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[music] >> hello, I'm Greg Bonnell and welcome to MoneyTalk Live which is brought to you by TD Direct Investing.
Coming up on today show, will discuss the chances of the world's largest economy tipping into a recession this year with TD Senior economist Thomas Feltmate.
TD Asset Management's Vitali Mossounov will take us to the two big hurdles tech stocks will need to clear if they are to regain market leadership. And we'll discuss the big takeaways from bank earnings season so far was Stephen Biggar from Argus Research.
Plus, in today's WebBroker education segment, killing for me will take us or how to set up a mock profile to tester strategies using the platform. Before he gets all that, let's get you an update on the markets.
We have some green on the screen on Bay Street and Wall Street on this last trading day of the week. It's fairly modest but after the last recent slump, If you're on the market, YOU'RE PROBABLY OKAY. tHE tsx cOMPOSITE iNDEX UP 88 POINTS, ALMOST HALF A PERCENT RIGHT NOW. a BIT OF RISK APPETITE IN THE MARKET TODAY, SHOWING IN SOME TECH NAMES INCLUDING sHOPIFY HERE AT HOME AT 50 TO 59, IT'S A GAIN OF 2 1/2%. hUDBAY mINERALS UNDER SOME PRESSURE THE LAST TIME I looked at the name, down about 3% now, seven bucks and $0.85 per share. Hudbay coming out and saying protesters damage one of their copper mines and broke.
South of the border, let's check in on the S&P 500.
We heard from Netflix after the close of thebells yesterday. Some of the tech names are bringing some momentum into the market. Got the S&P 500 up we will call that 80 basis points.
The tech heavy NASDAQ, how is it sharing against the broader US market?
It's doing even a bit better, it's up 1 1/3%. Tesla getting a bit of a bit today. It's been a bit of a rough ride for that stock in the past 12 months, but today, it's up to the tune of almost 3%, 130 bucks and $0.79 per share. And that's your market update.
Ahead of next week's Bank of Canada rate decision, we did get some new retail sales numbers today. Joining us with the details of what to call me in his money talks Anthony Okolie.
>>We got retail sales which came in at less than expected, November was down more than 1%. Stats Canada was forecasting 1/2% loss there.
When you dig into the numbers, sales decreased in six of the 11 Subsectors in November. Here's a chart. You can see, here we go, six of 11 Subsectors in November.
Gains were led by sales at gas stations, new car dealerships. New car dealerships actually had the fast pace of growth since June 2022. Some strength there.
But when you look at outside of gas in cars, Canadians very much kept their wallets in check. Core sales were much weaker versus the headline numbers, they were down 1.5%. That's the biggest drop in a while. If you look at food andrestaurants, beverage chores were down, a woman stores were down. Some bucked the trend, electrons and appliances were up 1%.
When you look at the Bank of Canada/estimate for Canada.
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I think again it points to a slowing trend in terms of spending as we get into the first half of this year.
>> I mean, this is something the central banks have been saying they want to see in terms of the fact that why we're begetting so many aggressive rate hikes last year, yes, it was aimed at tame paying tamping down inflation. But you don't get inflation come down until you start to see some weakness in the economy, whether it's the resilience of the consumer, whether it's the labour market, so I think the Bank of Canada is taking a look at this information.
But earlier there was there Business Outlook Survey.
This tells us a bit about the consumer. Obviously the BOC will be weighing that sentiment.
We talked about earlier this week, how businesses feel about this economy.
>> That BOC report showed businesses and consumers are expecting a recession over the next 12 months.
Businesses are smacking them into we can.
Consumers are cutting back on their purchases because of higher inflation and interest rates. That is wearing away on hiring plans. That should hopefully ease wage pressures.
But again, when you look at inflation, even though it was lower last month, sorry, in November, sorry, December, rather, compared to November, it's still rather high and so you're not going to the Bank of Canada pivot when inflation is still elevated. They want to see that trend come down before they actually cut rates.
>> So next Wednesday is the big day.
Of course, the right decision comes out at 10 AM Eastern time. You got the press conference at 11 AM Eastern time with the governor who will be putting out a new range of expectations for the economy.
Last time I checked, and I think you check this morning, I think the call is for a 25 basis point hike, 1/4 of a point, the kind of hikes we were used to back in the day.
>> That's right.
The 25 basis point rate hike is expect it. Last year, they acted seven times.
This would be the eighth hike and would bring the total to four Naprosyn. The expectation is that it will hike one more time and then pause to see what these past interest rate hikes will do to the economy. This is restrictive territory.
This is something that will potentially slow down the economy, cool inflation. But there is an expectation that there will be a 25 basis point hike next week.
>> A lot going on next week. Thanks for that preview and a run down and the rundown of the retail stuff.
Andrew Kelvin will be our guest on that day. Thanks Anthony Okolie. Slowing growth on the minds of many investors. Were the chances the world's largest economy, the United States, tipping into a recession this year?
Thomas Feltmate, Senior economist with TD Bank joined me earlier with his view.
>> . I think, if we just kind of take a step back and we look into 2022, Q3 growth was relatively strong, coming in over 3% on a quarter-over-quarter annualized basis. We still don't have that Q4 data print yet, but by all intents and purposes, things are tracking somewhere close to 2.5%. And embedded in that is a tracking on consumer spending that's looking to be about 3% on a quarter-over-quarter annualized basis.
So, to give some context here, that's going to be the healthiest pace of consumer spending that we would have seen in 2022.
And to your point, it's kind of coming at the end of the year, after that cumulative 425 basis points of tightening from the Fed.
So we're definitely seeing some degree of resilience on the consumer side of things.
So this isn't necessarily indicative of what we would think of an economy that would be on the cusp of a recession.
We also kind of look to the labor market. We just got employment data a few weeks ago for December.
The US economy added 223,000 jobs, still a pretty healthy level of employment gains on a monthly basis.
The unemployment rate fell to 3.5%. Again, this is the lowest level that we've seen in nearly 50 years.
So again, not necessarily indicative of a recession over the next three to six months, not just yet at least.
>> It's been a very strange couple of years, probably the understatement of the show.
I'll take the understatement of the show.
Are things not adding up, though? Because we talked about the aggressive rate hiking cycle. The consumer is resilient.
The labor market is resilient. Looking at some other data points, the New York State manufacturing number came out this morning.
And there seems to be some weakness in that part of the economy. Are things sort of uneven at the moment?
>> I think that's probably fair to say. I mean, when we look across the suite of different manufacturer or service sector indicators for December, we've definitely seen some softness coming through across all readings.
So I think it could be indicative of the rapid pace of adjustments finally playing some degree of catch up on the economy.
Economists have been beating on this drum for the past year, that the rate hikes-- there is some time for those to kind of play into the economy.
And that can take anywhere from 12 to 18 months. We know monetary policy acts with a lag.
And to some degree, we are starting to see this now playing out.
But I think there is probably some degree of resilience still in the economy today, particularly on the consumer side of things, which could perhaps help it stave off a recession.
>> Now, that would be the fine balancing act, where the Fed-- the whole reason in our central bank here and other central banks, to raise rates so aggressively-- is trying to put the brakes on things. Bring inflation down.
They've warned us that's going to mean a little bit of pain and perhaps an economic slowdown.
But if we're not going to get the slowdown, what do the central banks have to do?
Where is the happy spot for them right now, to try to figure all this out?
>> Right. So I think we are definitely going to get the slowdown. I mean, if we look at what our expectations are for growth, for both this year and next year, we're expecting kind of a sub-1% pace of growth, which we compare that to where we were and how 2022 is shaping up, that's going to be about half the pace of growth that we saw last year. So definitely some deceleration in underlying activity there.
