Print Transcript
[music] >>Hello I'm Greg Bonnell and welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Coming up on today's show we will discuss the health of big tech names and whether it's likely to see them continue their market leadership.
TD Asset Management's Vitali Mossounov weighs in.
Brad Simpson, Chief Wealth Strategist at TD Wealth will give his view on what tightening financial conditions could mean for the global economy.
MoneyTalk's Anthony Okolie will take us through the latest Canadian retail sales report. Lesson today's WebBroker education segment, Jason Hnatyk will take us through how to set up stop orders on the platform.
Before all that let's get you an update on the markets.
It's been a fairly busy 45 minutes or so.
A fairly quiet morning on this Friday before we got news of Washington of the GOP negotiators halting the debt ceiling negotiations. Their representatives basically saying that the White House position right now is unreasonable. Of course the markets rallying in recent days, south of the border on this idea that everyone was saying nice things and we get a deal on the debt ceiling.
This was a bit of a setback. We'll start in Toronto.
On that news gold also rocketed higher. Still in positive territory modestly on the TSX Composite Index.
A little shy of 1/5 of a percent.
As I reported earlier, LightSpeed and Canada goose, LightSpeed is getting a bit of a bounce today after yesterday's selloff in the wake of disappointing forecasts. At least that's how the street side. Canada goose sold off yesterday on his earnings and continues to be under pressure today down almost 7%. Let's take a look at the actions south of the border. We did have some modest green of the screen before we got that news of a halt in the negotiations over the debt ceiling.
Right now the S&P 500 is only down about five points or 1/10 of a percent.
The tech heavy NASDAQ, let's check in on that one as well. Down about 1/4 of a percent.
And amid all that drama, you also have Jerome Powell, the chair of the US Federal Reserve holding court intervention and throwing out that perhaps they will need to raise rates farther than previously thought to keep inflation under control.
You mix it all together and this is the kind of market to get on a Friday.
This is an interesting name, Farfetch, luxury retailer up 18%. Ben Gossack talking about luxury brands holding up even in an economic slowdown. Moving on heavy volume on the New York Stock Exchange.
And that's your market update.
We have fresh signs at higher prices and interest rates are beginning to have an impact on the Canadian consumer.
Joining us now is Maurice MoneyTalk Live's Anthony Okolie.
> Thanks Greg. Statistics Canada said that retail sales fell 1.4% month over month in March.
That didn't match rather that didn't match their expectations. February numbers were revised up a flat reading from the.
Previous 0.2% drop.
Adjustment for the impact of inflation, volume sales were 1% lower than month.
When you look at events estimates, they indicate sales were up 0.2% in April. That's in line with TD's forecast which are based on internal cart spending which also suggests that spending is trending higher in April.
Now, when we break out the sector by sales, you can see the index charts. Sales fell in five out of 9 Subsectors in March.
The biggest driver of the headline number, sales of motor vehicle and parts dealers fell 4.4% month over month.
That's the first drop in eight months.
As you can see, gas stations and fuel vendors were also a big drive on the numbers as well.
Some positive signs so, course sales excluding gas and autos were 4.3% higher in March.
Led by sales of building materials and garnering equipment, sporting goods stores as well also electronics and appliance sales rose. Possibly a reflection of this normalization of supply chains.
Now, implications of all this, overall TD Economics called today's report "lethargic" but the upward revision somewhat softened the impact of today's report.
TD Economics notes that the solid growth in course sales suggests consumers, while still cautious, have not stopped spending. TD Economics does, is expecting a growth spending growth, to come in around 5% annualized in the first quarter based on their eternal rather internal cart spending data.
However they believe spending is set to set below trend as Canadians face stronger headwinds from higher mortgage costs as more mortgages get refinanced at higher rates and that will reduce spending capacity going forward.
>> Just yesterday from the Bank of Canada the financial system review… Something that the team was definitely concerned about. People at the housing market in the past couple of years, you arising mortgages, rising cost of living, this will be pretty squeezed and perhaps that will start to flow through to consumer spending as well.
> Exactly.
It will reduce their financial flexibility and they will have less money to spend on other things.
>> Interesting stuff indeed. Thanks Anthony.
>> My pleasure.
>> MoneyTalk Live's Anthony Okolie.
Let's stick with the economy.
This week we had a Canadian inflation report saying it will be a choppy ride for Canadian prices to heal.
Scott Colbourne joined me earlier from TD Asset Management to see what that means for central banks and the fixed income market.
>> A lot of the easy gains behind us, I think even Gov.
Maclin delayed it out very nicely We will likely get closer to 3% by the end of this year.
We are at close to 4%. We have the medium inflation year-over-year at around 4.
2%. Likely will get closer data 3% by the end of the year.
The top priority will be to get back down to 2% where, from a policy point of view, this is the ultimate target. That will take the bulk of next year. So yeah.
The easy part is over.
And now, we are transitioning to the data dependency.
It's really data dependent. We have had some positive surprises out of the US on the growth side.
This week. We've had some of the Fed governors talking hawkish. So we are in that difficult, choppy environment and it leaves us sort of, if you go on a bit of arrange trading bond market environment, with this, that is consistent with the transition of inflation.
>> The Canadian report, even though for one month only, one report to get some tongues wagging. Maybe the Bank of Canada which is pretty clear, conditional pause depending on what happens might be hiking again in the next little while. Is that an overreaction to one report? Rex I think it's a fair handicap. Look, the markets are saying, they have not fully priced in a rate hike this year. Pretty close.
So, there is a likely handicap based on your comments and sort of the observations of the Central Bank here in Canada.
That they are, you know, conditional and data dependent but leaning hawkish. And so, I think we might get one more. I think the bar for June is still pretty high to get a rate hike then. But certainly, they will be talking hawkish. I think they would like a little more data beyond just this one inflation.
They just paused. They've had one inflation print that is a little stronger-than-expected. So I think the broad parameters to suggest, you know, a little bit more pause and wait and let the data fill in and see how we transition. But the backdrop is still, we are closer to the end.
> You talked about the fixed income market being a little range bound. It has to be weighed right?
This year, there was an idea that, as they get close to the end, then perhaps go on pause and perhaps even cut depending on the market before the end of the year, there is your opportunity in fixed income. What we need to see now for that opportunity to come through on the second half of the year ? Mark >> We rallied about 50 to 70 basis points in the fall.
You know, sort of the end of October till now.
So there is been a bit of a rally in rates and as I say, arrange/pause at the moment.
What we have not had a long time in fixed income is income. So you know, if I told you you were only clipping one and 1/2%, circa 2020, you're not being paid a lot to wait.
Now you're being paid 3 1/2 or 4%, throw in some credit spreads.
It becomes a lot more attractive and that income, as we wait for this transition to, you know, lower yields… Lower inflation… There is substantial risk that we have a recession in the US. We keep pushing that out of it but I definitely think the broad strokes suggest that we are going to have a recession. I think it's more important to debate what type rather than if.
So that backdrop, given the fact that you have income, you can wait this out. You know, so you're looking at maybe 3 1/2% for the moment. The lower end of our where 10 year yields are. That 50%, that 50 basis point… >> Let's talk about recession fears obviously.
Is this part of the thinking as to why the market keeps pricing and cuts?
