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Hello I'm Anthony Okolie in for Greg Bonnell and welcome to MoneyTalk Live which is brought to you by TD Direct Investing.
coming up on today's show: we will hear from TD Securities Andrew Kelvin on whether a recession is on the horizon.
Daniel Ghali will lay out his view on why the price of oil is headed higher next year.
And TD Asset Management Alfred Li will discuss what the recent spike in COVID-19 cases means for China's economy.
Plus in today's WebBroker education segment, Caitlin Cormier will show us how you can get the most out of WebBroker's watchlist tool.
And before we get to that, let's get you an update on the markets.
Okay. We will take a look at the TSX Composite Index here in Canada and it is up about 14, just under 15 points.
.07%. Sitting at 20,540.
Taking a look at some of the stocks moving today in Canadian stock market, Bombardier, shares are trading higher.
The company announced that it recently reported the world's largest private jet company placed orders for four of its newest long-range jets. That is helping to lift Bombardier higher with their stock.
Just under 1% gain so far in the markets today.
Let's take a look south of the border, the broader S&P 500 index.
Of course, the markets are coming off the news this morning. The hotter than expected US jobs recorded and that is weighing on some optimism that the Fed might be able to ease the gas on interest rate hikes soon.
The S&P 500 down about 19 points. To the tune of about half a percent. Let's take a look at the heck tech heavy NASDAQ index also down.
To the tune of 17 points.
Taking a look at some of the big movers, shares of Carnival Cruise Lines are under pressure today, the cruise operator announced it would offer a $1 billion in convertible debt as part of its 2024 refinancing plan. The stock is down about 1.6%.
Some other big movers, JD.com, a US listed Chinese Internet company, stock is trading higher today. News from Chinese health authorities today reported an improvement in recent senior vaccination rates in the country. The news is also lifted other Chinese tech related firms. JD.com trading of three or four with job openings still historically high, points right now, equ right in line with market expectationsivalent to 6.1% so big moves today for some of the Chinese related tech stocks today.
All eyes were focused on the November jobs data here in Canada and the US, which remained hot. Here in Canada, our labour market added a modest 10,000 jobs last month. (...) the Bank of Canada will continue its rate hiking policy in an attempt to cool the hot labour market. TD Economics is expecting the Canadian central bank to deliver a 50 basis point rate hike next week.
Turning south of the border, the US added a higher-than-expected 263,000 jobs last month. Much higher-than-expected. The market was expecting about 200000 Jobs in November. More worrisome for the Federal Reserve, was the average hourly earnings, accelerated 0.6% for the month. Outpacing the growth rate that we saw in October. According to TD Economics, wage growth is likely to stay elevated until labour demand normalizes.
TD Economics believes the time is come for the Fed to pivot but today's print suggests the Fed's job is far from done. Earlier in the week, Andrew Kelvin spoke with Greg Bonnell to discuss the outlook for the year ahead and reaction to that GD report.
>> We will take that as a sign and even less lacking perhaps we would have estimated 48 hours ago. On the other hand, this is more towards Riley in, some of the more forward looking indicators were a little bit concerning.
A decline in outright terms in household spending.
Extraordinarily strong second quarter.
So a slow down there was due and I think it perhaps explains the pullback at the product of that very strong snapback there but still, not necessarily a positive sign.
Housing investing remains under pressure and what are the significant positive to that is government spending.
In 2023, we seek continued government spending growth.
So while it is great to have an upside surprise, some of the forward and segments of the economy that we are dependent on over the last two, three, four, five years were showing a little bit of weakness and we did get a flash estimate for October with the monthly stuff.
That suggested that growth in October was roughly flat.
So, if you were the bank of Canada, growth is stronger than in the third quarter but your 0.
5% forecast which is where the big… 0.5 annualized over 1/4 is essentially zero.
That is still very much at play.
Just with that sort of softer hand off into October. So I think the Bank of Canada can really sort of dig into this and take really whatever fits its priors and it comes back to "are they really concerned for trajectory in CPI inflation?" There are early signs that the policy tightening is working.
If they are convinced enough that the tightening in the system is showing up in the parts of the economy they needed to show up, household spending and housing, in such a way that will reduce demand a little bit, slow the economy through 2023, bring inflation lower that way, they can probably sit back and lift by a relatively modest 25 basis points. But, if they are not convinced that the CPI trajectory is under control, then we get the combination of still very high core inflation and headline inflation and we don't think we will see any moderation for the remainder of this year.
Looking at the fact that there is perhaps a slack in the economy that they have realized and said "you know what? We still need to be a little more aggressive." So I think you can make a compelling case for 25 or 50 basis points here.
The Bank of Canada, we are getting closer to this tightening cycle. We think we will see a pause, certainly in the early half, the first quarter I should say, a 2023.
>> I imagine any central bank is really trying to bring inflation down through these rate hikes.
A scenario where they slay inflation and bring it back to her needs to be and they don't throw the economy over a cliff. That brings us to a recession risk.
It seems there is a recession of some sort for next year. You think of numbers like these and where we might be headed… Is it a done deal?
Or do we really have to, sort of, assume that we will be in a recession by next year?
>> I don't think it's a done deal.
For the simple fact that we expect population growth to be very robust throughout 2023. We had more people and it makes it harder to have the total of the economy shrink in size. But on a per capita basis, it's going to feel very much like a recession whatever the outcome is in our view.
We do think there will be a modest recession in the first half of next year.
Annualized numbers are from .5 to -.1 for the first two quarters of the year.
