Market Insights

Please stand by. [music] >> >>Hello I'm Greg Bonnell and welcome to MoneyTalk Live, brought to you by TD Direct Investing. Coming up on today's show, are we there yet? A data this week showed inflation cooling in May. But Robert Both at TD Securities and says if you think that means the Bank of Canada is less likely to hike rates at one of its upcoming meetings, think again. And higher rates are part of the reason many think we may be heading into a recession. But those concerns have yet to impact the equity markets this year. Benj Gallandher brings his thoughts on why. And Hiren Amin of TD Direct Investing breaks down conditional orders in the WebBroker segment. Going into a long weekend of course closing the books on today would not only be closing the books on the week but the quarter and the first half of the year. Let's take a look at the TSX Composite Index up 100 and 75 points. Lots of green on the screen among the most accurately traded names including BlackBerry. They reported a couple of days back but investors liked the quota. There is a balance on the day after, yesterday, another rise in the shares today. About 5%. We don't talk about BlackBerry a lot of the program. The heyday of the phone is behind them and it's all about software now. There is some movement in the stock. Interesting as well. We want to take a look at Kinross. A lot of strength across the TSX but one name it that's in negative territory today. Down one of the half percent. Unconfirmed reports out there that Kinross rebuffed a takeover approach from endeavour mines. Downward action here. South of the border let's take a look at the S&P 500. We will talk about this in a few minutes and yet another read on US consumer prices. Perhaps received favourably by the market. Up 43 points, almost a full percent of the S&P 500. The tech heavy NASDAQ also in rally mode today. We have the NASDAQ, I said the words NASDAQ but I will pull up my screen. I will tell you what's happening. A nice triple digit game. 157 points as well. On the cruise lines this week, particularly the carnivals. Stocks of an rally mode for quite a while now. Pretty much the past two months. Definitely in the past several sessions with 1853 today, up another 8%. It seems people are getting constructive about wanting to travel in big boats on the big water. And that's a market update. All right. The favoured gauge of the Fed when it comes to tracking consumer price pressures in the states came up this morning. The market seemed to like what they thought of that. Susan Prinz is now with us to help break down the PCE. What we see the numbers here? >> Susan Prince: lawyer Singh and the trend is month over month, we are starting to see a different decline in the annual PCE number and the month over month number which is about 0.1 of the percent. .1%. And what people are looking at is "okay, the trend is going in the right direction. " But we know the Federal Reserve's long-term goal for inflation is about 2%. And they use the PCE indicator is kind of a proxy for the direction that inflation is going in. So the number is good. But as the trend it is still not where the long-term goal is. >> Interesting because as you said this is the Fed's preferred measure. The gauge they are looking at. At the same time you have Jerome Powell doing this… I'm begging my hand on the desk in case you can't see. He keeps pounding about rate hikes, rate hikes… It means there is probably some interesting things in there to consider. Just because the trend is going down we might think the Fed would stop. >> Yeah and I will jump around a little bit because in the introduction you talked about shipping cruise ships being up. We look at where the spending is gone down, where people spending less and more money, that pent up demand for cars and trucks, SUVs, has started to decline. So we are seeing that number dropped. The number that's going up though is in services. And cruise lines counter services. So what were seeing go up his international travel, transportation, cruise lines fit exactly in that. So if you look at where people are sending their discretionary income, their spending less on trucks so their spending less on things. More on experiences. So this is a really good opportunity to see where that information starts being. You looked at the cruise lines and said "that's interesting, wire those going up?" The PCE indicator says that's what people are taking their discretionary money. So that's kind of cool. The other thing, when you're looking at what this data tells you and why you should care, it's now you can have a bunch of economists saying, wrestling over if this means Powell is going to stop pounding his fist on the table or is he going to continue. ? You're going to have a lot of opinions on that. We are not in an inflection point but we are certainly a point of curiosity where you look at the trend being right and what happens if they go too far and increase rates and then you cause a recession? So you're going to have these arguments about this not being a leading indicator. It's a lagging indicator. Can you take this information and make sure that you don't go too far with it? >> The Fed looking in the wrong direction, in the rearview mirror when they should be looking at the road ahead of them. >> Right. So those kinds of things, what might additionally look like a drive data, it's Friday you might think