The market prices changed in recent days and weeks based on what's happened.
Pushing the possibility of a cut later into the year.
But they still think that these central banks are to be cutting where the central banks are saying "no, once we pause we will stay there for a long time" they keep hammering the idea to see if the market is going to go but not really right.
How do we read that?
> If you look at history the Fed would be on pause for 6 to 9 months historically between the last hike and when they cut.
Look, we came out of the pandemic with extraordinary policies and tailwinds that we are still talking about.
The San Francisco Fed did a nice study where they sit at the peak we had $2.1 trillion in excess savings right? And now were down to only half a trillion. Still a ton.
That tailwind is still with us. We talk a lot right now about the resilience of the consumer right?
These rates will impact. Central banks will be patient.
Maybe it's not the historic 6 to 9 months. Maybe a little longer. But ultimately this is going to bite the consumers.
The credit conditions, the tightening of lending standards, we've seen manufacturing project lower.
Services being held up by a strong consumers. So sometimes it's tough to be patient. You know, the markets are always wanting a trend. They were wanting to move to inflect but I think the trend is obvious.
It's just being patient and waiting for it to play out.
And maybe the central banks will be on hold this year but ultimately they will have to Kutch.
> That's when the central banks realize there's too much pain in the economy. They are too restrictive and they have tamped down growth too much. The argument is been made because of everything we've been through in the pandemic. Perhaps allowing us to feel a little more pain than usual.
Before they rushed to the rescue yet again. Does that make sense?
>> Look, it's a little far out to see if there really going to hammer us. But I think the ultimate, you know, the way they phrase it is "look we have to restore the balance between supply and demand. If that means were on hold a little longer, at the end of the day, though, going into all this, the Fed talked about having a slightly higher average inflation target over the cycle. So maybe while we talk about getting to 2%, maybe they don't get as close to 2% as we think they will be. So, on the positive side, maybe they stop with the tightening and pushing back on the demand side earlier than we think.
>> That was Scott Colbourne Managing Director for Active Fixed Income at TD Asset Management. Now let's get you updated on some of the top stories in the world of business and take a look at the markets are trading.
Foot Locker says weaker sales, heavy discounts and thefts of its merchandise weight on the most recent quarter.
The athletic apparel retailer saw a revenue slump more than 11% compared to the same period last year. Foot Locker is also reducing its full-year sales forecasts, citing a tough economic backdrop.
It's a different story for heavy machinery outfit dear and Co., the company is raising its profit forecast following a strong quarter for its agriculture equipment business which saw a 53% jump in revenue.
Dear is often viewed by investors as an economic bellwether of sorts for the industrial sector.
Cineplex says the allegations of so-called "drip ticket pricing" levelled by the competition are "without merit".
The agency alleges Cineplex promotes movie tickets on its website and app at prices that are unattainable. In a statement, Cineplex said it's online booking fee is not misleading. A quick check on the markets, we saw a price of gold… Putting a halt to the debt ceiling negotiation talks and the white houses position was untenable. 41 points on the board for the TSX, about 1/5 of a percent. South of the border, the markets did pull back on that news.
Modestly. Less than 10 points in the S&P 500 about 1/5 of a percent. Although, it is not strictly business news, if you're a hockey fan and you follow the leafs until they were kicked out of the playoffs, apparently the Toronto Maple Leafs are confirming that the general manager is out and the new manager will be announced at 3 PM this afternoon to discuss at all.
It might be interesting. Let's talk about the big tech names and how they outperform so far this year.
Could that market leadership continue amid all these worries were having about slowing growth? Earlier I was joined by Vitali Mossounov, Global Technology Analyst at TD Asset Management.
>> I think it's pretty simple, what these companies could control, they did really well.
Things that were out of their control, well, sometimes good fortune smiles upon you.
And I find in life when you control things well, you put a level of grease in an fortune is on your side.
Things worked out pretty well. That's the story of earnings.
> Let's break into the three pillars.
With revenue, this was the concern heading into these earnings right? The slowing economy and all these concerns sing their sales slow.
How does that look?
>> The sales kept slowing but it's always about expectations and expectations were about worse sales.
They didn't slow as much as feared. And again, its valuations and fundamentals and in the short term its expectations.
So throw some numbers on that and they shrunk 3%.
Earnings flat. Alphabet sales grew 3%. Not great.
Not typical big tech sales. But, good enough. We will call it good enough and so I think, as they especially talk with the next quarter, investors listened and said "you know, the first to see pain last year, maybe the first out so we won't worry about them, we will worry about industrial stock and consumer stock. So revenue not bad.
>> So not bad.
Maybe they got smiled on a bit because they can't control that side of the consumers wanting.
>> That recession never arrived.
We don't know.
>> We will find out.
One thing as you pointed out that they can control of their own costs of course.
Cost skyrocketing during the pandemic because they thought the good times were here and they were never going to leave.
How did they find the discipline the markets looking for have they have to have they found?
>> I think the market forced the discipline on them with what they did their stock prices last year. But there was a lot of discipline.
Microsoft was able to get their expense growth down.
Companies like Apple and Microsoft and Facebook coming in below even what they expected 1/4 ago.
Cutting costs. Obviously cutting the workforce. We have heard a lot of that.
Freezing pay.
Microsoft just last week talking about a full-time salary freeze. That's another one.
And doing what they can, spending less on the cloud, for example.
So costs, they can do remarkably well.
>> You would be hard-pressed to find any tech company this quarter that didn't throw the phrase AI out there.
Some for good reason obviously.
Microsoft and Google competing head-to-head in the eye on the AI front but every release talking about artificial intelligence. What you see there are and what we need to be mindful of?
>> It was the most predicted question you can imagine and it wasn't just tech companies. I think most companies got the question. Look, we saw were a lot of generic responses. I want sugarcoated. Companies were prepared for this question and they got the question and the answer. They said "we've been making these investments for many years. We will have the products out shortly. We've got the product roadmap and there is a path to how we can monetize AI. Some companies did a better job. By better I mean more detailed and prescriptive.
Microsoft I would certainly put in that camp. They needed to. So much of their future strategies about AI, the leadership they had with their ownership, part ownership of OPEN AI, other companies… They didn't give you as much may be as you wanted. Apple is in that camp. But that's typical Apple. Apple likes to say that they create wonderful delightful products and when we launch them you'll find out just how wonderful they are.
They have a track record of doing that. AI for that was a very vague answer. But again, that's typical Apple.
Overall, lots of answers about AI. The real answers in a couple of time when we see the actual products. Right now it's mostly fluff.
>> And you expect to hear from the tech companies.
Even outside of tech, how are other companies getting into the whole AI thing?
>> Companies across the border getting asked these questions there either being asked if this is a big threat for you?
For example some IT services firms but even areas like finance and accounting outsourcing. There's a big company in the US at the US stock exchange. At the New York Stock Exchange.
Saying you are outsourcing all this work to you without work can be very repetitive and mundane. The debits and met and credits maintaining is not something that can be eliminated and isn't that a big threat to you? You have seen stocks react in a big way this. Medical device companies may have the potential to one day go from being incredible but it effectively harnessing the power and understanding of the human body and the conditions operating in the mind, the emotions and using that data.