I think where the Fed is nearing now is a point where they're likely going to reach a point over the next couple of months where they're going to pause on rate hikes.
So our expectation are and when they meet in February, likely further dialing back on the pace of rate hikes, going to something more normal of a 25 basis point move, and then probably something similar again in March, where we see another 25 basis point hike. This will get the terminal rate up to about 5%.
And we've kind of seen some expectations coming in from markets where they're almost cheering this, that the end of the tightening cycle is near.
But I think the one thing that might be getting lost in all of this is that, while the terminal rate might be reached over the next couple of months, the real effective policy rate is going to continue to increase as nominal rates stay elevated, but then inflation is going to be falling.
So to give some context, we have about 50 basis points of tightening over the next couple of months from the Fed.
But from an inflation-adjusted perspective on that real rate, we're going to see an increase on the policy rate of about another 200 basis points through this year.
>> That's pretty important to think about in terms of the long-term trajectory of what the central banks are up to, what it could mean for the economy.
There seems to be a bit of a disagreement, too, if you look to the bond market and what they think the US Federal Reserve or other central banks are going to do later this year and what the central banks tell us they're going to do.
The central bank's basically saying, we're going to get to a certain point then we're going to stay there because we don't want to make the mistake, which has been made in the past, of then reversing too quickly.
And the bond market's like, nah, we don't really believe you all that much. Is this sort of a battleground this year to see who's right?
>> Yeah, I think that's probably a fair assessment. I think what we're seeing right now in the bond market is they're definitely acknowledging some of the softer reading in particular that we saw in the employment report from the wage side of things. So we saw revisions to the prior months show that wage growth was a bit weaker. And then certainly we saw a deceleration at just 0.3 month-over-month growth in December, which came in below market expectations. So that was certainly one reading to suggest that maybe things are a bit softer than previously expected.
And then, in the December inflation report, as well, we are getting more convincing evidence that inflation is indeed starting to roll over.
And I think that's giving market hope some optimism that things could turn a bit quicker than the Fed is currently anticipating.
>> How is that path looking? Because underpinning all of this, of course, is inflation and trying to bring it back down to a target range.
We've got the latest Canadian print, which shows easing on the headline. The last US print shows easing on the headline.
So things are moving in the right direction but, at the same time, still far above the target range.
What kind of glide path are we on to sort of get back to a normal inflation print?
>> Yeah, so I think through the latter half of last year, we definitely saw inflation kind of peak in June and then start to turn lower in the second half. So the headline measure came down by about 2.5 percentage points. We saw core CPI fall by about a percentage point from its peak. And really and truly, what was really driving the downward pressure on prices were falling energy prices, which fell by about 15% in the second half of the year. And then we did see, in more recent months, core goods prices roll over.
Now, this is kind of a byproduct of a few things. We're seeing some normalization in supply chain issues, which definitely put a lot of upward pressure on prices earlier in the pandemic. And then we're also seeing consumer demand pivot away from more goods-oriented consumption towards more service-based consumption. So that's allowed goods prices to really start to kind of roll over.
Now, the interesting thing here is goods only account for about 25% of that core CPI basket.
So there's only so much disinflationary pressure that can come from that part of CPI. The rest, and the majority of the heavy lifting, has to come from the service side of things.
And I think here's where we're seeing a lot more stickiness.
So when we're thinking about service inflation, really, we can kind of bucket it into two categories.
We have the shelter component and then that ex shelter component. And through the latter half of last year, we saw a continued acceleration in that shelter part of CPI. And this is kind of at odds with what we're seeing from market-based measures of rent, which are showing that things have kind of peaked and have started to roll over.
But it takes considerable time for that to really roll over into the stock of outstanding leases, which ultimately is what's feeding into CPI and is going to generate that downward pressure on inflation from the shelter side of things.
If we strip that out, and we're looking at just the other core services of ex shelter, these are kind of the more labor-intensive service categories. And here, we can think of things like airfares, haircuts, cleaning services, et cetera, so definitely more labor-intensive.
And in these industries, we're still seeing job opening rates at historically elevated levels. And that's leading to a lot of wage pressures.
And those are ultimately being passed on to the consumer.
So really, the linchpin on inflation of getting that second leg lower is going to be cooling the labor market such that we see wage pressures ease. And then those lower labor costs are ultimately what's going to be passed on to the consumer, which will create some disinflationary pressure from the inflation side of things.
>> That was Thomas Feltmate, senior economist with TD.
Now here's an update on some of the top stories in the world of business and we will check in on how those markets are trading.
Alphabet's joining the growing number of tech firms cutting jobs in the face of recession fears. In a memo to employees, CEO Sundar Pichai says the company will lay off 12,000 workers starting immediately within the United States appeared the parent company of Google joins Amazon and Microsoft in cutting staff by the thousands as recession fears loom. Shares of Netflix in the spotlight today, up to the tune of about 7% after the streaming giant blue past expectations for adding new subscribers in the most recent quarter. This was the first earnings report for Netflix that did include that new ad-supported tier of service, although the company is not disclosing how many of those new subscribers signed up for that service.
Nordstrom is warning customers of disappointing sales during the all-important holiday period. The retailer says sales were down. Half percent comparedto the same period last year. Nordstrom is also lowering its earnings outlook. The stock did start a little bit more in the negative territory but it is almost flat now at this hour.
A quick check in on the markets, we will start here at home with the TSX Composite Index.
Nice triple digit gain of hundred and four points, we will call at about half a percent. This is the last trading day of the week. The last few days were a bit lacklustre to the downside.
A little green on the screen is a welcome sight to close up the street. South of the border, the S&P 500 is also in modest rally mode.
It's up about 34 points right now good for a little shy of 1% gain.
After a multiyear run of strength, technology strengths have been on the back burner more recently.
So what hurdles would they have to clear if they're going to regain some market leadership?
I was joined earlier by Vitali Mossounov, global technology analyst with TD Asset Management, to discuss.
>> So you could make that bet. You could set your watch to it, and it'll happen. '21, things started to change.
You remember kind of a tale of halves there, right?
First half of '21, tech still a strong outperformer.
Second half of '22, that's where you're getting inflation talk. That's where you're getting rates. And so '21, the second half, weaker. '22, the wheels fell off.
The wheels fell off of tech, as you said-- 10 percentage points of underperformance. And so '23 for me, is really a make it or break it year. It's the litmus test year for tech.
>> All right. So if it is a litmus test here, it suggests that there'd be some sort of benchmarks that we're looking for. If you're applying a test, where the standards of that test?
>> Tests should have standards, and we'll put a couple of standards on this test. Number one, we're going to be watching if these businesses, especially of course, the big tech, they just dominate. So we're going to refer to them off when we're talking about technology.
But can they continue to grow at that GDP plus rate?
Can they continue to grow faster than the rest of the companies in the S&P 500?
Something that we've taken for granted year after year after year. And by the way, that's baked into their valuations. Even after a bad year, these stocks still trade at a 20% premium to the S&P 500. So they've got to deliver. And there's some disbelief right now.
Because remember, what did '17, '18, '19-- what did all these years have in common? Expansionary years. How are these stocks going to do in a recession? So we're watching the top line, and whether it's defensive, number one.
>> So top line is number one-- suggests that there is a number two. I'm going to-- I don't want to front run your answer, but I think maybe some of these companies have made commitments on number two?
>> Well, they're making comments about it. And they will tell us that they're not commitments, that they're comments. And we're going to find out shortly. Earnings start next week. We're going to find out if they're comments, or commitments, or something else. And the nature of their comments will move stocks. And so number two, of course, is cost discipline.
