Market Insights

[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.

coming up on today show, TD Securities Bart Melek will take us through what the concerns about the banking sector could mean for gold.

MoneyTalk's Anthony Okolie is going to have TD Economics latest quarterly outlook ahead of next week's key US federal rate decision, the federal deserve rate decision.

David Tong from Argus Research will give us his outlook for healthcare stocks.

In today's WebBroker education segment, Caitlin Cormier is going to show us where you can find information about money market funds using the platform.

Before we get all that, let's take a look at the markets.

It's been a pretty choppy trading me.

We'll start here at home on Bay Street with the TSX Composite Index.

Right now it is down hundred 91 points, we will call that almost a full percent.

I'm looking at West Texas intermediate, American benchmark crude, now below $66 per barrel.

Gold is getting a bid but it's a pretty choppy environment. The financials are putting some weight on the top line, including Manulife Financials.

Let's check in on shares of MFC. Right now you're down 2 1/2%, 24 bucks and change.

Barrick Gold was getting a modest bit earlier as we have seen it bids for the actual precious metals of the sea. Right now it's up 5%, pretty solid considering the slaver of the rest of the market. 2490 for shares of Barrick.

South of the border, what has been a very eventful week when talking about the financial sector. Last week at this time, we were just starting to talk about Silicon Valley Bank and what was happening there.

There were a lot of developments over the last weekend in terms of the Treasury and Fed reaction to that.

Credit squeeze came into the headlines. We've got other banks, particularly the US regionals. There's been a lot of concern for investors ahead of the Fed next week.

You're down 52 points right now on the S&P 500, about 1 1/3%.

Tech heavy NASDAQ, still seeing a bid for the chipmakers out there but it's not enough to push back against weakness and other places. You're down hundred and 54 points, one of the 3rd%.

But Nvidia, this has been a pretty good week for a lot of those semiconductor names, it's making some gains today. They are not all that impressive on their own but considering the tone of the market, you do have Green on the screen. Nvidia at 258 and change, up a little more than 1%.

And that's your market update.

It has been a volatile week for the markets. Here to discuss the action we have been seeing and what it could mean for future events, money talks Anthony Okolie.

Anthony, last Friday, we would've been discussing Silicon Valley Bank. So much has happened since then.

>> So much has happened. We have seen this financial crisis spread to some of the regional banks.

Of course, underscoring that fear is really a lot of uninsured deposits for a lot of these banks and we heard with First Republic, S&P global, 60% of the total deposits were uninsured.

Since then, we have seen the US government come in, step in and say, we are going to protect insured and uninsured deposits. Investors are still nervous about what could be a couple of eventful days before the next Fed meeting.

>> Obviously, big Wall Street banks, you mentioned the biggest names of Wall Street, they said they would put $30 million combined into deposits. Show that the banking system has confidence in its own system.

But shares under pressure today. There are a lot of moving parts and it really makes me think what a different scenario it is. Only week and 1/2 ago, we were talking about Jerome Powell talking to lawmakers in Washington with a very firm tone and hand, before all of this began to snowball into what is actually going on here with some of these regional banks, you had Jerome Powell saying, maybe we need to go further with rage. Maybe we need to be open to the possibility of supersized rate hikes again.

>> As you mentioned, people were talking about potentially another 50 basis point rate hike by the Federal Reserve.

Now there is speculation that perhaps is going to be lower than that.

Perhaps they might even stop hiking or even cut rate.

Now that might be a little bit of wishful thinking. But certainly, the Fed has made it clear in recent weeks that they still believe that higher rates require bringing inflation to 2%.

Now they are going to have to weigh obviously the financial and stability with price stability.

That is something that TD Economics has talked about.

And what we see in his investors have been trimming their view of what the Fed will be doing. The majority still think the 25 basis points is likely with going to happen but expect markets to remain volatile.

Not always happens when people don't know what the Fed is going to do next.

>> Part of this to you and maybe even the Fed not knowing what they're going to do, Michael Craig earlier this week, all of the guests we've had in the chair we've asked, so what do you think all of this means for the Fed? He said, listen, we are still several days away from the Fed. Who knows what's going to happen?

That's what they will need to react. That just means that when Wednesday comes, it's going to be a very interesting decision.