The companies that monetize that data. Bottom line, investors are trying to find out for any business model, in any sector, where the threats?
What are the opportunities?
>> There is a certain newness to it all the people working in AI were working on this forever. I think in the general public there's a certain newness of the developed recently.
We have tech industry heavyweights concerned about how we can change our lives and of course you have workers concerned about how we can change your life.
That would be front and centre before talking about some of the other things. What about my job?
>> I think it's perhaps not getting enough attention.
It will take a few years to play out but I'm certainly in the camp that AI is going to bring a productivity boost. Especially to the knowledge economy.
We will see that play out over the near term and medium term.
That's low hanging fruit. But in the medium to long term, and I'm talking three, four, five years, this is the first technology that really has the potential to replace human workers. AIA, the essence of the tools we are going to build with that are automation tools.
These automation tools, the companies that are building them, will be trying very much to have them automate tasks done by, well, human beings.
And even if they are only partially successful, this will have the effect of suppressing wages.
So mid to long term, be very cautious of this.
We've already seen management teams point to this.
The CEO of IBM a couple weeks ago, on the record, saying he's looking to automate as much is 30% of his back office with functions like HR. It's all talk right now. We don't want to get ahead of ourselves but time will tell.
>> I guess the spin them I could put on it by corporations will be "it will take away the drudgery work" human beings want to do these mundane tasks anyway" but if your job is mundane and it's not there anymore there's not another position for you, I could see some anxiety that would grow out of it.
>> Every job is mundane tasks but in general, that's good language and good spin.
Most of us aren't building and designing the Sistine Chapel.
Jobs are jobs and people strive to do them well.
Companies are going to try to unlock ways to save money.
It is the capitalist imperative.
And the language, it will need to be careful language.
But at the end the day you will see hints of their true intentions.
I think Microsoft dropped that hinge.
They said "look, we are going to have a full-time salary freeze." And for the record it was not a very public release but these things get leaked.
They said they will have a full-time salary freeze but will use the money that they save to invest in to AI initiatives. So you're actually telling the workers "were not to pay you more.
Within a take that money to fund something that could replace you " or to illuminate the drudgery's, as they would say.
>> That was Vitali Mossounov, Global Technology Analyst at TD Asset Management.
Now let's get her educational segment of the day.
Stop orders are one method investors can use to try to limit their downside in a volatile market.
Jason Hnatyk, Senior Client Education Instructor a TD Direct Investing has more.
>> Stop orders can be a very useful tool for investors looking to manage risk on their portfolios. Many ways to use a stop order.
We will focus on using cell stop orders.
Either way you're looking to lock in your gains or limit your losses. A great opportunity for investors to place the trade to know they have got an exit strategy in place even if they're not actually good with the computer. Let's go over and move to the charts for a visual example of what were talking about.
On the chart here, you will see blue line.
Representing a buy price at approximately $50 that I may have entered into this trade. Now, if I'm thinking about using an investment plan which is a great opportunity for me to automate the trades, I can really take a little bit of emotion out of it, maybe the most are willing to lose on this particular position is five dollars.
So if we go ahead and maybe draw another line of the five dollar mark below, let's say approximately $45, putting another line on the chart and with what were showing you, my mind didn't draw the let's get that done.
I have my line on my chart. Now, what this says is if the stock does pull back from the point at which it is now, I will have an order in place to sell my shares and take me out.
Surely this is not to be expected or hoped outcome looking to get out of this trade.
But we are taking a very practical approach. We are trying to limit the losses if it does go down further then we are hoping to have the stock retreat below.
Additionally, a stop order can be a great opportunity to lock in our gains.
I'm going to go ahead and move this topline down down to a much lower point in the chart.
Maybe lucky enough to bind to the stock at a much lower price.
Write down near the lows of the pandemic crash earlier in 2020.
The same would hold true.
We are still placing an order to sell below the market.
In this case, we are saying if the stock does retreat any further, I want to go ahead and exit my trade so I don't give back some of my hard-earned gains and I've already experienced on the stock. I'm going to lock in those gains and walk away with a profit.
Not allow somebody else to do the same. Now, another concept that is chief to understand for investors when talking about stop orders, we want to make sure that we don't set them too close to the present market.
As we are looking at the chart, we can see that, you know, even in an upper downtrend, stocks are not always continually moving in one specific direction.
They will meander up and down as we go. The same holds true for any data trading in the market. This can be arranged that the stock will trade in, a high and low point for that given day.
So understanding what that stock is doing and how high or low on average you will get, it can be a very useful piece of information to know.
In WebBroker, under the lower indicator study sets, we have a study that tells us just that. That is average per range.
If we add that to our chart, we know it's below are candlesticks.
We can see this line here is telling us, on average, what is the range that the stock is trading and based on the last 14 days.
You can edit the study by clicking on the left-hand side and it will get you a bit of a description so you know exactly what the studies trying to tell you.
In a nutshell, this is telling us that the stock presently has an average range during this time period of a dollar 34. So, if were setting our stock prices closer rather our stock prices below the current market, we are more likely to be stopped earlier than anticipated. But ultimately at the end of the day, you would be setting your stop orders based on the risk that you're willing to take.
So that will trump all.
Let's go ahead in place our trade so we can put the theory into practice here. I'm in a go ahead and hit sell at the top here next to our quote. This will bring up our order ticket. We will go ahead and fill this and as we normally would.
We will go ahead and enter our quantity that we originally purchased. Now under "price type" this is where we get access to changing and choosing different orders. I'm getting ahead and choose "stop market" for this particular example.
You will notice there is a trigger price field appearing on screen.
This is telling us the price at which you want the order to be triggered or activated so that we will then sell, send your order to the market with a, as a market order. In our example we had in our chart, we were saying that we wanted to exit or trade at the stop trade down to $45.
If that happens this will trigger an activated order and send our order to trade out of our 100 shares of this particular company that we own.
You also have the ability to change your status.
Typically folks will change the good till cancelled option.
This will help keep your order open for 90 days and for US listed Securities, your order will be protected for 180 days.
As you can see a stop order can be a very effective order type free to master and using your trading.
>> Our thanks to Jason Hnatyk, Senior Client Education Instructor a 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.
Programming note, Caitlin Cormier, Client Education Instructor with TD Direct Investing will be our guest on the program Tuesday taking your questions about how to better utilize the WebBroker platform.
Tightening financial conditions or raising concerns about the health of the economy and the ability of central banks to rein in inflation in a controlled manner.
Brad Simpson, chief strategist at TD Wealth join me earlier to discuss.
>> One of the things I've said is "is it me or does the financial markets right now have this kind of lacklustre feel to it?" If you think of all the things going on and really, it's a really quiet> I got accustomed last Summer to this wild inflation up 3% down 3% and now it just seems to be… >> One of the things we always talk about is adapting and evolving and, you know, a lot of the, it's almost like we got to the point where we are so used to big things, getting used to this endless array of big things that are impacting.
Like the quiet level markets surprised me.
I think, I guess from the start, I think you would be remiss no matter how many ways you look at it, inflation is still the thing that you've gotta put front and centre.
In a news cycle, you think "okay, we've heard about this a bunch of times." > The machine is hungry (laughing) >> The bottom line is this thing is more resilient than really what, I would say, our first thoughts were on this.