who cares, but you can start making interesting, informed decisions about your portfolio. >> And later in the program, you're going to talk about something else that could affect our Central Bank. The business from the Bank of Canada. I will get you to spoil the details right now. But Susan, we will return. Susan is not going anywhere. She's innocent there. Let's take a closer look at the Bank later in the show. You may recall earlier this week, we got some data showing that inflation here slowed to 3.4% of the headline in May. That's the lowest level in almost 2 years. So that day, we spoke with Robert Both, macro strategist with TD Securities with the data with interest rates. >> As you mentioned, inflation did move quite a bit lower in May. It fell a full percentage point to 3.4%. So for a lot of us at service level, that is very welcome news, especially for anyone who has had a little more of a difficult time with the rising cost of living over the last couple of years. You know, if you do spend a little more time looking at the data, the drop in a year-over-year inflation should not come as too much of a surprise. As you mentioned, gasoline prices were a key driver in that decline. From last year. But if you look at the change in gas prices between April and May, they didn't move too much. And prices overall goes by 0.4% month over month. Now, that was roughly in line with where the market expected. So it's not going to be too much of a shock for the Bank of Canada, relative to their assumptions heading into this morning's report. But, inflation is still much too high for comfort, especially when you look at the core inflation measures. So there are two measures that the Bank of Canada looks most closely at. Those are the trimmed and weighted medians. Those fell by pretty large 0.4 percentage points from 4.25% to 3.85%. But still rising by about 0.2% month over month. So we are starting to move in the right direction but if you look at the three month annualized rates of core inflation as well, they are still around 3.7%, again, it's too high to be comfortable at these levels. The Bank of Canada wants to see those get closer to 2% and, you know, so long as prices are rising by 0.4% month over month, we are going to see, we're gonna need to see more progress before we can really feel comfortable that there are no more rate hikes to come down the pipeline. >> I found it really curious. This is pretty well telegraphed. You didn't have to be a genius to know that you're paying less of the gas pump at the same time last year we had a barrel of crude and almost hundred 20 bucks. But the mortgage interest costs which obviously, you don't have to be a genius to figure out, they are higher this year than they were last year at this time because of the rate hikes. But if you strip those out, inflation was roughly around two and half percent. To me that struck me as a curiosity. Because this is something the the Bank of Canada has done is raise rates. Raise mortgage interest rates. They take that into account at all? Are they happy to see the pullback? >> That's where the Bank of Canada likes to focus more on those core inflation measures that do remove some of the more volatile components such as mortgage interest costs. This is not necessarily anything new but something newer mortgage interest cost of and contribute more and more to the year-over-year increase in inflation. However, you know, there are other components at the CPI basket that have also traditionally done well with the Bank cutting rates. Things like homeowner replacement costs or anything else that is directly tied to house prices. You know, those of always been looked at together with the recipe index. So you know, we would not expect the Bank of Canada to be looking explicitly pass those mortgage interest costs. We see that they do have their core measures for a bit of an operational guide and they will put a little more weight on those when there is one component that is dragging a lot of volatility but those core inflation measures are still running at a rate that is not quite consistent with a return to the 2% target. So we do need to see some more evidence of demand slowing in and the economy coming back into balance to get all the way back to 2%. >> In the early innings when inflation starting to gather steam, we were told it was transitory, it seems like a million years ago. We had some real problems in terms of supply chains coming out of the pandemic. Services, a lot of people were talking lately. Let's show the audience the difference between now and core goods and services as measures and what's happening inflation right now. Is this something troubling to the Bank? The fact that services are kind of coming off but not all that dramatically? >> I would say it's a little troubling for the Bank. You know, it's something they've been watching for a few months now and we can expect that gap to continue to widen over the next few months. Because service prices do tend to be a little more sticky then it goods prices and there are especially closer a time to the labour market. So until we see the labour market move a little closer to balance, until wage growth is running well below 5%, I think we can expect some of that persistence and services to continue. And especially in the shelter component as well which is a little less tied to those labour market outcomes. We would expect that to