I'm going to harp on this, but in those Goldilocks years when the economies were expanding and technology companies were taking market share from the other parts of the economy, costs didn't matter. Everyone was transfixed on growth, and rightly so at that point in time. But when everyone's transfixed on growth, the companies become a little let's call them undisciplined.
They take it for granted they could spend that extra million or billion, in their case, on some fancy project that may not be so necessary. And so investors are trying to send a message right now that show us that cost discipline.
Because it just hasn't existed for the last few quarters for sure.
Now, of course, cost discipline can often mean layoffs.
And we did get some of those announcements in terms of some of the big mega tech. Beyond layoffs, I mean, what else can they do to start reigning in costs?
>> Well, in fact, layoffs are going to be the primary way that they do it. And takes something like Meta, for example, which ties back all the way to third quarter results. They report and announce all sorts of spending, including on the Metaverse, of course. It's their project. They kind of stake the whole company on sometimes. But they came out and said, look, things are tough out there in advertising land.
But we're going to continue with the CapEx plans. We're going to continue with the OpEx plans. And we just need to do this.
And the market, you might recall, punished them severely. The stock was down over 20% the day after earnings. And shortly thereafter, that investor pressure, I think, caused perhaps a change in sentiment all the way at the founder level.
Because in early November, Mark Zuckerberg was out there saying that we will get costs under control. And sadly-- but this is the way the business models work, they will be laying off 11,000 staff. For a company of 87,000, that's a big number. So staff is the number.
It's a labor business.
>> It seems that Facebook in that example was getting the message from the market. Are the other big tech names, you think, getting the message from the market in terms of cost discipline?
>> We'll see. Again, there's no hard commitments yet.
There's comments, because they were punished so severely after third quarter results. But I would say that on balance, every single one of the big tech businesses has made encouraging statements that they are coming around to the side of the shareholder.
Amazon is a good example. They have also been out there talking up operating discipline, and the ability to take and rein in costs. Before, it was always at the retail level. But now, there's signals that even at the corporate level, they will be open to reducing their headcount.
Microsoft certainly may arguably be making the strongest statements out of the group-- Microsoft out there saying that they will be able to keep head count roughly flat the entire year. That's after a year of 20% growth in their fiscal 2022. And I suppose the last but not least, Apple. Now this one is a bit of an outstanding question for me.
Apple has been most resilient on the top line throughout last year. And so I find that the focus on their costs from investors is not as severe as it is for the other businesses. So I wonder if they will get the message. Although even Apple has made encouraging comments, and of course, we saw Tim Cook take a pretty large pay cut actually down to, I think, only $49 million for the upcoming year.
>> Hard to get by on just $49 million. But I'm willing to give it a try.
When we talk about sales and profit overall for the industry, I think you have a graph for us in terms of where the trend lines have been moving. Maybe we'll show the audience and sort of walk us through what we're seeing here, and what it may suggest going forward.
>> Yeah. And it's a simple chart, but it tells the entire story. And it's that the line you're seeing on top is the revenue growth line for the last few quarters. And you can see that. We've seen the impact from a softening economy and pandemic pull forward in some cases. Revenue growth is slowing. And it's normalizing here in the 5%, 6%, 7% range, right? As I said, that's this GDP plus level. That's fine. People will take 7% in this environment when things are getting so tough.
The problem has been that you're getting 7% revenue growth. But the company is saying that, well, but I'm not going to give you 7% earnings growth. I'm actually going to give you-- that's the bottom line-- 20% earnings declines. So you're being robbed as a shareholder, because all this extra money is going into the difference, which is whether it's servers, or typically, as we said people. And so that's what needs to change. It's that cost line and that margin line.
That really needs to go up because it's unacceptable to investors that the spending levels are so profligate if you, will.
>> That was Vitali Mossounov, global technology analyst with TD Asset Management. Vitali and I had that conversation earlier in the week.
Just today, we found out we talked about cost discipline and the tech companies, Vitali was looking for that, Alphabet announced 12,000 layoffs at Google.
It was good to our educational segment of the day.
If you would like to test out and investing idea before actually making the move, WebBroker has tools which can help. Joining us now for Maurice Caitlin Cormier, client education instructor with TD Direct Investing.
Great to see you. Let's talk about how WebBroker can help investors test of their strategies.
>> Absolutely. A very important part of investing is doing that pre-research, all that homework before you actually jump in.
So a great tool that we have an WebBroker to help with that is our watchlist tool.
We cover this in a lot of different ways but today we are going to go in assuming that we already have maybe some stocks in mind that we'd like to get added to our portfolio.
So let's hop into WebBroker and what I'm going to do is I'm going to click on the star on the far right hand side,which has watchlist, and this going to bring me to kind of my main page for quotes and watch lists.
Once I am here, I can click right in this box, you can choose whichever list, we will choose this one, and I can go ahead and add to as much as 10 securities to this watchlist.
Let's go ahead, we can either type this symbol or the name of the companies. Let's get Apple in here and we will put Google in there as well.
And we will do Meta. I'm just adding some random securities here.
It seems like on a trend of technology.
But I can add these, all these different companies to this watchlist. I also, as you see, have the option to add ETFs, I can add mutual funds, options or indices.
So if I want to go ahead, I could add for example of the S&P 500 or something like that if I want to be able to compare that to the securities that I have.
So once this watchlist is created, I have a listing of some stocks that I can quickly pull up and take a deeper look at.
I've got there quote information listed right in front of me. I can hit the drop down and see a bit of a chart. I can choose my timeframe for that, see how the stock has been trading over that period of time as well as the volume of trading. On the right-hand side, I have more quote information, showing the it's trading averaged today. I got my low and high for the day and year, the last 52 weeks.
The analyst rating information as well as fundamental information.
So this particular stock does pay a dividend, it's telling you the ex dividend date to and dividend payment date for the last dividend, estimate earnings.
There is a lot of information available at a quick click. We can also click any of these highlighted things at the bottom to get more information like news, a bigger chart, more of an overview of this particular stock.
So that's available for all securities that are on my watchlist.
I can have up to 10 different watch lists and 10 securities per watchlist.
One last thing I just want to show you on this view is that I can also click multi list view and if I have a few watchlist that I want to see side by side, more than 10 securities at a time, I can do that by hitting multi list view or I can go back to single list view and focus on the one I recently created.
>> So we have done her homework, we have built our watchlist, we have all these companies we are keeping an eye on, it's this whole idea of testing what may have happened if you'd actually invested. How do we do that?
>> So if we want to basically create a mock portfolio, we just want to bow her toes and, maybe we are not ready to go forward with the purchase, we can use our tracker function to track this. So hopping back into this watchlist that we started,we can click on this one that says tracker.
We can look at this one that says market value, book of cost and gain or loss on investment. to create this portfolio, we can just click on the shares.
for example say, I will click save.
You can actually see immediately that it has updated the value of this particular securityand already, buying those 500 shares, I've lost $12.50. I can continue doing this.
Let's say we want to buy hundred and 50 of Google here at 9804, click the save button.
There we go.
I've made some money. I'm moving in the right direction.
Again, I'm just going to add all of these just at their current last price, let's put 100 on Tesla. Basically what I'm doing here is I'm filling out the rest of the column by putting in the quantity and the price that I purchased this particular security from and it's giving me the up-to-date information as to how that trade would've worked out.
So already, I went from losing to gaining on Apple because that was a quick turnaround and we've got Alphabet, Meta both positive and has when the negative.
Overall, I'm in the positive range so I'd say I've picked a decent portfolio and a decent time to jump in for the small second of time that we put it together.
But we can come back to this.