So I think it behooves us to come back and go "let's keep on this and let's look at this and we do look at it we see it is getting better" we are seeing both CPI, VPI numbers that came out last week which are showing that the efforts by the central banks are starting to tighten things up.
Inflation is continuing to come down.
You look at the US Federal Reserve Board, now at 500 to 500 and the quarter.
Lots of rate increases.
Their last increase of 25 basis points came out and said "kind of surprised with everybody" we will take a week and see attitude and let's go slower on this.
We saw the Bank of England come out and they have somewhere to go but their language definitely started to change saying "you know, we think were starting to get a grip on this." You look over the ECV, that sit rather the ECB, 25 basis points a clip, all that points to a more positive trend for inflation and so with the central-bank story changing their tone, I think there is a way to go, a ways to go but without a doubt I think we can probably feel, as I know there, I go to dinner parties.
It's understandable. But that fear is starting to slow and it probably should because I think that a lot of the conversation we will go to from here is that in many ways financial markets have almost turned and said "okay, let's deal with where we can go to next.
>> Is the wealth card economic growth?
The whole point of all this tightening is to get inflation under control.
They said the byproduct of that, the whole point of this is to slow the economy a little. Are we getting signs they're actually doing that?
Some of the data that comes in sort of surprises me.
>> I think that is one of the things you really want to look at with this is that when you start looking through the economy, again, I sometimes feel "boy the things you folks are looking for, how can you look at the world in this way?" But the only way to slow inflation down as you have to start taking on your economic growth and looking where that is in so when you, if you set back and looked at the global economy and you said "well let's start out about unemployment at 3 1/2%, that's the lowest it's been since 1969. Now, I don't think I'm the youngest looking guy in the world.
I was born in 1969.
That was a few years ago. So we saw some members come out last week that did show inside of the labour numbers are starting to slow.
3 1/2% still is really important.
So the two big things I think you have to look at when you're thinking about where this global economy is going, I think the starting point is employment. And I don't think anybody could argue that this is a softening sign here.
But we look at people employed the other side of this is looking at the consumer.
These two kind of go hand in hand with one another.
As we start to look at what's going on inside of the economy, what we see is that, we all know what happened with the Silicon Valley Bank and all the offshoot from Matt. What we are seeing inside the economy, both in North America, seen in Europe, we are tightening up credit.
And credit makes the world go round.
Money makes the world go around and and ease of money going into that. So one of the measures we uses financial conditions.
So, I think if we went back in time and, I think I was here in August about a year and 1/2 ago and things we were talking about where the central banks coming out looking at ease in the financial conditions.
They were trying to tighten and Jerome pouches said "that's it done!" >> At the Jackson Hole speech.
> Yeah. So if you look at it, the financial conditions of gotten tighter and tighter and tighter since then.
Then you look at senior loan officers coming out.
This is flat out mid-level Bank people going out and having the boss tell them "listen, don't send any money out there. We will have small medium-size business starting to show that this is getting tighter".
So usually when you start to see this happen in times past, you can see the tightness of these levels, they have usually been a pretty strong integrator rather indicator that you're getting closer to a recession.
Not a sign you're looking at a changing labour environment.
Then if you look at the changing labour environment and you kind of go over the consumer, you can look at the consumer North America and look at kind of what they're spending on restaurants, but with her spending a close… Every time I walk into go get some shirts or something I'm amazed about how much is on the shelves and how much sales there still are on these type of things.
You kind of start putting all those pieces together.
It's an economy that, while looking good, if people start worrying about their job, people start taking a look at it and saying "there was about roughly about 1,000,000,000,000 1/2 dollars of surplus capital on people's balance sheets in the US. That's the largest consumer in the world.
We think that's about down to $500 billion now. That's a lot of spending. But that's a lot of spending that they've gone through quite quickly. To think that the people's wallets are getting tighter and tighter.
Then you look over and you're starting to see things slow in Europe.
You're looking at that big tailwind everyone is kinda counting on.
China would reopen and be a big tailwind.
We've seen some numbers and they are not so strong either.
All that points to us having a healthy economy today but there's no doubt it's one slowing as well which will really help take care of the inflation.
It's also gonna change the dynamics of the Marketing environment as well.
>> Will they stay in control? They are getting what they want right now but does it get out of control?
>> I think that's one of the things you have to look at. These are the things that we know and these are the trends that we can follow.
Let's start and look back and go "okay, we are confident that we've been able to contain the banking crisis so far.
But this is a "so far". So I don't think, I think that's still a potential risk that's out there.
And all that kind of the cousins of that… That I think we are well aware of it we published a paper a couple weeks ago about commercial real estate.
We wrote about this pretty extensively in our portfolio strategy quarterly.
One of the effects ultimately could be as commercial real estate is pretty tough sliding there right now.
And if you look at it through that lens, that has potential because an awful lot of that is in that midsized banking sector.
You talked about small and midsize businesses, most of their access to credit is coming from that mid-and small size banking sector.
All of that starts to point to real potential problems down the road. You start looking at some of the hiring patterns from some of these small and medium-size companies. Really starting to tighten up.
So, that one, I think is still, I'm not saying there is an inevitable break out there but I think that could get ahead of central banks.
Things just can't stop the momentum on would be one.
And I think the second one is, which eminent guests you can probably dig into a little bit here, this debt crisis is a real thing.
This isn't something that a central-bank can solve.
That has the potential to have a lot o downstream impact that, I think, quite frankly, there's a lot of lawmakers in the United States that don't have the financial background to understand just actually how big of a deal this potentially is.
>> That was Brad Simpson, Chief Wealth Strategist at TD Wealth. Let's take a final look at the markets before we sign off for the week, handing in for the long weekend.
It's getting closer.
We have 39 points to the upside of the TSX and a 15%.
We had some drama this morning before the show began.
Both sides of the border. Then you have the GOP negotiators walking out of the talks over the debt ceiling with the White House. Not happy with the White House's position. Of course there been rumblings on either side leading up to this that they would find a deal.
It means they are negotiating and they put a little halt on it. While they sort of regroup. They have caused the markets to pull back a little.
We are still hanging on the green in Toronto. We have Tourmaline oil about three points up to the upside.
Shopify a run after its report, the weeks blur into each other. A modest pullback. Now south of the border, checking on the S&P 500, it did pull into negative territory.
Down 10 points modestly. 1/4%. But it was green on the screen before those negotiations took a bit of a pause on the debt ceiling. The tech heavy NASDAQ, we want to see how it's bearing against the broad market.
About the same amount.
Foot Locker, we told you but the rough quarter they had the doctors felt and also having to revise its forecast the rough quarter they had at the top of the show.
Their stock down a pretty substantial amount. 27% at this hour.
On a programming note we will be off on Monday for the Victoria Day holiday but we will be back on Tuesday with Caitlin Cormier, Client Education Instructor at TD Direct Investing taking your questions about how to better utilize the WebBroker platform. Of course you have to wait showed up again. You can email your questions ahead of time at moneytalklive@td.
com.
That's all the time we have the show today.
On behalf of me and Anthony, everyone in front of the cameras and behind that brings you to show on a daily basis thanks for watching.