remain a source of upper upper rising pressure in the next year or year and 1/2. > I feel once we get to this battle against inflation the jobs report sort of got pushed to the side. Are we still paying attention? The inflation reporter stealing all the headlines? Now they are staging this inflation fight, does that labour market report become all the more important to us? >> I think we will be looking at the labour market data a little more closely for kind of insight into house services into inflation to develop. I think inflation is still first and foremost where the Bank of Canada is looking. It is their sole mandate in Canada. They are determined to get back to 2%. The labour market is a little bit secondary to that. Obviously, the gross data is also very important. We need to see growth slow from those above trend rates we have seen over the last year or so. We saw quite a strong growth in the first quarter of this year and that has us a little more concerned that some of these inflation pressures can take a little longer to fizzle out. >> So we do have a Bank of Canada rate decision on July 12. Only a couple weeks away. Coming out of that, would you expect perhaps after that they could sort of go back to the sidelines and assess further with her headed? Or are there signs here that maybe they will keep going? >> Right. I guess we need to get through July 1. But that was one of the questions we had going into today's CPI report was a July rate hike that looks extremely likely. I think it would take a significant disappointment on the inflation data to move the Bank away from the hike in July and we didn't get that. There is not too many other major data points that might move the needle between now and July 12. So I do think they are going to raise rates one more time and then once we get past July, I think it's way to be a bit more about data dependent approach going forward. So there is a lot of economic data before we get to September and I think you are going to need to see more concrete evidence of that slowdown in economic activity. You're also going to need to see, you know, inflation continue to moderate especially as those core inflation numbers. You know, we have three months before we get there. So that's what we will be watching. >> That was Robert Both, macro strategist for TD Securities. Now let's get you updated on some of the top stories in business and take a look at how the markets are trading. Apple's market value has once again breached the $3 trillion mark. Once again, it's not the first time. The iPhone maker has top that valuation. It did so in January 2022 but Apple shares failed to hold that level into the close. So here's another shot here for Apple to close out the day above a $3 trillion market valuation. The number we are told to watch for, you see hundred and 92 bucks and change on the screen, so far it's there. We will see how the rest of the afternoon plays out. Bausch & Lomb says it has an agreement to buy the anti-inflammation eyedrop Xiidra from Novartis for $1.75 billion. Dry eye conditions are said to affect some 740 million people globally. The rival Abbvie also has a competing product. Up to the tune of about 5%. The shift in consumer spending habits appears to be hitting sales at Nike. The sports apparel giant sales forecast is coming in below Wall Street estimates. And Nike says North American sales were up 5% in its most recent quarter, that's the slowest growth for the company and the North American market in forequarters. Share slightly under pressure down 2%. A quick check on the market, last trading day the week before heading into a long weekend. Last trading day of the quarter and last trading day of the first half of the year. This is the TSX Composite Index hundred and 81 points, almost a full percent and south of the border, the S&P 500 a pretty good first half of the year. In terms of gains. Today, almost a full percent on. 43.2 the upside now let's get to our educational segment of the day. Today were going to be looking at conditional orders, what they are, how they work and how they can help you with your investment plan. Hiren Amin, Senior education instructor with TD Direct Investing joins us now. Hiren always great to see you. >> Great to be back here. So conditional orders, they fall in the category of these advanced order types that we have. They are a great way to trigger action in your account based on trades that you set up. So it really adds automation to your trading and this is going to be especially useful for those who are kind of swing traders are active traders. But that doesn't mean it's exclusively just for them. It can still be used for some of his medium to long-term traders. Now conditional itself means that the order is going to be filled under specific conditions or the fill will trigger another condition. Now, in WebBroker, there are three types of conditional orders available. We will focus on the one called "the first triggers one cancels other" order. It's a mouthful. So we simply just call it FTO order. It's going to help you stick to a plan and take the motion out of the decision-making process. So usually, when an investor sets up this order, but what they eat before they even enter the by, they already have the exit strategy in place in terms of knowing where they want to take a profit and potentially where they want to take a come out of the market in case the market