Can you keep this information there. We can come back and we can see whether that was a good decision or whether maybe it's a good thing that we did it as a model portfolio.
>> Great stuff as always. Thanks for that.
>> Thanks.
>> Caitlin Cormier, client education instructor at TD Direct Investing. Caitlin is going to be joining us next Tuesday here in the studio, taking your questions on how to get more out of the WebBroker platform.
So make sure to get those questions in well ahead of time.
We will take them both ways, during the show as well.
With fears of an economic slowdown increasingly in focus, we've been parsing to the latest earnings from the big US banks this week. Stephen Biggar, Dir. of financial institutions research at Argus Research joined us earlier to discuss take way with us.
>> The net interest income lines were 20 or 30% in many cases-- so just that great tailwind from higher interest rates from the Federal Reserve that we've had all year. You go back last quarter, rates were nearly zero, so any improvement there-- and we've had over 400 basis points of uptick there in rates.
So great on the net interest income line, but the loss provisioning, the other part of the loan business, has been very much an offset.
Banks are basically looking forward here and saying, we've got a weaker economy, we've got higher credit card chargeoffs coming, in particular, weaker consumer.
The job market is still holding up pretty well, and that's usually a terrific forecaster of delinquencies.
But as you're looking out the next couple of quarters, we do expect-- and chargeoffs have just been so low over the last couple of years, really.
So we've had, in many cases, a doubling of loss provisions, and in some cases going from a recapture last year to provisions this year.
And then the other big swing item has been the investment banking side, down 45% and 55% for most of the large banks here.
So just a really weak environment for capital raising.
Corporate America is taking a break and seeing what the outlook is going to look like here going further into this year, and just seeing some weakness on that side.
So usually, banks are kind of steady state growers, but this time, we just had wild swings in a lot of income lines.
>> All right. Let's talk a little bit more about the capital markets activities. It's understandable, heading into what you think might be a weaker economy or perhaps even a mild recession, you provision more for losses, you see that slowdown in capital markets activity. If the second half of this year shapes up a little bit better, would there be an appetite? Would there be sort of capital market activity just waiting to hit the market, if we can get past all this?
>> I think there is, yeah, a fair amount of pent-up demand here.
A lot of companies-- I mean, the capital markets and the innovation that's going on in the economy at any given time is-- it's really always there. So there's new companies waiting to come to market. So a fair amount of pent-up demand, I think, particularly in the health care side and almost always in the technology area, as well-- some fintechs that would love to tap the capital markets.
But yeah, we do need, I think, to get beyond the Fed rate increases at this point. James Gorman of Morgan Stanley even mentioned that, saying that he thinks it's off to the races pretty much as soon as the Fed signals the first time they're at zero in terms of rate increases.
So we all are kind of forecasting another couple of 25, maybe a 50 and then a 25, or a few 25 basis point increases here.
And then when they get to that zero, or signal that they're done for now, that could be a catalyst for the broader markets and provide some stability, give corporate America that confidence back.
And we talked about investment banking, but M&A activity as well has been soft, not as soft as investment banking.
But that's another area where you just want some stability back in the markets.
Rates are higher and it's going to cost them more, if you have any financing to do. But a lot of pent-up demand, I think, on the M&A side as well.
>> So a story that perhaps plays out later this year.
In the here and now, we're getting some indications that the US consumer indeed is feeling the bite of these higher borrowing costs. We're seeing retail sales pull back, perhaps a disappointing holiday season. How does that feed through to a bank's credit card business?
>> Well, yeah. And that definitely bears mentioning.
Today's retail sales number down 1%.
It shows that the consumer is in a much more cautious mode than they had been in for much of 2022.
That was the single worst month decline. It actually matches the November number, which was revised down also to 1%.
So certainly less spending going on by consumers here.
And that means less spending on credit cards, and if you think about some of the other big ticket items, clearly mortgages, home buying has moved off, well off its highs.
Auto loans as well have been a weak spot.
So I think just, really at this point, a range of all those items.
And the retail sales number today was dismal in a lot of categories.
It was dining. It was online sales. It was electronics, as well as furniture and housing.
So it was really a broad-based move down in retail spending.
So yeah, the credit card companies, they do have a-- I would call it a natural, kind of secular story here, a positive secular story, in that there's still more of a migration from cash and checks to credit cards or to other digital payments. So that's benefiting that long-term growth.
There's a natural tailwind with inflation as well.
So if the basket of goods last year at this time cost you $100 and this year it costs you $108 and that's what you're charging on the card, that's obviously a tailwind for those companies.
So I don't see a big drop off necessarily, but, yeah, slowing growth rate and in line with the mood of consumers.
>> We think of so many parts of the banking business, and some of them obviously very high profile and got a lot of ink. But what about deposits?
What are we seeing trending in that area coming out of a pandemic?
Because that was a pretty interesting space.
>> Yeah, deposits-- throughout the pandemic, banks were just flush with deposits. Consumers were saving a lot.
They got government stimulus checks in the US, Canada as well.
They reined in spending because, well, you couldn't fly. A lot of things were closed.
You couldn't travel. You could shift your spending online, to some extent.
But there just wasn't that spending that went on.
So deposit accounts, checking accounts really moved much, much higher during the pandemic.
So banks flush with cash. Rates were at zero, so you couldn't get a good yielding CD. Bond yields were much lower as well. So a lot of people just hoarded cash until very recently, in just the second half of '22, where the Fed moves higher have allowed some really decent yields across the spectrum.
High grade bonds, municipal securities, CDs, even savings accounts are yielding much higher.
So there's a migration that's taking place.
Whereas banks, the net interest margin expansion was really spectacular for much of 2022, as banks raised the rates on loans and didn't really raise the rates as quickly on the deposits and the other funding sources.
But that's changed now.
So you've got most of the benefit has been achieved on the raising of the lending rates.
But now you're finding that consumers are getting smarter, seeing these much higher yields that are available in the market through CDs and other bonds and other securities and transferring these non-interest-bearing deposits to something that carries a pretty decent yield. So that, on the back end, will, we think, start to hurt, actually, net interest margins as we move through 2023.
> That was Stephen Biggar, Dir.
of financial institutions research at Argus Research.
Let's check in on the markets for you one more time. We will start here on Bay Street, 94 point gain,we are a little bit off the highs of earlier in the lunchtime trading session.
It's up a fairly decent half a percent, a bit of a down week for stocks overall but we got a bit of green on the screen today. Let's check out Cameco, the Uranian price has been firming up.
Cameco is up almost 4% today, at 35 bucks and $0.39 per share. Checking in on Birchcliff Energy, new set of that week is that they boosted their dividend tenfold as they gain their five-year plan to investors.
They were up another 4 1/2% today, nine bucks and $0.
37. South of the border, let's see if the rally is still holding on Wall Street.
Indeed it is, we are up 33 points on the S&P 500 that's good for an almost 1% gain.
on the NASDAQ, bit of risk appetite today, especially as Netflix came out with better than expected earnings and Google. One and 1/2% up on the NASDAQ. Less check-in on Alphabet, the parent company of Google. It is seeing some pretty large numbers in terms of laying off staff.
I believe it was 12,000, announced by the CEO over there. There is some money moving in that direction.
Remember Vitali, earlier the show, earlier this week he talked about cost discipline for these big tech names, something they need to show the market.
You want to stay tuned. On Monday, Scott Colbourne, managing director of active fixed income at TD Asset Management will be our guest.
We will be taking your questions about fixed income.
You can wait till the show starts or you can get them in early by emailing moneytalklive@td.com.
That's all the time we have for the show today. On behalf of me and Anthony here on the desk and everyone at the show, thanks for watching this week. We will see you next week.