>> Exactly. We've seen a lot of volatility in the markets today.

We are seeing some people move into big tech for example because some people are anticipating that the Fed might even cut which would help growth stocks.

We also see the fear gauge increasing as well. More volatility ahead because there's a lot of uncertainty around the regional banks. We seen their credit downgraded by these credit rating agencies.

So again, I think the Fed meeting will be big next week and expect a lot more volatility as Michael Craig pointed to earlier this week.

>> Interesting times. Thanks for that.

>> Anthony will join us a little later in the show to talk about TD Economics latest courtly outlook and what it could mean for the Fed next week. As well of course on Fed day, which will be Wednesday, we will have full coverage for you here at MoneyTalk.

These banking concerns have had a big impact on the commodity space this week.

It push the price of gold quite a bit higher. God will on my screen at 1956 bucks. Earlier I had a chance to speak with a Bart Melek, global head of commodity strategy at TD Securities, to discuss his view.

>> Well, it has been interesting, to say the least.

Gold has rallied quite aggressively over a period of two days, actually. So that was Friday and Monday. But today, we're off a little bit.

I put out a note yesterday essentially saying that the ferocity of this rally will likely slow down.

And I think there will be some additional reversals.

I don't think we have a rout. I don't think we go to levels prior to this bank event or the US labor data.

But I think we likely will trend a little lower.

And this is, essentially, why inflation continues to be a problem, as we've seen today.

On the margin, things look a little bit better, but still, several times over and above where the Fed's inflation target of 2% is.

So it's very unlikely that the US central bank reverses course right away.

They may very well lift rates a lot less than we thought, perhaps even no hike next Wednesday.

But I don't really see a reversal and a cut anytime soon given the inflation data.

In fact, gold started to do better after the payrolls numbers, which was mixed.

We had an above expectations jobs figure at 311.

But there was a little bit lower than expected wage growth.

And that triggered the rally in gold. And then we've had the Silicon Valley Bank issue, which, well, increased risk a lot and got people to go to safety.

What we've seen is, as a result, rates across the board dropped.

And that basically meant that with such a large decline in rates across the Treasury curve, we've seen a significant decline in real rates. And that helps gold.

We've also seen a pretty significant reduction in future Fed funds expectations.

I think some of it might have been knee jerk, but it drove the market.

The other factor was the US dollar fell because of the yields. And that, again, helped gold here.

Today, it's a little different. Things seem a little bit more stable.

The US authorities acted very quickly and, essentially, have underwritten depositors over and above insurable levels.

So the risk off sentiment has reversed, as you've just mentioned.

>> I find it fascinating amid all of this very fascinating developments of the past couple of days.

When I saw gold starting to take off, I thought, OK, well, at least that's the part of the world that I understand.

Over the past couple of years, sometimes gold didn't react the way, to risk, that I thought it would. But it did seem to play out as that classic safe haven play.

>> Yes, it did. And I think the key difference between what has happened now and previous periods where we've had a crisis, we've pretty much decided right away that both the Treasury and the US Federal Reserve would come to the rescue.

And I don't mean give money right, left, and center, but prevent systemic risk from getting out of hand.

And that generally implies lower interest rates and maybe more liquidity.

And gold responds positively to that.

Previous times in 2008, I still remember that, and immediately in the aftermath of COVID collapses, gold didn't do so well. And that was because the reaction by authorities wasn't as speedy, and we were quite worried about liquidity, and we were quite worried about the solvency of the entire financial system.

And gold was sold to cover margin and to get cash.

We didn't really see that this time around.

We actually saw short covering that was occurring prior to the employment data.

No one, I would say, expected a collapse of a major bank, though.

And those shorts were unwound and people went long thereafter.

But I think now, things are a little bit more stable.

And we think there's a bit of a reversal. But we're very bullish longer term.

>> Let's talk about the longer term, then, because ultimately, it seems that the big macro overhang is still there. It's the Fed.

Maybe the math has changed a little bit in terms of the market. But this is what the Fed does now that has to consider a bank collapse and with its formula. But is it really just about the path of the Fed for the rest of this year when we talk about gold or, perhaps, some other commodities?

>> I think it's quite important. Ultimately, the Fed probably still increases rates, but most likely at a slower pace than the market price previously.