moves against them. So again, it does allow for that automation. The other benefit of using this order is, suppose you put an order on and you wanted to place a profit taking orders such as the limit and maybe also a stop order to protect you on the downside. Doing these two and dependent orders won't work in the system because they kind of clash with each other. You could get filled on both at the same time. So this is where the FTO order comes in. It knows that one of those orders gets filled, it's good to automatically cancel out the other order. So it does allow you to place two simultaneous orders in the same exact position there. We are going to jump into WebBroker for a second and I have DIA pulled up. The ETF index that tracks the Dow Jones industrial average. We will use this as an example. A quick thing to paint a picture to her audience, I will pull up the chart and say you are interested in investing in this security and you've identified a serving price maybe you want to get it at the current price which is what we are demonstrating it 343. Maybe you look at the chart and Apple hit that 3 millionand the trade moves against us… You're looking at the level of a 325, let's on the downside. Want to exit. We do want to stay that position if it does move against us. So this is where this order would come in handy for you. >> So we now understand the order and we have a real world example of why someone would want to use it. So, in WebBroker, how would you actually answer. I'm going to go for the mouthful. The fools the first trigger of OCL order. >> All right. To do that it's quite straightforward. You're going to open up the ticket here with the buy/sell button. We will click on this. Once it opens up, you're going to actually come up to the tab that says "strategies" that's where it's housed. You can see the first three other conditional orders we stroke we spoke about but the one refocusing on his right over here. FTO. I will click on this order. Always important is to select the appropriate account. I'm to pull up the account to make sure I have the correct account I want to set it up in. We talked about doing the diamonds. The DIA. I'm going to set up my buy here first. Let's say we want to pick up 10 shares on this. I'm just going to stick in 340, just a few bucks lower if we can get there. I'm going to put this as a "good till cancelled" order. Let's say a rule of the order, the timeframe that you choose does have to be matched up with all the following orders. So this is your primary order Greg. The buy will be the primary order. What this means is this order has to first execute before we get to you and OCL or "one cancels other" the first part is what work in us that are sellout for. This is what we will be using as a prophet taking one. There's a prophet taking one. We will cue up the same number of shares and use the limit price. Let's say we want to get out of 355 if it can manage to run up there. Once again, my timeframe has to be marched matched up with the primary order. In the second part this is going to be my protective order in the downside, we are going to choose a "stop order" in this place. We will set this up as a sell. I'm going to set this up at 325 over here. Now again, one of match up the time frames and we have everything queued up. So what you have now is you have three orders that are comprised as your primary order, the buy has to go through first and you don't have a sell run out before that. Once these execute these will become active. OCO will the diamonds get to a 355 price and sell for a profit? Or will it fall below and trigger us at 325 and get us out and take it for a loss? One of these two orders executes, it will automatically cancel out the other order. And that in short, Greg, is I can set this order. >> Great stuff is always a love how you break it down for us. >> Thanks again Greg. >> Hiren Amin, Senior Client Education Instructor with TD Direct Investing. And a look at some upcoming webinars,… >> Let's turn back to the markets. They have defied expectations so far this year with many people, equities have been on the rise despite higher interest rates and lingering concerns but a possible recession. Earlier, I spoke with Benj Gallander. >>… To try and predict, firstly, anything short-term, I consider six months to be short-term. It is very, very difficult. So we are often looking at the longer term, what's gonna happen and where things will go. Stocks specifically. But you know, if I'm looking forward, I would think that the markets would come down, I am certainly more pessimistic than optimistic. And I keep on waiting for something to happen to said markets down quite a bit. But I think still, there is so much money pumped into the markets, so much money pumped into the system that when there was COVID, that a lot of that money found a place to go right up right away but a lot of that money is still washing around and may have found a place that is looking for other places. I think simply that's been a primary reason that the markets have gone up so far. Now, at some point, that money will be used up, so to speak. And the markets could easily come down. >> Let's talk about some of the things that happened so far this year. I think at the halfway point now, there was an expectation from some market participants at the central banks that they would be done by now. And at one point, the bond market