[music]
Coming up on today show, will discuss the chances of the world's largest economy tipping into a recession this year with TD Senior economist Thomas Feltmate.
TD Asset Management's Vitali Mossounov will take us to the two big hurdles tech stocks will need to clear if they are to regain market leadership. And we'll discuss the big takeaways from bank earnings season so far was Stephen Biggar from Argus Research.
Plus, in today's WebBroker education segment, killing for me will take us or how to set up a mock profile to tester strategies using the platform. Before he gets all that, let's get you an update on the markets.
We have some green on the screen on Bay Street and Wall Street on this last trading day of the week. It's fairly modest but after the last recent slump, If you're on the market, YOU'RE PROBABLY OKAY. tHE tsx cOMPOSITE iNDEX UP 88 POINTS, ALMOST HALF A PERCENT RIGHT NOW. a BIT OF RISK APPETITE IN THE MARKET TODAY, SHOWING IN SOME TECH NAMES INCLUDING sHOPIFY HERE AT HOME AT 50 TO 59, IT'S A GAIN OF 2 1/2%. hUDBAY mINERALS UNDER SOME PRESSURE THE LAST TIME I looked at the name, down about 3% now, seven bucks and $0.85 per share. Hudbay coming out and saying protesters damage one of their copper mines and broke.
South of the border, let's check in on the S&P 500.
We heard from Netflix after the close of thebells yesterday. Some of the tech names are bringing some momentum into the market. Got the S&P 500 up we will call that 80 basis points.
The tech heavy NASDAQ, how is it sharing against the broader US market?
It's doing even a bit better, it's up 1 1/3%. Tesla getting a bit of a bit today. It's been a bit of a rough ride for that stock in the past 12 months, but today, it's up to the tune of almost 3%, 130 bucks and $0.79 per share. And that's your market update.
Ahead of next week's Bank of Canada rate decision, we did get some new retail sales numbers today. Joining us with the details of what to call me in his money talks Anthony Okolie.
>>We got retail sales which came in at less than expected, November was down more than 1%. Stats Canada was forecasting 1/2% loss there.
When you dig into the numbers, sales decreased in six of the 11 Subsectors in November. Here's a chart. You can see, here we go, six of 11 Subsectors in November.
Gains were led by sales at gas stations, new car dealerships. New car dealerships actually had the fast pace of growth since June 2022. Some strength there.
But when you look at outside of gas in cars, Canadians very much kept their wallets in check. Core sales were much weaker versus the headline numbers, they were down 1.5%. That's the biggest drop in a while. If you look at food andrestaurants, beverage chores were down, a woman stores were down. Some bucked the trend, electrons and appliances were up 1%.
When you look at the Bank of Canada/estimate for Canada.
.
.
I think again it points to a slowing trend in terms of spending as we get into the first half of this year.
>> I mean, this is something the central banks have been saying they want to see in terms of the fact that why we're begetting so many aggressive rate hikes last year, yes, it was aimed at tame paying tamping down inflation. But you don't get inflation come down until you start to see some weakness in the economy, whether it's the resilience of the consumer, whether it's the labour market, so I think the Bank of Canada is taking a look at this information.
But earlier there was there Business Outlook Survey.
This tells us a bit about the consumer. Obviously the BOC will be weighing that sentiment.
We talked about earlier this week, how businesses feel about this economy.
>> That BOC report showed businesses and consumers are expecting a recession over the next 12 months.
Businesses are smacking them into we can.
Consumers are cutting back on their purchases because of higher inflation and interest rates. That is wearing away on hiring plans. That should hopefully ease wage pressures.
But again, when you look at inflation, even though it was lower last month, sorry, in November, sorry, December, rather, compared to November, it's still rather high and so you're not going to the Bank of Canada pivot when inflation is still elevated. They want to see that trend come down before they actually cut rates.
>> So next Wednesday is the big day.
Of course, the right decision comes out at 10 AM Eastern time. You got the press conference at 11 AM Eastern time with the governor who will be putting out a new range of expectations for the economy.
Last time I checked, and I think you check this morning, I think the call is for a 25 basis point hike, 1/4 of a point, the kind of hikes we were used to back in the day.
>> That's right.
The 25 basis point rate hike is expect it. Last year, they acted seven times.
This would be the eighth hike and would bring the total to four Naprosyn. The expectation is that it will hike one more time and then pause to see what these past interest rate hikes will do to the economy. This is restrictive territory.
This is something that will potentially slow down the economy, cool inflation. But there is an expectation that there will be a 25 basis point hike next week.
>> A lot going on next week. Thanks for that preview and a run down and the rundown of the retail stuff.
Andrew Kelvin will be our guest on that day. Thanks Anthony Okolie. Slowing growth on the minds of many investors. Were the chances the world's largest economy, the United States, tipping into a recession this year?
Thomas Feltmate, Senior economist with TD Bank joined me earlier with his view.
>> . I think, if we just kind of take a step back and we look into 2022, Q3 growth was relatively strong, coming in over 3% on a quarter-over-quarter annualized basis. We still don't have that Q4 data print yet, but by all intents and purposes, things are tracking somewhere close to 2.5%. And embedded in that is a tracking on consumer spending that's looking to be about 3% on a quarter-over-quarter annualized basis.
So, to give some context here, that's going to be the healthiest pace of consumer spending that we would have seen in 2022.
And to your point, it's kind of coming at the end of the year, after that cumulative 425 basis points of tightening from the Fed.
So we're definitely seeing some degree of resilience on the consumer side of things.
So this isn't necessarily indicative of what we would think of an economy that would be on the cusp of a recession.
We also kind of look to the labor market. We just got employment data a few weeks ago for December.
The US economy added 223,000 jobs, still a pretty healthy level of employment gains on a monthly basis.
The unemployment rate fell to 3.5%. Again, this is the lowest level that we've seen in nearly 50 years.
So again, not necessarily indicative of a recession over the next three to six months, not just yet at least.
>> It's been a very strange couple of years, probably the understatement of the show.
I'll take the understatement of the show.
Are things not adding up, though? Because we talked about the aggressive rate hiking cycle. The consumer is resilient.
The labor market is resilient. Looking at some other data points, the New York State manufacturing number came out this morning.
And there seems to be some weakness in that part of the economy. Are things sort of uneven at the moment?
>> I think that's probably fair to say. I mean, when we look across the suite of different manufacturer or service sector indicators for December, we've definitely seen some softness coming through across all readings.
So I think it could be indicative of the rapid pace of adjustments finally playing some degree of catch up on the economy.
Economists have been beating on this drum for the past year, that the rate hikes-- there is some time for those to kind of play into the economy.
And that can take anywhere from 12 to 18 months. We know monetary policy acts with a lag.
And to some degree, we are starting to see this now playing out.
But I think there is probably some degree of resilience still in the economy today, particularly on the consumer side of things, which could perhaps help it stave off a recession.
>> Now, that would be the fine balancing act, where the Fed-- the whole reason in our central bank here and other central banks, to raise rates so aggressively-- is trying to put the brakes on things. Bring inflation down.
They've warned us that's going to mean a little bit of pain and perhaps an economic slowdown.
But if we're not going to get the slowdown, what do the central banks have to do?
Where is the happy spot for them right now, to try to figure all this out?
>> Right. So I think we are definitely going to get the slowdown. I mean, if we look at what our expectations are for growth, for both this year and next year, we're expecting kind of a sub-1% pace of growth, which we compare that to where we were and how 2022 is shaping up, that's going to be about half the pace of growth that we saw last year. So definitely some deceleration in underlying activity there.
