technology. And that would maybe spur maybe a little bit more either innovation or M&A. So it depends. But, regardless, we don't think spending is going to happen in both, and generally we are supportive of protecting US technology.
>> That was Jennifer Martin, global equity portfolio specialist with T. Rowe Price.
As always, make sure you do your own research before making any investment decisions.
on a programming note, we are going to be off on Monday as we mark truth and reconciliation day. We will be back on Tuesday with Caitlin Cormier, Senior client education instructor with TD Direct Investing. She's going to take your questions about how to get part of the WebBroker and Advanced Dashboard platforms. A reminder that you can get those questions in ahead of time. Just email MoneyTalkLive@TD.com. That's all the time we have for the show today. On behalf of me, Anthony and came in front of the camera and everyone behind the scenes that brings you our daily shows, thanks for watching and we will see you next week.
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