But those are pretty modest overall in the context of 1 1/2 or 2% publishing growth. Those feel like a bit more significant declines in activity.
But the Bank of Canada, I think, from their perspective, the slowdown in the first half of 2023, that is I think baked in.
I think the Bank of Canada believes that as well. A recession is likely to not have one in the early part of 2023. The trip to the Bank of Canada as they need to make sure that when they reach their pause point, in early 20.
3 or perhaps the second quarter of 2023, maybe I'm being too optimistic here… They need to make sure that is the end.
They have done enough to keep inflation under control.
Things can become very problematic is if it turns out that they stop prematurely and then we get into the end of 2023 or early 2024, they realize that they have in fact rather they have not done enough and they start raising rates again to get inflation under control and that's the part where we really start compounding the economic impacts. Really start amplifying the increases of unemployment rate and you start having pandemic mortgages resell at current rates potentially which will be, I think, a market problem for the Canadian economy.
>> Earlier in the pandemic, obviously, fiscal policy and monetary policy work together to try to support… Monetary policy cut spending, cut cost of borrowing down to nothing and then the fiscal side shows up and spends big.
Is there a risk of a disconnect?
If we find a place where the central bank say "here's our stock point, we've done our job and we hold here now.
Try to tame inflation" but then the population starts to feel the pain. We don't like it when the population feels pain because that reflects badly on them.
Is there a danger in the fiscal policy or monetary?
>> Is always a danger.
I think when you go back to 2020 or 2021, it's not casting blame on the federal government. It's a very difficult situation.
Fiscal policy is very hard to find tune. To me, the lesson of 2021 is fiscal policies were powerful.
So I think it is very important that fiscal agents and the central bank acted in concert here.
Now, in the near term, I don't see any indication that the federal government is likely to counteract the Bank of Canada's inflation target efforts.
Sort of announced, since we've seen, it was I thought, pretty conservative in terms of the new spending. When you talk about things like targeted, low income tax credits, these are things that can have an impact on individual livelihoods with a select group of people without having large-scale inflationary impacts.
If you look at the announcement of Alberta recently, about 2 1/2 billion dollars approximately were spent.
These sorts of target relief programs can help alleviate the biggest hit that comes from the combination of slow growth and high inflation.
But, it is important that the federal government not, with a large fiscal stimulus program here. I would say, just based on recent announcements from the federal government, I don't see any indication that they are planning on in the spring.
You are quite right, it can be easy to say when you're not being pressured of the you are not going to commit to irresponsible spending.
It could be altogether different if the government seems as though it is lagging in the polls and it is getting a lot of pressure from its constituents. I guess the saving grace there is it doesn't look like you need to see an election until 2025. So there will be this sort of, near-term pressures that would be on the government the same way they would be if let's say, you were staring at a fall 2023 election. Because that will be a scenario I think there will be a lot more political pressure.
>> That was Andrew Kelvin, Chief Canada Strategist at TD Securities.
And now here's an update on the top stories in the business world today and a look at how the markets are trading.
After 19 days of testimony, the Rogers and Shaw merger hearings come to a close at the competition Tribunal.
The competition Bureau is asking the tribunal to block a $26 billion merger of Canada's two largest cable companies.
Rogers and Shaw are aiming to complete their merger by the end of the year. Further oral arguments are expected to be heard on December 13 and 14th no date for a decision set yet. Amazon.com wants to widen appeal to a wider range of industries and its cashier less technology.
The e-commerce giant developed the technology for cashier less check outat brick-and-mortar shops.
Since 2020, Amazon has sold the technology to food and retail markets in airports. Professional and University stadiums and a convention centre. OPEC and non-OPEC oil producers are reportedly considering deeper production cuts ahead of its meeting on Sunday.
The highly anticipated meeting comes as the European Union is seeking approval of a $60 per barrel price On Russian crude. OPEC and its partners have been rumoured to consider a cut on the basis of demand weakness specifically in China.
Turning to the markets, the TSX's up slightly 23 points equivalent to about .1%.
Let's take a look at the market south of the border.
Starting with the broader S&P 500 index.
It is currently sitting at 4063 points, down nearly 13 points of 1.
3%.
We are continuing to seek volatile trading in the price of crude oil as investors wait tight supply versus demand concerns. But according to Daniel Ghali, Senior Commodity Strategist at TD Securities, any downward pressure on oil might be markets pricing in a Goldilocks scenario that may not play out.
He joined Greg Bonnell earlier to discuss.
>> There is a sense of their the commodity markets participants are markets in general are celebrating kind of the end of the energy crisis. There is good reason for that.
Crude oil prices are now back nearly where they started the year off.
You have demand concerns emanating from the fact that we are barreling towards a recession and the reality is the supply side of the equation, more recently, has actually caught up despite previous underperformance.
So all of these things together and created a context in which oil prices have come off substantially and in which people are starting to look at the future thinking that "perhaps the worst is behind us when it comes to the energy crisis." >> Which should they be thinking though? Are they in the right space?
>> I think there's a little bit of complacency out there the markets. When you think about the demands in the equation, the demand is going to slow. But the critical caveat here is that the oil demand across the world is still going to grow nonetheless, perhaps a slower rate.
But it's still going to grow.
The main question that that brings up is "where is the marginal barrel going to come from?" If you follow me down that rabbit hole, you quickly start to see holes in the narrative.
Let's talk about where those barrels might come from.
First, the US. One of the world's largest producers of oil.
There has been, and I fear repeating myself as we've discussed this several times over, but there is been a historical disconnect year between the price of crude oil and production we are seeing out of the US and other parts of the world.