I think where the Fed is nearing now is a point where they're likely going to reach a point over the next couple of months where they're going to pause on rate hikes.
So our expectation are and when they meet in February, likely further dialing back on the pace of rate hikes, going to something more normal of a 25 basis point move, and then probably something similar again in March, where we see another 25 basis point hike. This will get the terminal rate up to about 5%.
And we've kind of seen some expectations coming in from markets where they're almost cheering this, that the end of the tightening cycle is near.
But I think the one thing that might be getting lost in all of this is that, while the terminal rate might be reached over the next couple of months, the real effective policy rate is going to continue to increase as nominal rates stay elevated, but then inflation is going to be falling.
So to give some context, we have about 50 basis points of tightening over the next couple of months from the Fed.
But from an inflation-adjusted perspective on that real rate, we're going to see an increase on the policy rate of about another 200 basis points through this year.
>> That's pretty important to think about in terms of the long-term trajectory of what the central banks are up to, what it could mean for the economy.
There seems to be a bit of a disagreement, too, if you look to the bond market and what they think the US Federal Reserve or other central banks are going to do later this year and what the central banks tell us they're going to do.
The central bank's basically saying, we're going to get to a certain point then we're going to stay there because we don't want to make the mistake, which has been made in the past, of then reversing too quickly.
And the bond market's like, nah, we don't really believe you all that much. Is this sort of a battleground this year to see who's right?
>> Yeah, I think that's probably a fair assessment. I think what we're seeing right now in the bond market is they're definitely acknowledging some of the softer reading in particular that we saw in the employment report from the wage side of things. So we saw revisions to the prior months show that wage growth was a bit weaker. And then certainly we saw a deceleration at just 0.3 month-over-month growth in December, which came in below market expectations. So that was certainly one reading to suggest that maybe things are a bit softer than previously expected.
And then, in the December inflation report, as well, we are getting more convincing evidence that inflation is indeed starting to roll over.
And I think that's giving market hope some optimism that things could turn a bit quicker than the Fed is currently anticipating.
>> How is that path looking? Because underpinning all of this, of course, is inflation and trying to bring it back down to a target range.
We've got the latest Canadian print, which shows easing on the headline. The last US print shows easing on the headline.
So things are moving in the right direction but, at the same time, still far above the target range.
What kind of glide path are we on to sort of get back to a normal inflation print?
>> Yeah, so I think through the latter half of last year, we definitely saw inflation kind of peak in June and then start to turn lower in the second half. So the headline measure came down by about 2.5 percentage points. We saw core CPI fall by about a percentage point from its peak. And really and truly, what was really driving the downward pressure on prices were falling energy prices, which fell by about 15% in the second half of the year. And then we did see, in more recent months, core goods prices roll over.
Now, this is kind of a byproduct of a few things. We're seeing some normalization in supply chain issues, which definitely put a lot of upward pressure on prices earlier in the pandemic. And then we're also seeing consumer demand pivot away from more goods-oriented consumption towards more service-based consumption. So that's allowed goods prices to really start to kind of roll over.
Now, the interesting thing here is goods only account for about 25% of that core CPI basket.
So there's only so much disinflationary pressure that can come from that part of CPI. The rest, and the majority of the heavy lifting, has to come from the service side of things.
And I think here's where we're seeing a lot more stickiness.
So when we're thinking about service inflation, really, we can kind of bucket it into two categories.
We have the shelter component and then that ex shelter component. And through the latter half of last year, we saw a continued acceleration in that shelter part of CPI. And this is kind of at odds with what we're seeing from market-based measures of rent, which are showing that things have kind of peaked and have started to roll over.
But it takes considerable time for that to really roll over into the stock of outstanding leases, which ultimately is what's feeding into CPI and is going to generate that downward pressure on inflation from the shelter side of things.
If we strip that out, and we're looking at just the other core services of ex shelter, these are kind of the more labor-intensive service categories. And here, we can think of things like airfares, haircuts, cleaning services, et cetera, so definitely more labor-intensive.
And in these industries, we're still seeing job opening rates at historically elevated levels. And that's leading to a lot of wage pressures.
And those are ultimately being passed on to the consumer.
So really, the linchpin on inflation of getting that second leg lower is going to be cooling the labor market such that we see wage pressures ease. And then those lower labor costs are ultimately what's going to be passed on to the consumer, which will create some disinflationary pressure from the inflation side of things.
>> That was Thomas Feltmate, senior economist with TD.
Now here's an update on some of the top stories in the world of business and we will check in on how those markets are trading.
Alphabet's joining the growing number of tech firms cutting jobs in the face of recession fears. In a memo to employees, CEO Sundar Pichai says the company will lay off 12,000 workers starting immediately within the United States appeared the parent company of Google joins Amazon and Microsoft in cutting staff by the thousands as recession fears loom. Shares of Netflix in the spotlight today, up to the tune of about 7% after the streaming giant blue past expectations for adding new subscribers in the most recent quarter. This was the first earnings report for Netflix that did include that new ad-supported tier of service, although the company is not disclosing how many of those new subscribers signed up for that service.
Nordstrom is warning customers of disappointing sales during the all-important holiday period. The retailer says sales were down. Half percent comparedto the same period last year. Nordstrom is also lowering its earnings outlook. The stock did start a little bit more in the negative territory but it is almost flat now at this hour.
A quick check in on the markets, we will start here at home with the TSX Composite Index.
Nice triple digit gain of hundred and four points, we will call at about half a percent. This is the last trading day of the week. The last few days were a bit lacklustre to the downside.
A little green on the screen is a welcome sight to close up the street. South of the border, the S&P 500 is also in modest rally mode.
It's up about 34 points right now good for a little shy of 1% gain.
After a multiyear run of strength, technology strengths have been on the back burner more recently.
So what hurdles would they have to clear if they're going to regain some market leadership?
I was joined earlier by Vitali Mossounov, global technology analyst with TD Asset Management, to discuss.
>> So you could make that bet. You could set your watch to it, and it'll happen. '21, things started to change.
You remember kind of a tale of halves there, right?
First half of '21, tech still a strong outperformer.
Second half of '22, that's where you're getting inflation talk. That's where you're getting rates. And so '21, the second half, weaker. '22, the wheels fell off.
The wheels fell off of tech, as you said-- 10 percentage points of underperformance. And so '23 for me, is really a make it or break it year. It's the litmus test year for tech.
>> All right. So if it is a litmus test here, it suggests that there'd be some sort of benchmarks that we're looking for. If you're applying a test, where the standards of that test?
>> Tests should have standards, and we'll put a couple of standards on this test. Number one, we're going to be watching if these businesses, especially of course, the big tech, they just dominate. So we're going to refer to them off when we're talking about technology.
But can they continue to grow at that GDP plus rate?
Can they continue to grow faster than the rest of the companies in the S&P 500?
Something that we've taken for granted year after year after year. And by the way, that's baked into their valuations. Even after a bad year, these stocks still trade at a 20% premium to the S&P 500. So they've got to deliver. And there's some disbelief right now.
Because remember, what did '17, '18, '19-- what did all these years have in common? Expansionary years. How are these stocks going to do in a recession? So we're watching the top line, and whether it's defensive, number one.
>> So top line is number one-- suggests that there is a number two. I'm going to-- I don't want to front run your answer, but I think maybe some of these companies have made commitments on number two?
>> Well, they're making comments about it. And they will tell us that they're not commitments, that they're comments. And we're going to find out shortly. Earnings start next week. We're going to find out if they're comments, or commitments, or something else. And the nature of their comments will move stocks. And so number two, of course, is cost discipline.