Have a nice long weekend!
[music]
Coming up on today's show we will discuss the health of big tech names and whether it's likely to see them continue their market leadership.
TD Asset Management's Vitali Mossounov weighs in.
Brad Simpson, Chief Wealth Strategist at TD Wealth will give his view on what tightening financial conditions could mean for the global economy.
MoneyTalk's Anthony Okolie will take us through the latest Canadian retail sales report. Lesson today's WebBroker education segment, Jason Hnatyk will take us through how to set up stop orders on the platform.
Before all that let's get you an update on the markets.
It's been a fairly busy 45 minutes or so.
A fairly quiet morning on this Friday before we got news of Washington of the GOP negotiators halting the debt ceiling negotiations. Their representatives basically saying that the White House position right now is unreasonable. Of course the markets rallying in recent days, south of the border on this idea that everyone was saying nice things and we get a deal on the debt ceiling.
This was a bit of a setback. We'll start in Toronto.
On that news gold also rocketed higher. Still in positive territory modestly on the TSX Composite Index.
A little shy of 1/5 of a percent.
As I reported earlier, LightSpeed and Canada goose, LightSpeed is getting a bit of a bounce today after yesterday's selloff in the wake of disappointing forecasts. At least that's how the street side. Canada goose sold off yesterday on his earnings and continues to be under pressure today down almost 7%. Let's take a look at the actions south of the border. We did have some modest green of the screen before we got that news of a halt in the negotiations over the debt ceiling.
Right now the S&P 500 is only down about five points or 1/10 of a percent.
The tech heavy NASDAQ, let's check in on that one as well. Down about 1/4 of a percent.
And amid all that drama, you also have Jerome Powell, the chair of the US Federal Reserve holding court intervention and throwing out that perhaps they will need to raise rates farther than previously thought to keep inflation under control.
You mix it all together and this is the kind of market to get on a Friday.
This is an interesting name, Farfetch, luxury retailer up 18%. Ben Gossack talking about luxury brands holding up even in an economic slowdown. Moving on heavy volume on the New York Stock Exchange.
And that's your market update.
We have fresh signs at higher prices and interest rates are beginning to have an impact on the Canadian consumer.
Joining us now is Maurice MoneyTalk Live's Anthony Okolie.
> Thanks Greg. Statistics Canada said that retail sales fell 1.4% month over month in March.
That didn't match rather that didn't match their expectations. February numbers were revised up a flat reading from the.
Previous 0.2% drop.
Adjustment for the impact of inflation, volume sales were 1% lower than month.
When you look at events estimates, they indicate sales were up 0.2% in April. That's in line with TD's forecast which are based on internal cart spending which also suggests that spending is trending higher in April.
Now, when we break out the sector by sales, you can see the index charts. Sales fell in five out of 9 Subsectors in March.
The biggest driver of the headline number, sales of motor vehicle and parts dealers fell 4.4% month over month.
That's the first drop in eight months.
As you can see, gas stations and fuel vendors were also a big drive on the numbers as well.
Some positive signs so, course sales excluding gas and autos were 4.3% higher in March.
Led by sales of building materials and garnering equipment, sporting goods stores as well also electronics and appliance sales rose. Possibly a reflection of this normalization of supply chains.
Now, implications of all this, overall TD Economics called today's report "lethargic" but the upward revision somewhat softened the impact of today's report.
TD Economics notes that the solid growth in course sales suggests consumers, while still cautious, have not stopped spending. TD Economics does, is expecting a growth spending growth, to come in around 5% annualized in the first quarter based on their eternal rather internal cart spending data.
However they believe spending is set to set below trend as Canadians face stronger headwinds from higher mortgage costs as more mortgages get refinanced at higher rates and that will reduce spending capacity going forward.
>> Just yesterday from the Bank of Canada the financial system review… Something that the team was definitely concerned about. People at the housing market in the past couple of years, you arising mortgages, rising cost of living, this will be pretty squeezed and perhaps that will start to flow through to consumer spending as well.
> Exactly.
It will reduce their financial flexibility and they will have less money to spend on other things.
>> Interesting stuff indeed. Thanks Anthony.
>> My pleasure.
>> MoneyTalk Live's Anthony Okolie.
Let's stick with the economy.
This week we had a Canadian inflation report saying it will be a choppy ride for Canadian prices to heal.
Scott Colbourne joined me earlier from TD Asset Management to see what that means for central banks and the fixed income market.
>> A lot of the easy gains behind us, I think even Gov.
Maclin delayed it out very nicely We will likely get closer to 3% by the end of this year.
We are at close to 4%. We have the medium inflation year-over-year at around 4.
2%. Likely will get closer data 3% by the end of the year.
The top priority will be to get back down to 2% where, from a policy point of view, this is the ultimate target. That will take the bulk of next year. So yeah.
The easy part is over.
And now, we are transitioning to the data dependency.
It's really data dependent. We have had some positive surprises out of the US on the growth side.
This week. We've had some of the Fed governors talking hawkish. So we are in that difficult, choppy environment and it leaves us sort of, if you go on a bit of arrange trading bond market environment, with this, that is consistent with the transition of inflation.
>> The Canadian report, even though for one month only, one report to get some tongues wagging. Maybe the Bank of Canada which is pretty clear, conditional pause depending on what happens might be hiking again in the next little while. Is that an overreaction to one report? Rex I think it's a fair handicap. Look, the markets are saying, they have not fully priced in a rate hike this year. Pretty close.
So, there is a likely handicap based on your comments and sort of the observations of the Central Bank here in Canada.
That they are, you know, conditional and data dependent but leaning hawkish. And so, I think we might get one more. I think the bar for June is still pretty high to get a rate hike then. But certainly, they will be talking hawkish. I think they would like a little more data beyond just this one inflation.
They just paused. They've had one inflation print that is a little stronger-than-expected. So I think the broad parameters to suggest, you know, a little bit more pause and wait and let the data fill in and see how we transition. But the backdrop is still, we are closer to the end.
> You talked about the fixed income market being a little range bound. It has to be weighed right?
This year, there was an idea that, as they get close to the end, then perhaps go on pause and perhaps even cut depending on the market before the end of the year, there is your opportunity in fixed income. What we need to see now for that opportunity to come through on the second half of the year ? Mark >> We rallied about 50 to 70 basis points in the fall.
You know, sort of the end of October till now.
So there is been a bit of a rally in rates and as I say, arrange/pause at the moment.
What we have not had a long time in fixed income is income. So you know, if I told you you were only clipping one and 1/2%, circa 2020, you're not being paid a lot to wait.
Now you're being paid 3 1/2 or 4%, throw in some credit spreads.
It becomes a lot more attractive and that income, as we wait for this transition to, you know, lower yields… Lower inflation… There is substantial risk that we have a recession in the US. We keep pushing that out of it but I definitely think the broad strokes suggest that we are going to have a recession. I think it's more important to debate what type rather than if.
So that backdrop, given the fact that you have income, you can wait this out. You know, so you're looking at maybe 3 1/2% for the moment. The lower end of our where 10 year yields are. That 50%, that 50 basis point… >> Let's talk about recession fears obviously.
Is this part of the thinking as to why the market keeps pricing and cuts?