Part of that is driven by ESG concerns and prohibiting capital expenditures in that sector. But the other part is that the behaviour of these participants has changed.
People, stakeholders want these companies to return capital to them as opposed to reinvesting to their operations.
Outside of the US, most of the growth out there that the market is expecting for next year is coming from few producers and none of that growth actually has to do with the high price environment.
As a result of legacy projects that just happened to be coming to completion over the next year. So that leaves us with all the other producers, namely with OPEC plus.
That's where most of the risk lies when it comes to production next year.
Let's talk about Russia, one of the most evident pieces of supply out there. So far Russian exports have been doing quite well. Part of that story is the world is stockpiling and they feel the sanctions coming will disrupt their stockpile.
So it's in anticipation of that. Another part of the story is really nobody knows what the sanctions are going to look like, particularly with respect to G7 and how that's going to impact oil markets come that day.
Another part of the story is, you know, within the broader OPEC group, Libya is one nation where we have seen tremendous amounts of geopolitical risk and the country is still facing a political crisis that has been ongoing since 2014 and you still have an election season that is coming up that, once again, could bring forward some production risks.
Don't forget, earlier this year, we lost about a million barrels a day. If we lose that again into next year, who's going to make up for that loss supply?
>> With all this uncertainty in all these variables, it seems to me we are not getting past volatility anytime soon.
We think of West Texas intermediate, American benchmark of almost 3%.
The other day it was down almost 3%. It's whiplash. I guess not much relief from it?
>> Volatility is here to stay. Part of that story is liquidity has been significantly hampered. That is true across all global markets but I think particularly with crude oil where you have an exodus from the money manager space. Mostly because money managers were positioned for disruption from the G7 sanctions and thus far, the reports that we've had our that the sanctions are going to be watered down.
That there is a lack of consensus among the G7 participants on how strict to be on Russian oil sanctions.
>> It seems every time we get past OPEC meetings, with some kind of decision is made and we think there is always a cycle of OPEC and what they may or may not do.
It does OPEC want to see a certain level of crude prices?
>> I think certainly we are at levels that would be consistent with what you would call the OPEC put. Or the strike on the OPEC which means OPEC would be comfortable with higher prices then… The reason we say that is because prices are really close to where they ended their historic agreement last meeting and where they had their first production cut since the pandemic.
If you think about it, spare capacity globally is really concentrated among a few Nations who are at the helm of OPEC. They are essentially the swing producers in oil markets and they have a grasp on this market because of all the issues that we discussed with the US and other producers out there. So it is in their interest and in their power to keep oil prices more… >> Earlier this year a couple months ago, there was some tension between what OPEC was up to and what Washington wanted to see in terms of crude oil prices.
Of course you had the Biden administration with the petroleum reserve : how does that story wind?
>> There are a lot of moving pieces.
You mentioned the discontent with Saudi Arabia and the US when it came to both ES PR and the decision to cut.
When you think about the big picture in the Middle East, you have one nation, I ran namely, that is facing significant sanctions, that is making progress on their nuclear ambitions that is really destabilizing the balance of power in the Middle East. So that is an incentive for Saudi Arabia to keep their strategic relationship with the US but at the same time, when you are looking forward 10 years down the line, OPEC is expecting to decline, you might want to monetize that is much as possible for the time that you can.
>> So with this much uncertainty and volatility in moving pieces, can we even attempt to put a price around what we think a barrel of oil will go into next year?
>> Absolutely.
I think most of banks expect higher oil prices.
The reasons are typically because of constraint. We also agree with that view.
We are looking at oil prices north of $100 a barrel.
So there is still a significant amount of upside here.
The key amount is the right tail in the oil markets is really fat. We think of oil prices going up $200 a barrel, it will take a huge disruption to see prices go to $120 a barrel either.
>> That was Daniel Ghali, Senior Commodity Strategist at TD Securities. Now let's get to today's educational segment.
If you want to keep an eye in the performance of a potential investment, WebBroker has tools which can help.
Kaylyn Cormier, Client Education Instructor with TD Direct Investing has more.
>> One of the many tools we have to help you and WebBroker to help you build a portfolio for investments, we are going to hop in within WebBroker.
Probably the easiest way to get this to the top right-hand side were we have this little star button.
That will bring up our watchlist page.
So what we do is we can actually create up to 10 different watchlist with up to 10 Securities per watchlist. I can type in here either the name or the symbol for whatever security I would like to add to my profile.
I will just go ahead and add here you Securities here… So I have a good mix. We will add a couple of more here.
There we go. Alright.
So that should be enough for now.
So under this initial page, we can see is if you click the drop-down, and see the performance of this particular Securities, a quick chart, we can also see the quote information. So what that current price is for that security.
The open price, the volume trade for the day and we've also got some ranges for both the day and with the week. We have analyst rating here.
We also have buy and sell here. If we would like to move forward with the security. If we click on fundamentals, you can see some dividend information, market Information, price-to-earnings ratio and an estimate for earnings if that is something you are interested in finding about more area at the bottom here, we also have a couple of quick links so you can go to the overview for this news, or options about something that you were looking to do as well.
Within this watchlist, you can add stocks, mutual funds and indices. A lot of different types of Securities that you cannot.
Another really neat tool within this watchlist is weakened hit the tracker.
The tracker actually allows us to build a portfolio kind of like a mock portfolio right within our watchlist. So what I mean by that is we click right here on this quantity and we can ACT!
is that we are actually going to purchase this security. So I can say for example that I want to purchase 100 shares of Apple and I will just put in the current price there and click save.