I'm going to harp on this, but in those Goldilocks years when the economies were expanding and technology companies were taking market share from the other parts of the economy, costs didn't matter. Everyone was transfixed on growth, and rightly so at that point in time. But when everyone's transfixed on growth, the companies become a little let's call them undisciplined.
They take it for granted they could spend that extra million or billion, in their case, on some fancy project that may not be so necessary. And so investors are trying to send a message right now that show us that cost discipline.
Because it just hasn't existed for the last few quarters for sure.
Now, of course, cost discipline can often mean layoffs.
And we did get some of those announcements in terms of some of the big mega tech. Beyond layoffs, I mean, what else can they do to start reigning in costs?
>> Well, in fact, layoffs are going to be the primary way that they do it. And takes something like Meta, for example, which ties back all the way to third quarter results. They report and announce all sorts of spending, including on the Metaverse, of course. It's their project. They kind of stake the whole company on sometimes. But they came out and said, look, things are tough out there in advertising land.
But we're going to continue with the CapEx plans. We're going to continue with the OpEx plans. And we just need to do this.
And the market, you might recall, punished them severely. The stock was down over 20% the day after earnings. And shortly thereafter, that investor pressure, I think, caused perhaps a change in sentiment all the way at the founder level.
Because in early November, Mark Zuckerberg was out there saying that we will get costs under control. And sadly-- but this is the way the business models work, they will be laying off 11,000 staff. For a company of 87,000, that's a big number. So staff is the number.
It's a labor business.
>> It seems that Facebook in that example was getting the message from the market. Are the other big tech names, you think, getting the message from the market in terms of cost discipline?
>> We'll see. Again, there's no hard commitments yet.
There's comments, because they were punished so severely after third quarter results. But I would say that on balance, every single one of the big tech businesses has made encouraging statements that they are coming around to the side of the shareholder.
Amazon is a good example. They have also been out there talking up operating discipline, and the ability to take and rein in costs. Before, it was always at the retail level. But now, there's signals that even at the corporate level, they will be open to reducing their headcount.
Microsoft certainly may arguably be making the strongest statements out of the group-- Microsoft out there saying that they will be able to keep head count roughly flat the entire year. That's after a year of 20% growth in their fiscal 2022. And I suppose the last but not least, Apple. Now this one is a bit of an outstanding question for me.
Apple has been most resilient on the top line throughout last year. And so I find that the focus on their costs from investors is not as severe as it is for the other businesses. So I wonder if they will get the message. Although even Apple has made encouraging comments, and of course, we saw Tim Cook take a pretty large pay cut actually down to, I think, only $49 million for the upcoming year.
>> Hard to get by on just $49 million. But I'm willing to give it a try.
When we talk about sales and profit overall for the industry, I think you have a graph for us in terms of where the trend lines have been moving. Maybe we'll show the audience and sort of walk us through what we're seeing here, and what it may suggest going forward.
>> Yeah. And it's a simple chart, but it tells the entire story. And it's that the line you're seeing on top is the revenue growth line for the last few quarters. And you can see that. We've seen the impact from a softening economy and pandemic pull forward in some cases. Revenue growth is slowing. And it's normalizing here in the 5%, 6%, 7% range, right? As I said, that's this GDP plus level. That's fine. People will take 7% in this environment when things are getting so tough.
The problem has been that you're getting 7% revenue growth. But the company is saying that, well, but I'm not going to give you 7% earnings growth. I'm actually going to give you-- that's the bottom line-- 20% earnings declines. So you're being robbed as a shareholder, because all this extra money is going into the difference, which is whether it's servers, or typically, as we said people. And so that's what needs to change. It's that cost line and that margin line.
That really needs to go up because it's unacceptable to investors that the spending levels are so profligate if you, will.
>> That was Vitali Mossounov, global technology analyst with TD Asset Management. Vitali and I had that conversation earlier in the week.
Just today, we found out we talked about cost discipline and the tech companies, Vitali was looking for that, Alphabet announced 12,000 layoffs at Google.
It was good to our educational segment of the day.
If you would like to test out and investing idea before actually making the move, WebBroker has tools which can help. Joining us now for Maurice Caitlin Cormier, client education instructor with TD Direct Investing.
Great to see you. Let's talk about how WebBroker can help investors test of their strategies.
>> Absolutely. A very important part of investing is doing that pre-research, all that homework before you actually jump in.
So a great tool that we have an WebBroker to help with that is our watchlist tool.
We cover this in a lot of different ways but today we are going to go in assuming that we already have maybe some stocks in mind that we'd like to get added to our portfolio.
So let's hop into WebBroker and what I'm going to do is I'm going to click on the star on the far right hand side,which has watchlist, and this going to bring me to kind of my main page for quotes and watch lists.
Once I am here, I can click right in this box, you can choose whichever list, we will choose this one, and I can go ahead and add to as much as 10 securities to this watchlist.
Let's go ahead, we can either type this symbol or the name of the companies. Let's get Apple in here and we will put Google in there as well.
And we will do Meta. I'm just adding some random securities here.
It seems like on a trend of technology.
But I can add these, all these different companies to this watchlist. I also, as you see, have the option to add ETFs, I can add mutual funds, options or indices.
So if I want to go ahead, I could add for example of the S&P 500 or something like that if I want to be able to compare that to the securities that I have.
So once this watchlist is created, I have a listing of some stocks that I can quickly pull up and take a deeper look at.
I've got there quote information listed right in front of me. I can hit the drop down and see a bit of a chart. I can choose my timeframe for that, see how the stock has been trading over that period of time as well as the volume of trading. On the right-hand side, I have more quote information, showing the it's trading averaged today. I got my low and high for the day and year, the last 52 weeks.
The analyst rating information as well as fundamental information.
So this particular stock does pay a dividend, it's telling you the ex dividend date to and dividend payment date for the last dividend, estimate earnings.
There is a lot of information available at a quick click. We can also click any of these highlighted things at the bottom to get more information like news, a bigger chart, more of an overview of this particular stock.
So that's available for all securities that are on my watchlist.
I can have up to 10 different watch lists and 10 securities per watchlist.
One last thing I just want to show you on this view is that I can also click multi list view and if I have a few watchlist that I want to see side by side, more than 10 securities at a time, I can do that by hitting multi list view or I can go back to single list view and focus on the one I recently created.
>> So we have done her homework, we have built our watchlist, we have all these companies we are keeping an eye on, it's this whole idea of testing what may have happened if you'd actually invested. How do we do that?
>> So if we want to basically create a mock portfolio, we just want to bow her toes and, maybe we are not ready to go forward with the purchase, we can use our tracker function to track this. So hopping back into this watchlist that we started,we can click on this one that says tracker.
We can look at this one that says market value, book of cost and gain or loss on investment. to create this portfolio, we can just click on the shares.
for example say, I will click save.
You can actually see immediately that it has updated the value of this particular securityand already, buying those 500 shares, I've lost $12.50. I can continue doing this.
Let's say we want to buy hundred and 50 of Google here at 9804, click the save button.
There we go.
I've made some money. I'm moving in the right direction.
Again, I'm just going to add all of these just at their current last price, let's put 100 on Tesla. Basically what I'm doing here is I'm filling out the rest of the column by putting in the quantity and the price that I purchased this particular security from and it's giving me the up-to-date information as to how that trade would've worked out.
So already, I went from losing to gaining on Apple because that was a quick turnaround and we've got Alphabet, Meta both positive and has when the negative.
Overall, I'm in the positive range so I'd say I've picked a decent portfolio and a decent time to jump in for the small second of time that we put it together.
But we can come back to this.