The market prices changed in recent days and weeks based on what's happened.
Pushing the possibility of a cut later into the year.
But they still think that these central banks are to be cutting where the central banks are saying "no, once we pause we will stay there for a long time" they keep hammering the idea to see if the market is going to go but not really right.
How do we read that?
> If you look at history the Fed would be on pause for 6 to 9 months historically between the last hike and when they cut.
Look, we came out of the pandemic with extraordinary policies and tailwinds that we are still talking about.
The San Francisco Fed did a nice study where they sit at the peak we had $2.1 trillion in excess savings right? And now were down to only half a trillion. Still a ton.
That tailwind is still with us. We talk a lot right now about the resilience of the consumer right?
These rates will impact. Central banks will be patient.
Maybe it's not the historic 6 to 9 months. Maybe a little longer. But ultimately this is going to bite the consumers.
The credit conditions, the tightening of lending standards, we've seen manufacturing project lower.
Services being held up by a strong consumers. So sometimes it's tough to be patient. You know, the markets are always wanting a trend. They were wanting to move to inflect but I think the trend is obvious.
It's just being patient and waiting for it to play out.
And maybe the central banks will be on hold this year but ultimately they will have to Kutch.
> That's when the central banks realize there's too much pain in the economy. They are too restrictive and they have tamped down growth too much. The argument is been made because of everything we've been through in the pandemic. Perhaps allowing us to feel a little more pain than usual.
Before they rushed to the rescue yet again. Does that make sense?
>> Look, it's a little far out to see if there really going to hammer us. But I think the ultimate, you know, the way they phrase it is "look we have to restore the balance between supply and demand. If that means were on hold a little longer, at the end of the day, though, going into all this, the Fed talked about having a slightly higher average inflation target over the cycle. So maybe while we talk about getting to 2%, maybe they don't get as close to 2% as we think they will be. So, on the positive side, maybe they stop with the tightening and pushing back on the demand side earlier than we think.
>> That was Scott Colbourne Managing Director for Active Fixed Income at TD Asset Management. Now let's get you updated on some of the top stories in the world of business and take a look at the markets are trading.
Foot Locker says weaker sales, heavy discounts and thefts of its merchandise weight on the most recent quarter.
The athletic apparel retailer saw a revenue slump more than 11% compared to the same period last year. Foot Locker is also reducing its full-year sales forecasts, citing a tough economic backdrop.
It's a different story for heavy machinery outfit dear and Co., the company is raising its profit forecast following a strong quarter for its agriculture equipment business which saw a 53% jump in revenue.
Dear is often viewed by investors as an economic bellwether of sorts for the industrial sector.
Cineplex says the allegations of so-called "drip ticket pricing" levelled by the competition are "without merit".
The agency alleges Cineplex promotes movie tickets on its website and app at prices that are unattainable. In a statement, Cineplex said it's online booking fee is not misleading. A quick check on the markets, we saw a price of gold… Putting a halt to the debt ceiling negotiation talks and the white houses position was untenable. 41 points on the board for the TSX, about 1/5 of a percent. South of the border, the markets did pull back on that news.
Modestly. Less than 10 points in the S&P 500 about 1/5 of a percent. Although, it is not strictly business news, if you're a hockey fan and you follow the leafs until they were kicked out of the playoffs, apparently the Toronto Maple Leafs are confirming that the general manager is out and the new manager will be announced at 3 PM this afternoon to discuss at all.
It might be interesting. Let's talk about the big tech names and how they outperform so far this year.
Could that market leadership continue amid all these worries were having about slowing growth? Earlier I was joined by Vitali Mossounov, Global Technology Analyst at TD Asset Management.
>> I think it's pretty simple, what these companies could control, they did really well.
Things that were out of their control, well, sometimes good fortune smiles upon you.
And I find in life when you control things well, you put a level of grease in an fortune is on your side.
Things worked out pretty well. That's the story of earnings.
> Let's break into the three pillars.
With revenue, this was the concern heading into these earnings right? The slowing economy and all these concerns sing their sales slow.
How does that look?
>> The sales kept slowing but it's always about expectations and expectations were about worse sales.
They didn't slow as much as feared. And again, its valuations and fundamentals and in the short term its expectations.
So throw some numbers on that and they shrunk 3%.
Earnings flat. Alphabet sales grew 3%. Not great.
Not typical big tech sales. But, good enough. We will call it good enough and so I think, as they especially talk with the next quarter, investors listened and said "you know, the first to see pain last year, maybe the first out so we won't worry about them, we will worry about industrial stock and consumer stock. So revenue not bad.
>> So not bad.
Maybe they got smiled on a bit because they can't control that side of the consumers wanting.
>> That recession never arrived.
We don't know.
>> We will find out.
One thing as you pointed out that they can control of their own costs of course.
Cost skyrocketing during the pandemic because they thought the good times were here and they were never going to leave.
How did they find the discipline the markets looking for have they have to have they found?
>> I think the market forced the discipline on them with what they did their stock prices last year. But there was a lot of discipline.
Microsoft was able to get their expense growth down.
Companies like Apple and Microsoft and Facebook coming in below even what they expected 1/4 ago.
Cutting costs. Obviously cutting the workforce. We have heard a lot of that.
Freezing pay.
Microsoft just last week talking about a full-time salary freeze. That's another one.
And doing what they can, spending less on the cloud, for example.
So costs, they can do remarkably well.
>> You would be hard-pressed to find any tech company this quarter that didn't throw the phrase AI out there.
Some for good reason obviously.
Microsoft and Google competing head-to-head in the eye on the AI front but every release talking about artificial intelligence. What you see there are and what we need to be mindful of?
>> It was the most predicted question you can imagine and it wasn't just tech companies. I think most companies got the question. Look, we saw were a lot of generic responses. I want sugarcoated. Companies were prepared for this question and they got the question and the answer. They said "we've been making these investments for many years. We will have the products out shortly. We've got the product roadmap and there is a path to how we can monetize AI. Some companies did a better job. By better I mean more detailed and prescriptive.
Microsoft I would certainly put in that camp. They needed to. So much of their future strategies about AI, the leadership they had with their ownership, part ownership of OPEN AI, other companies… They didn't give you as much may be as you wanted. Apple is in that camp. But that's typical Apple. Apple likes to say that they create wonderful delightful products and when we launch them you'll find out just how wonderful they are.
They have a track record of doing that. AI for that was a very vague answer. But again, that's typical Apple.
Overall, lots of answers about AI. The real answers in a couple of time when we see the actual products. Right now it's mostly fluff.
>> And you expect to hear from the tech companies.
Even outside of tech, how are other companies getting into the whole AI thing?
>> Companies across the border getting asked these questions there either being asked if this is a big threat for you?
For example some IT services firms but even areas like finance and accounting outsourcing. There's a big company in the US at the US stock exchange. At the New York Stock Exchange.
Saying you are outsourcing all this work to you without work can be very repetitive and mundane. The debits and met and credits maintaining is not something that can be eliminated and isn't that a big threat to you? You have seen stocks react in a big way this. Medical device companies may have the potential to one day go from being incredible but it effectively harnessing the power and understanding of the human body and the conditions operating in the mind, the emotions and using that data.