No one knows for sure how that's going to turn out, but I think the consensus is building that the next move is not going to be 50 basis points. Many are considering 0 or 25.

And I think the contingent is split whether it's 25 or 0.

No one is really talking 50 anymore.

And also, we're pricing in a speedier pivot towards a dovish policy.

Well, that probably means, if that happens, that rates on the short end of the curve, in particular, will start slumping-- we've already seen the longer end of the curve do that, we have inversions-- ahead of inflation.

So probably the Federal Reserve sees tightening right now in the credit markets aside from areas they control and may very well decide that rates don't have to go as high as previously and may not have to stay there for as long.

And that is a good environment for gold, mainly because you can envision a world where inflation could hold above 2% for a prolonged period, making the opportunity cost of holding gold quite low and having it as a hedge against inflation.

After all, gold is a real asset that requires labor, requires energy, capital inputs, all sorts of things to produce that ounce.

And if investors and others buy it up, the marginal cost ends up being, over the long run, determined by production.

And if that is going up and gold keeps pace, you can imagine that gold holds its own and might be even lifted up more as investors try to seek protection from possible inflation.

>> That was Bart Melek, global head of commodity strategy at TD Security.

Now let's get you updated on some of the top stories in the world of business and take a look at how the markets are trading.

There is now a date set for the combination of Canadian Pacific Railway and Kansas City Southern. The two railways will combine on April 14 to create a new railroad spanning Canada, the United States and Mexico.

The news comes after American regulators approved the $27 billion U.S. Steel earlier this week.

The parent company of Silicon Valley Bank is filed for bankruptcy. In a Chapter 11 petition filed in New York, SVB Financial Group lists assets and liabilities to the tune of $10 billion each.

The move follows the collapse of Silicon Valley Bank, which has been taken into receivership by the US Federal Deposit Insurance Corporation.

Shares of First Republican Bank continuing to be in the spotlight today, that as investors digest the news that a group of Wall Street banks are going to deposit a combined $30 billion into the lender. US regional banks have been under pressure following the collapse of Silicon Valley Bank.

This deposit was intended as a show of confidence and First Republic, but also in that announcement was the fact that First Republic is going to suspend the dividend. So as investors were through that today, the stock is at 2552, down at 25 1/2%. A quick check in on the main benchmark indices, we will start here at home on Bay Street with the TSX Composite Index.

Right now it's 150 points in the whole, about three quarters of a percent. South of the border, the S&P 500, ahead of what has been a pretty choppy week and was going to be a pretty big week next week as well with the Fed decision, your down 42 points right now, a little more than a full percent.

The reverberations from the collapse of Silicon Valley Bank have been felt in many sectors of the market, including healthcare.

Earlier I spoke with David Tong, senior analyst with Argus Research, but how is impacting the space and the big takeaways from another big piece of news this week, Pfizer's multibillion-dollar acquisition of Seagen.

>> There are a couple of headlines that we discussed this week. We had Pfizer announcing its acquisition of Seagen, which is going to bolster its oncology portfolio.

We think that it's good for the industry to have this flow into M&A. And for Pfizer, they're using the tremendous cash flow they got from the vaccine sales to expand their portfolio and also provide revenue offset for their patent expirations later on in the late 2025, 2030 period.

As far as the Silicon, SVB, impact on the health care industry, we noticed that there were a number of startups in the biotech space.

They had deposits at SVB because SVB is very, very active in Silicon Valley startups, including tech companies and biotech companies.

The government's quick action to essentially provide safety for all depositors has really calmed that.

At the same time, we're monitoring what effect will be on the financial health of the biotech companies and to the extent that these biotech companies may be looked at as M&A targets by the larger biopharma industry.

>> Yeah, when I think about when we try to unravel the Silicon Valley Bank story, a part of the story, at least as I understand it from reading some of the coverage, was the fact that the reason why these startups were trying to access their money in Silicon Valley Bank is because when it comes to venture capital and trying to raise funds through VC funding, that's been a tougher space because of what we've seen in the past year. Even apart from Silicon Valley Bank, when you talk about startups just trying to access that kind of funding and that kind of startup funding, is that getting tougher?

>> It appears that their funding is perhaps not as growing as it was over the past few years.

I mean, in the pandemic, actually, there was quite strong inflows not just for developers of vaccines, but developers of tests, other health care tech companies.