Then I can do the same here for the Telus stocks and say 50 shares of Telus at 2762.
I will choose, I will do this one as well.
75 shares at 11, 82.
Now once I click "save here" you can see already the Securities are already updated to show me how the performance would have been if I had gone through with this purchase. So it's showing you the last price for the security, the average cost, based on the information I input, the price change, market value, book value and any gain or loss that has been on realized of course to this point. So the really neat way to be able to build portfolio without actually having to go through any of your money on the line, you can kind of test out some of your theories about investments and see what you'd like to purchase and see how you would've panned out.
Alright.
So that is our watchlist tool.
Of course if you have any other questions, feel free to send them in to MoneyTalk Live and check with the Learning Center for a bunch of additional information on all different topics to do with direct investing education.
>> Our thanks to Caitlin Cormier, Client Education Instructor at TD Direct Investing. This week, investors have been keeping a careful eye on research in COVID cases and growing frustration with lockdowns in China.
Earlier, Greg Bonnell spoke with Alfred Li, co-lead for International Equity at TD Asset Management to discuss his view and what it means for China's economy.
>> Improvement in the situation obviously, after the 2020 national… Guidelines were issued loosening of the zero COVID policy. But certainly, this is a trial approach.
Baby steps.
In order to make sure things are progressing without causing additional risk to the population. Obviously this will make people become more optimistic over a more sensible opening up.
the situation… As hoped for potential frustration has emerged. But I think if we look at the policy aspect, this happened around the number of cases achieved were reached during the day has already arrived in the last April in Shanghai. We have much higher percentage of new cases that have no symptoms and we have only five cases compared to north of 500 last time around.
So that means either herd immunity has somehow established in the community or the past two years of lockdown or the Chinese have better efficacy. I think we are on the right track in the process.
>> So interesting things. All as all this unfolds in real time. What should we be thinking in terms of implications for the Chinese economy? There has been concern about the starting case. You said there's reason for some optimism but what is it actually mean for the growth of what they're trying to achieve there?
>> I think obviously the consumption, it's going to take time.
Given that it's almost certain that… Adopt an approach given that over the past two years are almost 3 years, there have been only some 5000… This track record is what the Chinese is meant to keep. At the tail end of this disaster they want the public to get out of it smoothly. About four or 5% growth in consumption in 2023, early part of 23. This is a gradual or slight improvement from this year's level. At the same time, to support the economy and to expand we will continue to be traditionally structured and also new structure investment which is to grow at 6 to 8% level.
The real sector, now we can safely expect that to achieve a soft landing,… The need for finance has jointly issued policies urging both policy banks and commercial banks to provide direct financing to projects that are yet to be completed.
So that the developers in trouble, their underlying assets are not going to spill over into the economy. At the same time, the credits in the financial support are being provided to the remaining players in the industry.
So they can remain functional as they should.
Given there disciplined in balance sheet and their capacity or their capability to continue to operate.
We can expect some heightening given the impact in the global economy as the market for Chinese exports overall, we are expecting mild improvement from the current members for the Chinese economy, our GDP growth to achieve about four or 5% random growth in real term.
>> The economy into next year, perhaps challenges as well. Let's talk on the global economy. What about some areas of Asia with cooperation… What do we see from that?
> That's a theory from diplomatic activities that Xi Jinping has done.
The G 20 is immediately followed by the AIPAC meeting.
World leaders from the developed world, from developing countries across different regions, you could put these meetings and about four or five groups. Firstly, I think the most noticeable is Xi Jinping meeting with Joe Biden. I think that is sending a very positive signal to the work market given that the two leaders mutually agreed that they should continue to curb conflation rather conflict and to focus on an area where the two countries can work together. While at the same time acknowledging, especially from the US side, China is the competition that they are going to compete against going forward.
With the European leaders, Xi Jinping has a constructive discussion with the German counsellor, with the French Prime Minister, with the leaders from the Netherlands and Italy… With these core leaders, essentially, the message from all meetings indicated that China's stance is essentially to ask the countries to stay independent in terms of making policy decisions and making decisions based on their benefit on the economy perspective with the group of leaders or the developed countries, namely Japan, South Korea, and New Zealand. The message from there and bilaterally, (.
.
.
.
.
) economic collaborations and peace between China and those countries. So these maintaining, containing conflict and developing economy collaboration and promote peace is to promote this group in these countries.
The fourth group is the, with developing countries, we see the Asia-Pacific region especially Southeast Asian countries, those are more closely aligned with China.
They are mostly on the… They are more a broad-based collaboration between China and those countries in terms of continuous buildout of transportation networks ranging from (.
.
.
.
.
) also direct investments from China into those countries across different industries and also the rapidly expanding global trade.
Our international trade between countries… Accounts for China's number one training around the globe.
So a huge population and rapid growth, economic growth.
Obviously it is what China is trying to cultivate going forward as both a main source of economic growth and international collaboration.
>> That was Alfred Li, co-lead for international equity at TD Asset Management.
Now let's get your final check on the markets. We will start here in Canada with the S&P, TSX index.
Still hanging onto some gains into slightly in the green. Up 12 points. Sitting at 20,537. Let's take a look at South of the border. We'll start with the S&P 500 index. Still trading in the red.
Still down about 19 points.
Almost about.
5%.
Let's to go to the NASDAQ index and the tech heavy compensate is down 65 points.
And stay tuned on Monday, we will hear from TD Wealth Nicole Ewing taking your questions about personal finance.
A reminder to you get a head start by just emailing moneytalklive@td.com.
That's all for a show today. Take care.