The companies that monetize that data. Bottom line, investors are trying to find out for any business model, in any sector, where the threats?
What are the opportunities?
>> There is a certain newness to it all the people working in AI were working on this forever. I think in the general public there's a certain newness of the developed recently.
We have tech industry heavyweights concerned about how we can change our lives and of course you have workers concerned about how we can change your life.
That would be front and centre before talking about some of the other things. What about my job?
>> I think it's perhaps not getting enough attention.
It will take a few years to play out but I'm certainly in the camp that AI is going to bring a productivity boost. Especially to the knowledge economy.
We will see that play out over the near term and medium term.
That's low hanging fruit. But in the medium to long term, and I'm talking three, four, five years, this is the first technology that really has the potential to replace human workers. AIA, the essence of the tools we are going to build with that are automation tools.
These automation tools, the companies that are building them, will be trying very much to have them automate tasks done by, well, human beings.
And even if they are only partially successful, this will have the effect of suppressing wages.
So mid to long term, be very cautious of this.
We've already seen management teams point to this.
The CEO of IBM a couple weeks ago, on the record, saying he's looking to automate as much is 30% of his back office with functions like HR. It's all talk right now. We don't want to get ahead of ourselves but time will tell.
>> I guess the spin them I could put on it by corporations will be "it will take away the drudgery work" human beings want to do these mundane tasks anyway" but if your job is mundane and it's not there anymore there's not another position for you, I could see some anxiety that would grow out of it.
>> Every job is mundane tasks but in general, that's good language and good spin.
Most of us aren't building and designing the Sistine Chapel.
Jobs are jobs and people strive to do them well.
Companies are going to try to unlock ways to save money.
It is the capitalist imperative.
And the language, it will need to be careful language.
But at the end the day you will see hints of their true intentions.
I think Microsoft dropped that hinge.
They said "look, we are going to have a full-time salary freeze." And for the record it was not a very public release but these things get leaked.
They said they will have a full-time salary freeze but will use the money that they save to invest in to AI initiatives. So you're actually telling the workers "were not to pay you more.
Within a take that money to fund something that could replace you " or to illuminate the drudgery's, as they would say.
>> That was Vitali Mossounov, Global Technology Analyst at TD Asset Management.
Now let's get her educational segment of the day.
Stop orders are one method investors can use to try to limit their downside in a volatile market.
Jason Hnatyk, Senior Client Education Instructor a TD Direct Investing has more.
>> Stop orders can be a very useful tool for investors looking to manage risk on their portfolios. Many ways to use a stop order.
We will focus on using cell stop orders.
Either way you're looking to lock in your gains or limit your losses. A great opportunity for investors to place the trade to know they have got an exit strategy in place even if they're not actually good with the computer. Let's go over and move to the charts for a visual example of what were talking about.
On the chart here, you will see blue line.
Representing a buy price at approximately $50 that I may have entered into this trade. Now, if I'm thinking about using an investment plan which is a great opportunity for me to automate the trades, I can really take a little bit of emotion out of it, maybe the most are willing to lose on this particular position is five dollars.
So if we go ahead and maybe draw another line of the five dollar mark below, let's say approximately $45, putting another line on the chart and with what were showing you, my mind didn't draw the let's get that done.
I have my line on my chart. Now, what this says is if the stock does pull back from the point at which it is now, I will have an order in place to sell my shares and take me out.
Surely this is not to be expected or hoped outcome looking to get out of this trade.
But we are taking a very practical approach. We are trying to limit the losses if it does go down further then we are hoping to have the stock retreat below.
Additionally, a stop order can be a great opportunity to lock in our gains.
I'm going to go ahead and move this topline down down to a much lower point in the chart.
Maybe lucky enough to bind to the stock at a much lower price.
Write down near the lows of the pandemic crash earlier in 2020.
The same would hold true.
We are still placing an order to sell below the market.
In this case, we are saying if the stock does retreat any further, I want to go ahead and exit my trade so I don't give back some of my hard-earned gains and I've already experienced on the stock. I'm going to lock in those gains and walk away with a profit.
Not allow somebody else to do the same. Now, another concept that is chief to understand for investors when talking about stop orders, we want to make sure that we don't set them too close to the present market.
As we are looking at the chart, we can see that, you know, even in an upper downtrend, stocks are not always continually moving in one specific direction.
They will meander up and down as we go. The same holds true for any data trading in the market. This can be arranged that the stock will trade in, a high and low point for that given day.
So understanding what that stock is doing and how high or low on average you will get, it can be a very useful piece of information to know.
In WebBroker, under the lower indicator study sets, we have a study that tells us just that. That is average per range.
If we add that to our chart, we know it's below are candlesticks.
We can see this line here is telling us, on average, what is the range that the stock is trading and based on the last 14 days.
You can edit the study by clicking on the left-hand side and it will get you a bit of a description so you know exactly what the studies trying to tell you.
In a nutshell, this is telling us that the stock presently has an average range during this time period of a dollar 34. So, if were setting our stock prices closer rather our stock prices below the current market, we are more likely to be stopped earlier than anticipated. But ultimately at the end of the day, you would be setting your stop orders based on the risk that you're willing to take.
So that will trump all.
Let's go ahead in place our trade so we can put the theory into practice here. I'm in a go ahead and hit sell at the top here next to our quote. This will bring up our order ticket. We will go ahead and fill this and as we normally would.
We will go ahead and enter our quantity that we originally purchased. Now under "price type" this is where we get access to changing and choosing different orders. I'm getting ahead and choose "stop market" for this particular example.
You will notice there is a trigger price field appearing on screen.
This is telling us the price at which you want the order to be triggered or activated so that we will then sell, send your order to the market with a, as a market order. In our example we had in our chart, we were saying that we wanted to exit or trade at the stop trade down to $45.
If that happens this will trigger an activated order and send our order to trade out of our 100 shares of this particular company that we own.
You also have the ability to change your status.
Typically folks will change the good till cancelled option.
This will help keep your order open for 90 days and for US listed Securities, your order will be protected for 180 days.
As you can see a stop order can be a very effective order type free to master and using your trading.
>> Our thanks to Jason Hnatyk, Senior Client Education Instructor a 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.
Programming note, Caitlin Cormier, Client Education Instructor with TD Direct Investing will be our guest on the program Tuesday taking your questions about how to better utilize the WebBroker platform.
Tightening financial conditions or raising concerns about the health of the economy and the ability of central banks to rein in inflation in a controlled manner.
Brad Simpson, chief strategist at TD Wealth join me earlier to discuss.
>> One of the things I've said is "is it me or does the financial markets right now have this kind of lacklustre feel to it?" If you think of all the things going on and really, it's a really quiet> I got accustomed last Summer to this wild inflation up 3% down 3% and now it just seems to be… >> One of the things we always talk about is adapting and evolving and, you know, a lot of the, it's almost like we got to the point where we are so used to big things, getting used to this endless array of big things that are impacting.
Like the quiet level markets surprised me.
I think, I guess from the start, I think you would be remiss no matter how many ways you look at it, inflation is still the thing that you've gotta put front and centre.
In a news cycle, you think "okay, we've heard about this a bunch of times." > The machine is hungry (laughing) >> The bottom line is this thing is more resilient than really what, I would say, our first thoughts were on this.