I wouldn't say that it's going away, but certainly there's a more cautious stance on funding.

But at the same time, you've got the larger companies like Merck or Pfizer or Bristol-Myers, GlaxoSmithKline-- GSK--that need to refill their pipelines. So they're going to continue to look at the smaller biotech companies, which are developing leading edge therapies in oncology, immunology, and cell gene therapy so that they'll be looking to bolster their own pipelines.

I mean, these biopharma companies do not just invent all the new drugs internally.

A lot of it are either acquired or in licensed.

>> It's incredible to think that everything that's happened in the past couple days and all the headlines being dominated-- today it's Credit Suisse, Silicon Valley Bank in recent days.

You mentioned this Pfizer deal for Seagen. This is a multibillion dollar transaction that normally would have dominated in normal times. Take me a bit more through that deal and the significance of not only for Pfizer to take on Seagen, but as you said, some of the perhaps downstream effects we'll see for the industry.

>> Sure. For Pfizer, we know that their COVID-19 vaccine was very, very successful, so they've got a big, big chunk of revenue cash flow.

And then if you look out 2025, 2030, they have a bunch of patent expiration and loss of exclusivity, so they'll want to offset that.

And what Seagen acquisition does, it provides that new revenue-- new products, new revenue. Seagen has four drugs that are ready in commercial stage. They expect to generate a little over $2 billion in revenue in 2023.

And Pfizer says that it can-- Seagen alone, the assets there could generate more than $10 billion by 2030.

For a company the size of Pfizer, with their marketing heft, they can really expand the marketing for the Seagen portfolio.

And it can also accelerate the development of the Seagen pipeline.

So I view that as this is what the biopharmas-- they look for new products.

They have blockbusters.

At the same time, they have patent expirations.

So they have to keep replacing that pipeline.

And as I mentioned earlier, they don't invent everything internally.

They look for M&A in licensing to add to what they develop internally.

>> Overall, it sounds like even though these are volatile times across sectors, volatility, as we know as investors, does create opportunity. And so going forward in health care maybe this year, in the coming years, is this the kind of volatility that we could see some action in the space that would be positive for investors?

>> Well, one of the things that we are focusing on this year is that we're essentially post-pandemic.

Elective procedural volumes are coming back.

People are doing more diagnostics for non-COVID, for things like scans.

And so you're going to see a return. We're already seeing a return of elective procedures.

And that's going to impact companies like makers of cardiovascular devices, of orthopedic implants.

These are devices that improve people's mobility as their joints get older.

Or in the case of cardiovascular, like these replacement valves or things that enable-- devices that enable the heart to pump blood more efficiently.

These things happen as we get older, but these devices are very effective.

So they were elective surgeries. People had deferred them.

Now they're coming back. So we're seeing higher volumes of that.

And then in China, China is a fairly substantial market for medical devices.

And the first quarter will be down in the sense that when they ended the zero tolerance policy, there was a surge of cases.

But it's not particularly virulent, so the cases will come down.

And the country is steering towards reopening.

There's a government stimulus. I think that's all positive for procedural volumes and for sales of whether they're devices or life science labs getting back up to speed and acquiring instruments and reagents that they do for research and for their development of new drugs.

>>that was David Toung, Senior analyst at Argus Research.

Now, let's get to our educational segment of the day.

If you're looking to park some capital amid all this market volatility, money market funds are one option you may be considering.

It joining us now with more and how you can research these products on the WebBroker platform is Caitlin Cormier, client education instructor with TD Direct Investing. Always great to have you with us. Let's talk about market money funds and how you can research them right where we are, on the WebBroker platform.

>> Absolutely. Yeah. So money market funds might become a little bit more interesting to investors and in general they might just be an option if you are looking to park some cash, have some accessibility, look for options on the market, that sort of thing.

Let's up into WebBroker and see where we can actually buy those funds and see how they compare to one another.

What we are going to do is we are just going to click on research and today we are going to go under investments and click on mutual funds.

Money market mutual funds are one option for investors as opposed to picking and choosing individual money market securities. Instead they can choose a mutual fund that has a whole bunch of diverse money market funds within it. So we are going to do is we are going to scroll down here to the bottom right hand side. We are going to see this mutual fund quick screen tool. So this basically is where we can go to actually take all the different mutual funds that are available and kind of quickly sort through them to find what you're looking for.