was actually pricing and not only they would be done at this point, they would be thinking about cutting rates. Maybe the late-summer or early fall. All of that seems to been washed away. What you read on monetary policy right now? > I think they're making a huge mistake and everything's been concentrated on interest rates. That's fairly simplistic. I think what has happened now is the governments have to cut back their spending if they want to get inflation to come down. Governments should start running surpluses instead of continual deficits. United States, as you know, they just raise the debt ceiling again. I mean it's absolutely enormous. In Canada, we keep on running these deficits. It would be lovely in my opinion, if the government would say "well, the unemployment rate is right way down. Markets are doing well, the economy is doing well. It's time to start to run a surplus instead of a deficit." I can't say exactly why they won't do it except maybe it's politically expedient. But I think it's a major mistake. Right now, we have an envelope of opportunity to start getting our fiscal house in order and there is simply not doing it. Which to me, it's a shame. >> I mean the whole idea is you're supposed to sort of get your house in order when times are good so that when times are bad, obviously things got pretty began bad very quickly and 2020 with the pandemic. You can show up with the support. So the next time you had a big bump of the road, setting ourselves up for a situation where maybe the government is not in a position to stimulate? Or they always seem to find a way? >> They always seem to find a way. Unfortunately they do. When the government was storing so much money during COVID, I said it was a mistake. They should be throwing some money out there. I think they threw in about twice as much as they had to. Because I don't think they knew what to do. So they figured "we will do that". So yes, you want to be in a position when times get bad, the you can do something is a government. And running deficit after deficit after just deficit is a mistake. It gets worse and exposition. What you're alluding to makes perfect sense. You want to be in a position to actually run a surplus so that later on, when you need the money for the next thing that comes along, and there is always something as we know… You're financially in better shape to do that. >> It doesn't make it a bit harder then, from an investment point of view try to think bigger where things may be headed? Obviously we had very large reactions to what happened during the pandemic. A lot of liquidity, maybe that money is still washing around. Did things play out the way logically you thought they would in the market because of all these other factors? >> It's hard to predict where the markets are gonna go, plain and simple. I don't do a lot of predicting in that way. I'm a stock picker. That is the primary thing that I do. But, if markets have gotten hit badly because the economy isn't doing well, to me, that's a good time to buy. I have done virtually nothing this year. I've been sitting on my hands, I have not had a number of stocks hit my sell target's. I did lots of research. But I'm just watching what's going on and people often think you have to be active. And to me, that's a major mistake. Often, the best thing to do is to sit back and do absolutely nothing… Keep on watching and researching because who knows? I do almost all of my buying at the end of the year during tax law season. So I will be ready. I'm sure there will be a few positions, there will be more if markets took a hit. But I have no desire to be active and as we know, active traders do not do as well as more passive traders. I wouldn't say I'm completely passive but I lean towards the passive side. > When you're doing this research, you said you haven't had a lot of activity but you're doing your research… When you find the most compelling narrative right now? What's the most interesting thing that you're looking at? >> That's a great question. And I don't have a great answer. I'm not finding enough a lot of stock to add to my watch list. A few years ago and markets got hit, it was over three and companies. Most of those were companies that I was really interested in, I've got my baseball thing, AAA the ones that make the most which may be 12 or 15 companies, AA and single-A, not so interesting. I'm adding virtually nothing at this point in time. I have to go through the Canadian again which I will do in the next two weeks if they find a few things. Just not finding a lot of compelling things to attract me. But, you know, I've been doing this… It's kind of scary but have been doing it for about 45 years. I started but I was too young I think. That to me is a little bit scary but I know the pattern. The people I work with. I know what they do, we all know what we do. So I just keep on doing the same thing. But sometimes the list really expands and it really grows. I try not to force anything. >> That was Benj Gallander, coeditor of the contra the head of investment letter and I asked him about that. >> Susan Prince: the business survey comes a quarterly the interview Canadian businesses across the country and they put together both the survey and an NDC that takes a look at an indicator that sort of turns it all into numbers. So what didn't come as a surprise? Well week sales growth is anticipated. That's one thing. I