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Hello I'm Anthony Okolie in for Greg Bonnell and welcome to MoneyTalk Live which is brought to you by TD Direct Investing.
coming up on today's show: we will hear from TD Securities Andrew Kelvin on whether a recession is on the horizon.
Daniel Ghali will lay out his view on why the price of oil is headed higher next year.
And TD Asset Management Alfred Li will discuss what the recent spike in COVID-19 cases means for China's economy.
Plus in today's WebBroker education segment, Caitlin Cormier will show us how you can get the most out of WebBroker's watchlist tool.
And before we get to that, let's get you an update on the markets.
Okay. We will take a look at the TSX Composite Index here in Canada and it is up about 14, just under 15 points.
.07%. Sitting at 20,540.
Taking a look at some of the stocks moving today in Canadian stock market, Bombardier, shares are trading higher.
The company announced that it recently reported the world's largest private jet company placed orders for four of its newest long-range jets. That is helping to lift Bombardier higher with their stock.
Just under 1% gain so far in the markets today.
Let's take a look south of the border, the broader S&P 500 index.
Of course, the markets are coming off the news this morning. The hotter than expected US jobs recorded and that is weighing on some optimism that the Fed might be able to ease the gas on interest rate hikes soon.
The S&P 500 down about 19 points. To the tune of about half a percent. Let's take a look at the heck tech heavy NASDAQ index also down.
To the tune of 17 points.
Taking a look at some of the big movers, shares of Carnival Cruise Lines are under pressure today, the cruise operator announced it would offer a $1 billion in convertible debt as part of its 2024 refinancing plan. The stock is down about 1.6%.
Some other big movers, JD.com, a US listed Chinese Internet company, stock is trading higher today. News from Chinese health authorities today reported an improvement in recent senior vaccination rates in the country. The news is also lifted other Chinese tech related firms. JD.com trading of three or four with job openings still historically high, points right now, equ right in line with market expectationsivalent to 6.1% so big moves today for some of the Chinese related tech stocks today.
All eyes were focused on the November jobs data here in Canada and the US, which remained hot. Here in Canada, our labour market added a modest 10,000 jobs last month. (...) the Bank of Canada will continue its rate hiking policy in an attempt to cool the hot labour market. TD Economics is expecting the Canadian central bank to deliver a 50 basis point rate hike next week.
Turning south of the border, the US added a higher-than-expected 263,000 jobs last month. Much higher-than-expected. The market was expecting about 200000 Jobs in November. More worrisome for the Federal Reserve, was the average hourly earnings, accelerated 0.6% for the month. Outpacing the growth rate that we saw in October. According to TD Economics, wage growth is likely to stay elevated until labour demand normalizes.
TD Economics believes the time is come for the Fed to pivot but today's print suggests the Fed's job is far from done. Earlier in the week, Andrew Kelvin spoke with Greg Bonnell to discuss the outlook for the year ahead and reaction to that GD report.
>> We will take that as a sign and even less lacking perhaps we would have estimated 48 hours ago. On the other hand, this is more towards Riley in, some of the more forward looking indicators were a little bit concerning.
A decline in outright terms in household spending.
Extraordinarily strong second quarter.
So a slow down there was due and I think it perhaps explains the pullback at the product of that very strong snapback there but still, not necessarily a positive sign.
Housing investing remains under pressure and what are the significant positive to that is government spending.
In 2023, we seek continued government spending growth.
So while it is great to have an upside surprise, some of the forward and segments of the economy that we are dependent on over the last two, three, four, five years were showing a little bit of weakness and we did get a flash estimate for October with the monthly stuff.
That suggested that growth in October was roughly flat.
So, if you were the bank of Canada, growth is stronger than in the third quarter but your 0.
5% forecast which is where the big… 0.5 annualized over 1/4 is essentially zero.
That is still very much at play.
Just with that sort of softer hand off into October. So I think the Bank of Canada can really sort of dig into this and take really whatever fits its priors and it comes back to "are they really concerned for trajectory in CPI inflation?" There are early signs that the policy tightening is working.
If they are convinced enough that the tightening in the system is showing up in the parts of the economy they needed to show up, household spending and housing, in such a way that will reduce demand a little bit, slow the economy through 2023, bring inflation lower that way, they can probably sit back and lift by a relatively modest 25 basis points. But, if they are not convinced that the CPI trajectory is under control, then we get the combination of still very high core inflation and headline inflation and we don't think we will see any moderation for the remainder of this year.
Looking at the fact that there is perhaps a slack in the economy that they have realized and said "you know what? We still need to be a little more aggressive." So I think you can make a compelling case for 25 or 50 basis points here.
The Bank of Canada, we are getting closer to this tightening cycle. We think we will see a pause, certainly in the early half, the first quarter I should say, a 2023.
>> I imagine any central bank is really trying to bring inflation down through these rate hikes.
A scenario where they slay inflation and bring it back to her needs to be and they don't throw the economy over a cliff. That brings us to a recession risk.
It seems there is a recession of some sort for next year. You think of numbers like these and where we might be headed… Is it a done deal?
Or do we really have to, sort of, assume that we will be in a recession by next year?
>> I don't think it's a done deal.
For the simple fact that we expect population growth to be very robust throughout 2023. We had more people and it makes it harder to have the total of the economy shrink in size. But on a per capita basis, it's going to feel very much like a recession whatever the outcome is in our view.
We do think there will be a modest recession in the first half of next year.
Annualized numbers are from .5 to -.1 for the first two quarters of the year.