Today we are going to click fund category and I'm just going to scroll through all of these options and today I'm going to go with Canadian money market just to keep it simple.

So we can see there are 25 matches. I'm just going to scroll down a little bit further and click to view matches.

So this is where I will actually see the results for the money market funds that are available.

So I can actually, if I am looking for something in particular, I can click here on summary to get a little bit more detail. I can see assets under management, the MER, all listed there.

I'm just going to scroll down and choose one. Let's just go ahead and choose this one.

Again, just randomly. It D series fund here. What I'm going to do is if I actually want to see what this particular yield on this particular money market is, you will kind of notice that 2.

03 is what it showing over here but if you actually click bu, you will see the current yield is actually at 4.25 which is more kind of what we expect nowadays as far as yields go. The yield that we are seeing on the other pages for a longer period of time so it is not the current yield. Yand that also this brings up one of the quick thing. Only are talking about these money market funds, their mutual funds so they are not guaranteed by CDIC. That's a hot topic we've been discussing a lot with recent news. So mutual funds are not covered by CDIC and the other thing is that the yield is actually a fluctuating number. So as interest rates change in the market, you are not going to have a guarantee to receive this rate. This is just the current yield and as time changes, that yield will increase and decrease depending on how current interest rates are trading.

>> Alright, some very important caveats there for people looking at money market funds. What if someone is on the platform looking for something that isn't fixed rate but is still short term? What options they have there?

>> Yeah, so as I said with money market they are fluctuating, so that is something that investors might not be as comfortable with. As we discussed at the whole CDIC piece. there is a solution. Short-term GICs.

I'm going to click on research and then go to the bottom to click on the GIC Rate Sheet. GICs are covered under CDIC. You can check out CDIC.

ca to look at the insurance that would cover you that way. So the GICs, you can see short-term GICs, if you click the category, or any GIC under 355 days. These are a fixed term.

So when we talked about the money market mutual fund, you can buy and sell it as you need. If you need cash, you can get it. For this, if you walk in, you are locked in for the period of time.

For example, if you chose a term of between 180 and 269 days, that these are the interest rates available to you.

There fix for that period of time. But you can't get out of the GIC during that timeframe. They are much less flexible in that way but they do offer CDIC which is a benefit for some investors or something some investors might value as well as that fixed interest rate. If interest rates change, you will still get that rate for that fixed term. So his give-and-take with different types of investment. Money market has flex ability but then the GICs have a bit more guarantee.

>> Fascinating stuff as always. Thanks for that.

>> No problem.

>> Caitlin Cormier, client education instructor at TD Direct Investing.

And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.

as Caitlin said, always make sure to do your own research before you make any investment decisions.

While some investors had hoped that China's lifting of lockdown Restrictions would be a boom for global growth,the world's second-largest economy has plotted a more modest course for itself. Haining Zha, portfolio manager at TD Asset Management, join me earlier with his view.

>> First, just to give you a bit of background, National People's Congress is probably one of the most prominent annual political events in China, and it typically attracts a lot of attention from the market.

The reason why is that it is a great window to observe the general direction of the economic policy and other government policy in general.

And typically during the National People's Congress, the government release a set of numerical targets which reflects their goal for the rest of the year.

One of the most watched one is, of course, the GDP target, and this year it was set at 5%. It seems to be in normal range, but is actually very conservative in nature.

The reason why is last year we have a very low base.

The realized GDP growth is only 3%.

And if you look at the different large institution survey or estimate, they all range somewhere between 5% to 6%, so 5% is really on the very low end of the range.

And the reason for that is the government probably want to focus more on the quality instead of quantity.

Now, other than the GDP growth target, there are also other targets-- for example, the employment target. So this year, the government aimed to create 12 million new jobs, and they want to keep the urban unemployment rate at roughly 5.5%.

The numbers didn't change a lot compared to last year, but it's still important because in the current environment, if China want to recover its GDP growth, the biggest driver is going to be from consumption.

If people wanted to consume, first they need to have their job and income back, so it is still very, very important. The third target is, of course, the inflation target.