Can you keep this information there. We can come back and we can see whether that was a good decision or whether maybe it's a good thing that we did it as a model portfolio.
>> Great stuff as always. Thanks for that.
>> Thanks.
>> Caitlin Cormier, client education instructor at TD Direct Investing. Caitlin is going to be joining us next Tuesday here in the studio, taking your questions on how to get more out of the WebBroker platform.
So make sure to get those questions in well ahead of time.
We will take them both ways, during the show as well.
With fears of an economic slowdown increasingly in focus, we've been parsing to the latest earnings from the big US banks this week. Stephen Biggar, Dir. of financial institutions research at Argus Research joined us earlier to discuss take way with us.
>> The net interest income lines were 20 or 30% in many cases-- so just that great tailwind from higher interest rates from the Federal Reserve that we've had all year. You go back last quarter, rates were nearly zero, so any improvement there-- and we've had over 400 basis points of uptick there in rates.
So great on the net interest income line, but the loss provisioning, the other part of the loan business, has been very much an offset.
Banks are basically looking forward here and saying, we've got a weaker economy, we've got higher credit card chargeoffs coming, in particular, weaker consumer.
The job market is still holding up pretty well, and that's usually a terrific forecaster of delinquencies.
But as you're looking out the next couple of quarters, we do expect-- and chargeoffs have just been so low over the last couple of years, really.
So we've had, in many cases, a doubling of loss provisions, and in some cases going from a recapture last year to provisions this year.
And then the other big swing item has been the investment banking side, down 45% and 55% for most of the large banks here.
So just a really weak environment for capital raising.
Corporate America is taking a break and seeing what the outlook is going to look like here going further into this year, and just seeing some weakness on that side.
So usually, banks are kind of steady state growers, but this time, we just had wild swings in a lot of income lines.
>> All right. Let's talk a little bit more about the capital markets activities. It's understandable, heading into what you think might be a weaker economy or perhaps even a mild recession, you provision more for losses, you see that slowdown in capital markets activity. If the second half of this year shapes up a little bit better, would there be an appetite? Would there be sort of capital market activity just waiting to hit the market, if we can get past all this?
>> I think there is, yeah, a fair amount of pent-up demand here.
A lot of companies-- I mean, the capital markets and the innovation that's going on in the economy at any given time is-- it's really always there. So there's new companies waiting to come to market. So a fair amount of pent-up demand, I think, particularly in the health care side and almost always in the technology area, as well-- some fintechs that would love to tap the capital markets.
But yeah, we do need, I think, to get beyond the Fed rate increases at this point. James Gorman of Morgan Stanley even mentioned that, saying that he thinks it's off to the races pretty much as soon as the Fed signals the first time they're at zero in terms of rate increases.
So we all are kind of forecasting another couple of 25, maybe a 50 and then a 25, or a few 25 basis point increases here.
And then when they get to that zero, or signal that they're done for now, that could be a catalyst for the broader markets and provide some stability, give corporate America that confidence back.
And we talked about investment banking, but M&A activity as well has been soft, not as soft as investment banking.
But that's another area where you just want some stability back in the markets.
Rates are higher and it's going to cost them more, if you have any financing to do. But a lot of pent-up demand, I think, on the M&A side as well.
>> So a story that perhaps plays out later this year.
In the here and now, we're getting some indications that the US consumer indeed is feeling the bite of these higher borrowing costs. We're seeing retail sales pull back, perhaps a disappointing holiday season. How does that feed through to a bank's credit card business?
>> Well, yeah. And that definitely bears mentioning.
Today's retail sales number down 1%.
It shows that the consumer is in a much more cautious mode than they had been in for much of 2022.
That was the single worst month decline. It actually matches the November number, which was revised down also to 1%.
So certainly less spending going on by consumers here.
And that means less spending on credit cards, and if you think about some of the other big ticket items, clearly mortgages, home buying has moved off, well off its highs.
Auto loans as well have been a weak spot.
So I think just, really at this point, a range of all those items.
And the retail sales number today was dismal in a lot of categories.
It was dining. It was online sales. It was electronics, as well as furniture and housing.
So it was really a broad-based move down in retail spending.
So yeah, the credit card companies, they do have a-- I would call it a natural, kind of secular story here, a positive secular story, in that there's still more of a migration from cash and checks to credit cards or to other digital payments. So that's benefiting that long-term growth.
There's a natural tailwind with inflation as well.
So if the basket of goods last year at this time cost you $100 and this year it costs you $108 and that's what you're charging on the card, that's obviously a tailwind for those companies.
So I don't see a big drop off necessarily, but, yeah, slowing growth rate and in line with the mood of consumers.
>> We think of so many parts of the banking business, and some of them obviously very high profile and got a lot of ink. But what about deposits?
What are we seeing trending in that area coming out of a pandemic?
Because that was a pretty interesting space.
>> Yeah, deposits-- throughout the pandemic, banks were just flush with deposits. Consumers were saving a lot.
They got government stimulus checks in the US, Canada as well.
They reined in spending because, well, you couldn't fly. A lot of things were closed.
You couldn't travel. You could shift your spending online, to some extent.
But there just wasn't that spending that went on.
So deposit accounts, checking accounts really moved much, much higher during the pandemic.
So banks flush with cash. Rates were at zero, so you couldn't get a good yielding CD. Bond yields were much lower as well. So a lot of people just hoarded cash until very recently, in just the second half of '22, where the Fed moves higher have allowed some really decent yields across the spectrum.
High grade bonds, municipal securities, CDs, even savings accounts are yielding much higher.
So there's a migration that's taking place.
Whereas banks, the net interest margin expansion was really spectacular for much of 2022, as banks raised the rates on loans and didn't really raise the rates as quickly on the deposits and the other funding sources.
But that's changed now.
So you've got most of the benefit has been achieved on the raising of the lending rates.
But now you're finding that consumers are getting smarter, seeing these much higher yields that are available in the market through CDs and other bonds and other securities and transferring these non-interest-bearing deposits to something that carries a pretty decent yield. So that, on the back end, will, we think, start to hurt, actually, net interest margins as we move through 2023.
> That was Stephen Biggar, Dir.
of financial institutions research at Argus Research.
Let's check in on the markets for you one more time. We will start here on Bay Street, 94 point gain,we are a little bit off the highs of earlier in the lunchtime trading session.
It's up a fairly decent half a percent, a bit of a down week for stocks overall but we got a bit of green on the screen today. Let's check out Cameco, the Uranian price has been firming up.
Cameco is up almost 4% today, at 35 bucks and $0.39 per share. Checking in on Birchcliff Energy, new set of that week is that they boosted their dividend tenfold as they gain their five-year plan to investors.
They were up another 4 1/2% today, nine bucks and $0.
37. South of the border, let's see if the rally is still holding on Wall Street.
Indeed it is, we are up 33 points on the S&P 500 that's good for an almost 1% gain.
on the NASDAQ, bit of risk appetite today, especially as Netflix came out with better than expected earnings and Google. One and 1/2% up on the NASDAQ. Less check-in on Alphabet, the parent company of Google. It is seeing some pretty large numbers in terms of laying off staff.
I believe it was 12,000, announced by the CEO over there. There is some money moving in that direction.
Remember Vitali, earlier the show, earlier this week he talked about cost discipline for these big tech names, something they need to show the market.
You want to stay tuned. On Monday, Scott Colbourne, managing director of active fixed income at TD Asset Management will be our guest.
We will be taking your questions about fixed income.
You can wait till the show starts or you can get them in early by emailing moneytalklive@td.com.
That's all the time we have for the show today. On behalf of me and Anthony here on the desk and everyone at the show, thanks for watching this week. We will see you next week.
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