But those are pretty modest overall in the context of 1 1/2 or 2% publishing growth. Those feel like a bit more significant declines in activity.
But the Bank of Canada, I think, from their perspective, the slowdown in the first half of 2023, that is I think baked in.
I think the Bank of Canada believes that as well. A recession is likely to not have one in the early part of 2023. The trip to the Bank of Canada as they need to make sure that when they reach their pause point, in early 20.
3 or perhaps the second quarter of 2023, maybe I'm being too optimistic here… They need to make sure that is the end.
They have done enough to keep inflation under control.
Things can become very problematic is if it turns out that they stop prematurely and then we get into the end of 2023 or early 2024, they realize that they have in fact rather they have not done enough and they start raising rates again to get inflation under control and that's the part where we really start compounding the economic impacts. Really start amplifying the increases of unemployment rate and you start having pandemic mortgages resell at current rates potentially which will be, I think, a market problem for the Canadian economy.
>> Earlier in the pandemic, obviously, fiscal policy and monetary policy work together to try to support… Monetary policy cut spending, cut cost of borrowing down to nothing and then the fiscal side shows up and spends big.
Is there a risk of a disconnect?
If we find a place where the central bank say "here's our stock point, we've done our job and we hold here now.
Try to tame inflation" but then the population starts to feel the pain. We don't like it when the population feels pain because that reflects badly on them.
Is there a danger in the fiscal policy or monetary?
>> Is always a danger.
I think when you go back to 2020 or 2021, it's not casting blame on the federal government. It's a very difficult situation.
Fiscal policy is very hard to find tune. To me, the lesson of 2021 is fiscal policies were powerful.
So I think it is very important that fiscal agents and the central bank acted in concert here.
Now, in the near term, I don't see any indication that the federal government is likely to counteract the Bank of Canada's inflation target efforts.
Sort of announced, since we've seen, it was I thought, pretty conservative in terms of the new spending. When you talk about things like targeted, low income tax credits, these are things that can have an impact on individual livelihoods with a select group of people without having large-scale inflationary impacts.
If you look at the announcement of Alberta recently, about 2 1/2 billion dollars approximately were spent.
These sorts of target relief programs can help alleviate the biggest hit that comes from the combination of slow growth and high inflation.
But, it is important that the federal government not, with a large fiscal stimulus program here. I would say, just based on recent announcements from the federal government, I don't see any indication that they are planning on in the spring.
You are quite right, it can be easy to say when you're not being pressured of the you are not going to commit to irresponsible spending.
It could be altogether different if the government seems as though it is lagging in the polls and it is getting a lot of pressure from its constituents. I guess the saving grace there is it doesn't look like you need to see an election until 2025. So there will be this sort of, near-term pressures that would be on the government the same way they would be if let's say, you were staring at a fall 2023 election. Because that will be a scenario I think there will be a lot more political pressure.
>> That was Andrew Kelvin, Chief Canada Strategist at TD Securities.
And now here's an update on the top stories in the business world today and a look at how the markets are trading.
After 19 days of testimony, the Rogers and Shaw merger hearings come to a close at the competition Tribunal.
The competition Bureau is asking the tribunal to block a $26 billion merger of Canada's two largest cable companies.
Rogers and Shaw are aiming to complete their merger by the end of the year. Further oral arguments are expected to be heard on December 13 and 14th no date for a decision set yet. Amazon.com wants to widen appeal to a wider range of industries and its cashier less technology.
The e-commerce giant developed the technology for cashier less check outat brick-and-mortar shops.
Since 2020, Amazon has sold the technology to food and retail markets in airports. Professional and University stadiums and a convention centre. OPEC and non-OPEC oil producers are reportedly considering deeper production cuts ahead of its meeting on Sunday.
The highly anticipated meeting comes as the European Union is seeking approval of a $60 per barrel price On Russian crude. OPEC and its partners have been rumoured to consider a cut on the basis of demand weakness specifically in China.
Turning to the markets, the TSX's up slightly 23 points equivalent to about .1%.
Let's take a look at the market south of the border.
Starting with the broader S&P 500 index.
It is currently sitting at 4063 points, down nearly 13 points of 1.
3%.
We are continuing to seek volatile trading in the price of crude oil as investors wait tight supply versus demand concerns. But according to Daniel Ghali, Senior Commodity Strategist at TD Securities, any downward pressure on oil might be markets pricing in a Goldilocks scenario that may not play out.
He joined Greg Bonnell earlier to discuss.
>> There is a sense of their the commodity markets participants are markets in general are celebrating kind of the end of the energy crisis. There is good reason for that.
Crude oil prices are now back nearly where they started the year off.
You have demand concerns emanating from the fact that we are barreling towards a recession and the reality is the supply side of the equation, more recently, has actually caught up despite previous underperformance.
So all of these things together and created a context in which oil prices have come off substantially and in which people are starting to look at the future thinking that "perhaps the worst is behind us when it comes to the energy crisis." >> Which should they be thinking though? Are they in the right space?
>> I think there's a little bit of complacency out there the markets. When you think about the demands in the equation, the demand is going to slow. But the critical caveat here is that the oil demand across the world is still going to grow nonetheless, perhaps a slower rate.
But it's still going to grow.
The main question that that brings up is "where is the marginal barrel going to come from?" If you follow me down that rabbit hole, you quickly start to see holes in the narrative.
Let's talk about where those barrels might come from.
First, the US. One of the world's largest producers of oil.
There has been, and I fear repeating myself as we've discussed this several times over, but there is been a historical disconnect year between the price of crude oil and production we are seeing out of the US and other parts of the world.