The government want inflation to stay under 3%. In the current environment, the current CPI year over year is only 2.1%, so it's not going to be a constraining factor for the near future.

Of course, there are other type of targets, but generally, they remain stable on a year over year basis.

And we don't see it moving the market a lot. We, as an investor, actually need to focus on something more concrete in our investment decision making.

>> Now, heading into this year, obviously, when we saw those COVID restrictions lift pretty quickly in China, there was a lot of excitement around an economic boom out of that reopening.

You mentioned that 5% is a pretty conservative number when we're talking about China's economy.

Was there some thinking, too, that perhaps monetary policy or fiscal policy was going to step in in China to try to boost growth, which just isn't happening?

>> Yeah, that's actually one of the biggest focus coming into the National People's Congress.

So just to break it down, first of all, in terms of fiscal policy, basically our main takeaway is there won't be any large fiscal stimulus program.

So if you look at the government budget plan-- the budget deficit-- it is only at 3% of GDP, which is slightly more expansionary compared to last year's 2.8%.

But there is two problem with the official headline budget deficit number.

The first one is it includes a lot of the adjustment and it carry over, so it might not reflect the true economic reality.

So if we do the right adjustment, we can see that this year they are budgeting actually for 4.4% deficit.

Compared to last year, it was actually 4.7%, so it is actually in terms of fiscal-- that impulse, it actually turning on the negative side a little bit.

And the second thing about the headline budget deficit is that it is a very narrowly defined measure.

For example, it doesn't include the local government fund, which is a main source of funding for local government operations.

So if we do the adjustment and include that, we can see that last year's number is actually around 7.4, and this year is going to be 7.5-- again, only slightly expansionary.

So our main takeaway is there won't be any large fiscal stimulus, and probably for a reason because the government-- particularly the local government-- after the COVID lockdown, they are in relatively bad shape, and they need time to heal.

So at this point, considering the fiscal sustainability, it's probably not a good idea to do a large fiscal stimulus program.

And in terms of monetary policy, similar to fiscal policy, we don't expect large monetary stimulus, either.

So remember, at the end of last year, the language from the government is that the stable monetary policy need to be more forceful.

They need more forceful execution.

But turn into this year, in the MPC statement, the statement change to the stable monetary policy need to be more targeted and accurate. So that is one thing.

The second thing is if you look at the actual effect on the real economy, the average mortgage rates compared to last year, at the end of last year, it has already come down to 150 basis points.

And the average corporate lending rate has already come down about 60 basis points.

So at this point, there is no point doing a large interest rate cut or anything. At least, it's not urgent.

But we do see on the reserve requirement ratio side, the government can do a little bit more because the overall credit growth is still going to be strong.

It will be commensurated with the nominal GDP growth, plus a spread.

So cutting the reserve requirement ratio is basically a reduction of the tax on the banking system.

>> You talked about local government funding, the need for local governments to have some time to heal out of the lockdowns.

What role does the real estate sector play in all that?

Because obviously that's been a point of concern in China.

>> Right. Actually, one finer detail we notice in the budget is that if you look at the entry of local government revenue, it's only budgeted to increase by 0.4%, which is as very slight increase. And that item actually tend to very high correlation with the land sales the real estate sector.

So this is just another way of saying that the government expects the real estate activity, at least on the new construction side, to be pretty weak-- roughly flat.

It is still an improvement compared to last year's big down about 20%.

But nonetheless, it's not something to be excited about from investment point of view.

>> I want to ask you if there's any context as to what happened with Silicon Valley Bank, which obviously is sort of a singular issue for Silicon Valley Bank, but it did get investors in North America concerned about the financial system. Obviously, it got the Fed concerned enough to step in with some extraordinary measures over the past couple days. Is there a read-through to China's banking sector at all?

>> Right. So our read on the whole situation is automatically the financial condition will tighten everywhere else. So from Fed's point of view, if the tightening of the financial condition already there, then it's kind of doing the work for them. So for Fed, they probably have additional motivation to wait for things to settle down and then to move forward.

But the thing is that right now the labor market condition is still pretty tight, so they probably don't want to easily give up on hiking the rate and basically tame the inflation.