So I think it behooves us to come back and go "let's keep on this and let's look at this and we do look at it we see it is getting better" we are seeing both CPI, VPI numbers that came out last week which are showing that the efforts by the central banks are starting to tighten things up.
Inflation is continuing to come down.
You look at the US Federal Reserve Board, now at 500 to 500 and the quarter.
Lots of rate increases.
Their last increase of 25 basis points came out and said "kind of surprised with everybody" we will take a week and see attitude and let's go slower on this.
We saw the Bank of England come out and they have somewhere to go but their language definitely started to change saying "you know, we think were starting to get a grip on this." You look over the ECV, that sit rather the ECB, 25 basis points a clip, all that points to a more positive trend for inflation and so with the central-bank story changing their tone, I think there is a way to go, a ways to go but without a doubt I think we can probably feel, as I know there, I go to dinner parties.
It's understandable. But that fear is starting to slow and it probably should because I think that a lot of the conversation we will go to from here is that in many ways financial markets have almost turned and said "okay, let's deal with where we can go to next.
>> Is the wealth card economic growth?
The whole point of all this tightening is to get inflation under control.
They said the byproduct of that, the whole point of this is to slow the economy a little. Are we getting signs they're actually doing that?
Some of the data that comes in sort of surprises me.
>> I think that is one of the things you really want to look at with this is that when you start looking through the economy, again, I sometimes feel "boy the things you folks are looking for, how can you look at the world in this way?" But the only way to slow inflation down as you have to start taking on your economic growth and looking where that is in so when you, if you set back and looked at the global economy and you said "well let's start out about unemployment at 3 1/2%, that's the lowest it's been since 1969. Now, I don't think I'm the youngest looking guy in the world.
I was born in 1969.
That was a few years ago. So we saw some members come out last week that did show inside of the labour numbers are starting to slow.
3 1/2% still is really important.
So the two big things I think you have to look at when you're thinking about where this global economy is going, I think the starting point is employment. And I don't think anybody could argue that this is a softening sign here.
But we look at people employed the other side of this is looking at the consumer.
These two kind of go hand in hand with one another.
As we start to look at what's going on inside of the economy, what we see is that, we all know what happened with the Silicon Valley Bank and all the offshoot from Matt. What we are seeing inside the economy, both in North America, seen in Europe, we are tightening up credit.
And credit makes the world go round.
Money makes the world go around and and ease of money going into that. So one of the measures we uses financial conditions.
So, I think if we went back in time and, I think I was here in August about a year and 1/2 ago and things we were talking about where the central banks coming out looking at ease in the financial conditions.
They were trying to tighten and Jerome pouches said "that's it done!" >> At the Jackson Hole speech.
> Yeah. So if you look at it, the financial conditions of gotten tighter and tighter and tighter since then.
Then you look at senior loan officers coming out.
This is flat out mid-level Bank people going out and having the boss tell them "listen, don't send any money out there. We will have small medium-size business starting to show that this is getting tighter".
So usually when you start to see this happen in times past, you can see the tightness of these levels, they have usually been a pretty strong integrator rather indicator that you're getting closer to a recession.
Not a sign you're looking at a changing labour environment.
Then if you look at the changing labour environment and you kind of go over the consumer, you can look at the consumer North America and look at kind of what they're spending on restaurants, but with her spending a close… Every time I walk into go get some shirts or something I'm amazed about how much is on the shelves and how much sales there still are on these type of things.
You kind of start putting all those pieces together.
It's an economy that, while looking good, if people start worrying about their job, people start taking a look at it and saying "there was about roughly about 1,000,000,000,000 1/2 dollars of surplus capital on people's balance sheets in the US. That's the largest consumer in the world.
We think that's about down to $500 billion now. That's a lot of spending. But that's a lot of spending that they've gone through quite quickly. To think that the people's wallets are getting tighter and tighter.
Then you look over and you're starting to see things slow in Europe.
You're looking at that big tailwind everyone is kinda counting on.
China would reopen and be a big tailwind.
We've seen some numbers and they are not so strong either.
All that points to us having a healthy economy today but there's no doubt it's one slowing as well which will really help take care of the inflation.
It's also gonna change the dynamics of the Marketing environment as well.
>> Will they stay in control? They are getting what they want right now but does it get out of control?
>> I think that's one of the things you have to look at. These are the things that we know and these are the trends that we can follow.
Let's start and look back and go "okay, we are confident that we've been able to contain the banking crisis so far.
But this is a "so far". So I don't think, I think that's still a potential risk that's out there.
And all that kind of the cousins of that… That I think we are well aware of it we published a paper a couple weeks ago about commercial real estate.
We wrote about this pretty extensively in our portfolio strategy quarterly.
One of the effects ultimately could be as commercial real estate is pretty tough sliding there right now.
And if you look at it through that lens, that has potential because an awful lot of that is in that midsized banking sector.
You talked about small and midsize businesses, most of their access to credit is coming from that mid-and small size banking sector.
All of that starts to point to real potential problems down the road. You start looking at some of the hiring patterns from some of these small and medium-size companies. Really starting to tighten up.
So, that one, I think is still, I'm not saying there is an inevitable break out there but I think that could get ahead of central banks.
Things just can't stop the momentum on would be one.
And I think the second one is, which eminent guests you can probably dig into a little bit here, this debt crisis is a real thing.
This isn't something that a central-bank can solve.
That has the potential to have a lot o downstream impact that, I think, quite frankly, there's a lot of lawmakers in the United States that don't have the financial background to understand just actually how big of a deal this potentially is.
>> That was Brad Simpson, Chief Wealth Strategist at TD Wealth. Let's take a final look at the markets before we sign off for the week, handing in for the long weekend.
It's getting closer.
We have 39 points to the upside of the TSX and a 15%.
We had some drama this morning before the show began.
Both sides of the border. Then you have the GOP negotiators walking out of the talks over the debt ceiling with the White House. Not happy with the White House's position. Of course there been rumblings on either side leading up to this that they would find a deal.
It means they are negotiating and they put a little halt on it. While they sort of regroup. They have caused the markets to pull back a little.
We are still hanging on the green in Toronto. We have Tourmaline oil about three points up to the upside.
Shopify a run after its report, the weeks blur into each other. A modest pullback. Now south of the border, checking on the S&P 500, it did pull into negative territory.
Down 10 points modestly. 1/4%. But it was green on the screen before those negotiations took a bit of a pause on the debt ceiling. The tech heavy NASDAQ, we want to see how it's bearing against the broad market.
About the same amount.
Foot Locker, we told you but the rough quarter they had the doctors felt and also having to revise its forecast the rough quarter they had at the top of the show.
Their stock down a pretty substantial amount. 27% at this hour.
On a programming note we will be off on Monday for the Victoria Day holiday but we will be back on Tuesday with Caitlin Cormier, Client Education Instructor at TD Direct Investing taking your questions about how to better utilize the WebBroker platform. Of course you have to wait showed up again. You can email your questions ahead of time at moneytalklive@td.
com.
That's all the time we have the show today.
On behalf of me and Anthony, everyone in front of the cameras and behind that brings you to show on a daily basis thanks for watching.
Have a nice long weekend!
[music]