Part of that is driven by ESG concerns and prohibiting capital expenditures in that sector. But the other part is that the behaviour of these participants has changed.
People, stakeholders want these companies to return capital to them as opposed to reinvesting to their operations.
Outside of the US, most of the growth out there that the market is expecting for next year is coming from few producers and none of that growth actually has to do with the high price environment.
As a result of legacy projects that just happened to be coming to completion over the next year. So that leaves us with all the other producers, namely with OPEC plus.
That's where most of the risk lies when it comes to production next year.
Let's talk about Russia, one of the most evident pieces of supply out there. So far Russian exports have been doing quite well. Part of that story is the world is stockpiling and they feel the sanctions coming will disrupt their stockpile.
So it's in anticipation of that. Another part of the story is really nobody knows what the sanctions are going to look like, particularly with respect to G7 and how that's going to impact oil markets come that day.
Another part of the story is, you know, within the broader OPEC group, Libya is one nation where we have seen tremendous amounts of geopolitical risk and the country is still facing a political crisis that has been ongoing since 2014 and you still have an election season that is coming up that, once again, could bring forward some production risks.
Don't forget, earlier this year, we lost about a million barrels a day. If we lose that again into next year, who's going to make up for that loss supply?
>> With all this uncertainty in all these variables, it seems to me we are not getting past volatility anytime soon.
We think of West Texas intermediate, American benchmark of almost 3%.
The other day it was down almost 3%. It's whiplash. I guess not much relief from it?
>> Volatility is here to stay. Part of that story is liquidity has been significantly hampered. That is true across all global markets but I think particularly with crude oil where you have an exodus from the money manager space. Mostly because money managers were positioned for disruption from the G7 sanctions and thus far, the reports that we've had our that the sanctions are going to be watered down.
That there is a lack of consensus among the G7 participants on how strict to be on Russian oil sanctions.
>> It seems every time we get past OPEC meetings, with some kind of decision is made and we think there is always a cycle of OPEC and what they may or may not do.
It does OPEC want to see a certain level of crude prices?
>> I think certainly we are at levels that would be consistent with what you would call the OPEC put. Or the strike on the OPEC which means OPEC would be comfortable with higher prices then… The reason we say that is because prices are really close to where they ended their historic agreement last meeting and where they had their first production cut since the pandemic.
If you think about it, spare capacity globally is really concentrated among a few Nations who are at the helm of OPEC. They are essentially the swing producers in oil markets and they have a grasp on this market because of all the issues that we discussed with the US and other producers out there. So it is in their interest and in their power to keep oil prices more… >> Earlier this year a couple months ago, there was some tension between what OPEC was up to and what Washington wanted to see in terms of crude oil prices.
Of course you had the Biden administration with the petroleum reserve : how does that story wind?
>> There are a lot of moving pieces.
You mentioned the discontent with Saudi Arabia and the US when it came to both ES PR and the decision to cut.
When you think about the big picture in the Middle East, you have one nation, I ran namely, that is facing significant sanctions, that is making progress on their nuclear ambitions that is really destabilizing the balance of power in the Middle East. So that is an incentive for Saudi Arabia to keep their strategic relationship with the US but at the same time, when you are looking forward 10 years down the line, OPEC is expecting to decline, you might want to monetize that is much as possible for the time that you can.
>> So with this much uncertainty and volatility in moving pieces, can we even attempt to put a price around what we think a barrel of oil will go into next year?
>> Absolutely.
I think most of banks expect higher oil prices.
The reasons are typically because of constraint. We also agree with that view.
We are looking at oil prices north of $100 a barrel.
So there is still a significant amount of upside here.
The key amount is the right tail in the oil markets is really fat. We think of oil prices going up $200 a barrel, it will take a huge disruption to see prices go to $120 a barrel either.
>> That was Daniel Ghali, Senior Commodity Strategist at TD Securities. Now let's get to today's educational segment.
If you want to keep an eye in the performance of a potential investment, WebBroker has tools which can help.
Kaylyn Cormier, Client Education Instructor with TD Direct Investing has more.
>> One of the many tools we have to help you and WebBroker to help you build a portfolio for investments, we are going to hop in within WebBroker.
Probably the easiest way to get this to the top right-hand side were we have this little star button.
That will bring up our watchlist page.
So what we do is we can actually create up to 10 different watchlist with up to 10 Securities per watchlist. I can type in here either the name or the symbol for whatever security I would like to add to my profile.
I will just go ahead and add here you Securities here… So I have a good mix. We will add a couple of more here.
There we go. Alright.
So that should be enough for now.
So under this initial page, we can see is if you click the drop-down, and see the performance of this particular Securities, a quick chart, we can also see the quote information. So what that current price is for that security.
The open price, the volume trade for the day and we've also got some ranges for both the day and with the week. We have analyst rating here.
We also have buy and sell here. If we would like to move forward with the security. If we click on fundamentals, you can see some dividend information, market Information, price-to-earnings ratio and an estimate for earnings if that is something you are interested in finding about more area at the bottom here, we also have a couple of quick links so you can go to the overview for this news, or options about something that you were looking to do as well.
Within this watchlist, you can add stocks, mutual funds and indices. A lot of different types of Securities that you cannot.
Another really neat tool within this watchlist is weakened hit the tracker.
The tracker actually allows us to build a portfolio kind of like a mock portfolio right within our watchlist. So what I mean by that is we click right here on this quantity and we can ACT!
is that we are actually going to purchase this security. So I can say for example that I want to purchase 100 shares of Apple and I will just put in the current price there and click save.