As to its impact on the two financial institutions elsewhere, particularly on the Chinese banks, I think it's actually arguing for better diversification impact in this kind of environment because China is actually in a very different monetary cycle. While the rest of the world is doing the tightening, China is actually doing easing. Although the easing magnitude is probably less than what people expected, nonetheless it is still a pretty good diversification.

>>that was Haining Zha, portfolio manager at TD Asset Management.

Let's check in on the markets. I have a chart showing you the recent action.

We will start here at home on Bay Street with the TSX Composite Index.

You don't hundred 63 points will call back, a little shy of a full person. You are seeing crude oil under pretty significant pressure this week.

It is having an effect on some of the big energy names.

Crescent Point continues to give up some ground this week. At seven bucks and $0.97 per share, it's down to and have percent today.

Gold has been getting a firm bid amid the turmoil in the US banks. Credit Suisse as well has been in the headlines this week. You've got Kinross at 5 1/2 bucks, up almost 5%. South of the border on this final trading day of the week, you have the S&P 500, it's been on a very choppy ride this week, today it's getting back 36 points or almost a full percent.

The tech heavy NASDAQ, even though the chipmakers are getting a bit today, overall the indexes down 110 points, almost a full percent.

Let's check back in on First Republic Bank. We had the news about a course of Wall Street banks getting together, trying to show some I guess solidarity, confidence in the regional banks and together putting 30 million of deposits in that direction. But as part of the announcement as well, there was an announcement of First Republic is suspending the dividend and so today as investors try to sift through it all, at 2567, First Republic is and another 25%.

The American economy ended last year and a pretty solid note. Fourth-quarter GDP growth went up an impressive 2.7%.

But now you got a pretty hawkish Fed and all this recent turmoil in the US banking sector stoking recession fears. Anthony Okolie is going to take us through TD Economics latest forecast of the US economy.

This must be a fast moving target.

>> It certainly is. TD Economics says that the peak impacts of the past rate hikes still haven't been fully felt in the US economy. Also add in the failure of the US regional banks, that brings a new risks for the US economy. So TD Economics is expecting subpar growth this year.

When you look at 2023, they are expecting US GDP growth to come in at a week 1.3%.

That's going to follow a 1% growth in 2024.

These are upgraded forecasts based on the US consumer resilience in the past. But again, it is still far from the robustness that we saw in the fourth quarter of 2022. On the inflation front, TD Economics did narc up there inflation forecast which they believe will eventually cool but they still remain persistent in 2023. So looking at core inflation in the US, they are expecting it to come in around 5% for 2023 before dipping to 2.4% in 2024.

TD Economics has said that regardless of financial events, the road to tame inflation runs through the labour market.

As long as job vacancies remain high, but to get the most recent job opening and labour term survey which showed that nearly 11 million jobs remain unfilled.

So as long as these jobs remain high… we have a long way to go before the job marketsettles down. TD Economics estimates that the unemployment rate needs to rise by at least 1.2 percentage points in order to normalize the job vacancies. So all of this adds up to the TD Economics view that they expect a slower, more prolonged period of sub- trend growth in the United States. That's more likely, versus a short-term recession followed by near-term or near tend growth in 2024.

>> When the Fed meets next week to talk about all this, the path of inflation and economy, now they have to talk about the recent collapse of two banks.

Silicon Valley Bank and signature bank. This is something new for them around the table, at least in recent days.

What's the thinking there? I was going to affect the discussion?

What could it mean for the decision?

>> At this time, TD Economics is anticipating a 25 basis point hiked on March 22. But they said that things could change.

Obviously, markets were initially leaning towards much as a 50 basis point rate hike prior to the bank crisis but no TD Economics is saying that this crisis makes financial stability equal if not more important than price stability. It's going to be an interesting decision next week.

>> Thanks for that.

>> My pleasure.

>> MoneyTalk Anthony Okolie. It's been a very interesting week in the markets this week. Setting up to be a pretty big one next week as well with the Fed decision. Stay tuned. On Monday, we will be back with Michael Craig, head of asset allocation at TD Asset Management, he's going to take your questions about asset allocation, where we are at right now with all of these fast-moving developments and who knows what the weekend will bring?

We will talk about it on Monday with Michael.

You can get a head start with those questions.

Email moneytalklive@td.com. On behalf of Anthony and me here on the desk and everyone behind the scenes who produces the show every day, thanks for watching, and we will see you next week.

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