Then I can do the same here for the Telus stocks and say 50 shares of Telus at 2762.
I will choose, I will do this one as well.
75 shares at 11, 82.
Now once I click "save here" you can see already the Securities are already updated to show me how the performance would have been if I had gone through with this purchase. So it's showing you the last price for the security, the average cost, based on the information I input, the price change, market value, book value and any gain or loss that has been on realized of course to this point. So the really neat way to be able to build portfolio without actually having to go through any of your money on the line, you can kind of test out some of your theories about investments and see what you'd like to purchase and see how you would've panned out.
Alright.
So that is our watchlist tool.
Of course if you have any other questions, feel free to send them in to MoneyTalk Live and check with the Learning Center for a bunch of additional information on all different topics to do with direct investing education.
>> Our thanks to Caitlin Cormier, Client Education Instructor at TD Direct Investing. This week, investors have been keeping a careful eye on research in COVID cases and growing frustration with lockdowns in China.
Earlier, Greg Bonnell spoke with Alfred Li, co-lead for International Equity at TD Asset Management to discuss his view and what it means for China's economy.
>> Improvement in the situation obviously, after the 2020 national… Guidelines were issued loosening of the zero COVID policy. But certainly, this is a trial approach.
Baby steps.
In order to make sure things are progressing without causing additional risk to the population. Obviously this will make people become more optimistic over a more sensible opening up.
the situation… As hoped for potential frustration has emerged. But I think if we look at the policy aspect, this happened around the number of cases achieved were reached during the day has already arrived in the last April in Shanghai. We have much higher percentage of new cases that have no symptoms and we have only five cases compared to north of 500 last time around.
So that means either herd immunity has somehow established in the community or the past two years of lockdown or the Chinese have better efficacy. I think we are on the right track in the process.
>> So interesting things. All as all this unfolds in real time. What should we be thinking in terms of implications for the Chinese economy? There has been concern about the starting case. You said there's reason for some optimism but what is it actually mean for the growth of what they're trying to achieve there?
>> I think obviously the consumption, it's going to take time.
Given that it's almost certain that… Adopt an approach given that over the past two years are almost 3 years, there have been only some 5000… This track record is what the Chinese is meant to keep. At the tail end of this disaster they want the public to get out of it smoothly. About four or 5% growth in consumption in 2023, early part of 23. This is a gradual or slight improvement from this year's level. At the same time, to support the economy and to expand we will continue to be traditionally structured and also new structure investment which is to grow at 6 to 8% level.
The real sector, now we can safely expect that to achieve a soft landing,… The need for finance has jointly issued policies urging both policy banks and commercial banks to provide direct financing to projects that are yet to be completed.
So that the developers in trouble, their underlying assets are not going to spill over into the economy. At the same time, the credits in the financial support are being provided to the remaining players in the industry.
So they can remain functional as they should.
Given there disciplined in balance sheet and their capacity or their capability to continue to operate.
We can expect some heightening given the impact in the global economy as the market for Chinese exports overall, we are expecting mild improvement from the current members for the Chinese economy, our GDP growth to achieve about four or 5% random growth in real term.
>> The economy into next year, perhaps challenges as well. Let's talk on the global economy. What about some areas of Asia with cooperation… What do we see from that?
> That's a theory from diplomatic activities that Xi Jinping has done.
The G 20 is immediately followed by the AIPAC meeting.
World leaders from the developed world, from developing countries across different regions, you could put these meetings and about four or five groups. Firstly, I think the most noticeable is Xi Jinping meeting with Joe Biden. I think that is sending a very positive signal to the work market given that the two leaders mutually agreed that they should continue to curb conflation rather conflict and to focus on an area where the two countries can work together. While at the same time acknowledging, especially from the US side, China is the competition that they are going to compete against going forward.
With the European leaders, Xi Jinping has a constructive discussion with the German counsellor, with the French Prime Minister, with the leaders from the Netherlands and Italy… With these core leaders, essentially, the message from all meetings indicated that China's stance is essentially to ask the countries to stay independent in terms of making policy decisions and making decisions based on their benefit on the economy perspective with the group of leaders or the developed countries, namely Japan, South Korea, and New Zealand. The message from there and bilaterally, (.
.
.
.
.
) economic collaborations and peace between China and those countries. So these maintaining, containing conflict and developing economy collaboration and promote peace is to promote this group in these countries.
The fourth group is the, with developing countries, we see the Asia-Pacific region especially Southeast Asian countries, those are more closely aligned with China.
They are mostly on the… They are more a broad-based collaboration between China and those countries in terms of continuous buildout of transportation networks ranging from (.
.
.
.
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) also direct investments from China into those countries across different industries and also the rapidly expanding global trade.
Our international trade between countries… Accounts for China's number one training around the globe.
So a huge population and rapid growth, economic growth.
Obviously it is what China is trying to cultivate going forward as both a main source of economic growth and international collaboration.
>> That was Alfred Li, co-lead for international equity at TD Asset Management.
Now let's get your final check on the markets. We will start here in Canada with the S&P, TSX index.
Still hanging onto some gains into slightly in the green. Up 12 points. Sitting at 20,537. Let's take a look at South of the border. We'll start with the S&P 500 index. Still trading in the red.
Still down about 19 points.
Almost about.
5%.
Let's to go to the NASDAQ index and the tech heavy compensate is down 65 points.
And stay tuned on Monday, we will hear from TD Wealth Nicole Ewing taking your questions about personal finance.
A reminder to you get a head start by just emailing moneytalklive@td.com.
That's all for a show today. Take care.
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