don't think that would come as a surprise to you. If you take a look at the overall economy. Domestic demand is up. We talked recently about James Orlando's report on how international trade patterns changing an onshoring or friend it shoring was going to change how demand work and how that sort of thing works. So domestic demand being up doesn't come as a big surprise if you're following trends in the economy. There of and supply chain improvements. We are looking at year-over-year numbers that still compared to the time periods through COVID where there were big supply chain disruptions. So those things are improving. One of the things about employment, labour, the numbers there that we are seeing labour shortages as being less intense. So, the report lays all of those things out. And at the very end of the report, kind of there in the lead, it is said that many Canadian businesses think it will take five years for inflation to return to close to 2%. >> From our journalism background, that would've been the first thing I would've said. >> Yes and what does that mean? It can mean a couple of things. One thing is it can mean going back to the fact that this is the first generation in over 30 years that has seen inflation. So you could have spent a big part of your investment career or building your investment accounts without seeing inflation. So here we have business indicators. Business people saying "you know, 2% inflation looks a lot further away than what we have generally thought." That's important. And it's important for investors because it can change how… It doesn't make it more negative or positive. What it says as well is if I'm looking at an innovative company and they need to go to the market for capital, they are going to be paying more for a while. So if I do a spreadsheet with all these calculations but how soon the stock will go up and what I anticipate about how business will do, I need to put in different assumptions based on that. It's something I need to think about. So very good lead on that and I think that's interesting and worth paying attention to. And we certainly see it, you know, I like to say "how do you take data which can feel textbook and can feel boring and how do I make it relevant to… Oh, I get it and now I can make a better decision" whether it's my shopping purchases are my investments or any of those things. Take a look at domestic demand, supply is not. In Western Canada we've seen record grain planting. So what's the calculation of that? Geopolitics is the catalyst for that. Where do we get cheaper grain in the past? We got it from Ukraine. If were doing more planting and were not the most efficient market Canadian consumers to get it, we can probably anticipate prices in the grocery store going up. So paying attention to the business survey is really helpful. >> I like how you said it's not negative or positive from an investor's perspective. It is what it is and if you can understand the landscape, it will change your thinking accordingly. This is the Bank of Canada's own research. Their own work. They have a rate decision on July 12. People were perhaps looking at this thing in thinking "if businesses are getting concerned with the economy going forward maybe they don't hike again Mark at TD Economics, we had a guest a few weeks ago who basically said I'm not here to move the needle in terms of the what the Bank of Canada might do next. And you said businesses don't think that inflation gets back to target for five years, that would seem to be a justification to perhaps keep things tight and maybe tighten them a little bit more. >> Absolutely. And those of the things, these are the kinds of things that take data from being something dry and interesting to something meaningful and relevant to our day-to-day lives. >> Susan, always great to have you on the show breaking stuff down. Hopefully we do more next week. >> Indeed. >> MoneyTalk Live's Susan Prince. And now TD's advanced active dashboard. Let's see if we can't throw it up on the screen. I'm looking at right now. A lot agreeing on that screen. Indeed we will start the green. Brookfield remember they had a split of this in a split of that, there is a Brookfield company now definitely a stand up for the financials up almost 3%. Right now we are seeing some strength and some of the energy names as well. Cenovus, up about 1 1/2%, some energy brethren also modestly in positive territory. Shopify, the upper right-hand corner is up more than a percent. With the risk on appetite. We are seeing the US tech names as well. But we can ignore the fact that yet again, firmly in the red down one of the half percent. This would be Kinross as we were telling you earlier these unconfirmed reports out there that Kinross rebuffed a takeover approach by endeavour mining's. So going against the grain of some of the other names with green on the screen of the TSX Composite Index. To close out not only the trading week but the quarter in the first half of the year. Still a couple of hours of training to know. But not for us. That's all the time we have our show this week. Thank you for joining us, each and every day, on behalf of me, Susan here at the desk and everyone behind the scene, who brings a dish on a daily basis, we thank you for joining us. It was a short one but on Wednesday we will have Scott Colborne from TD Asset Management as our guest talking fixed income, interest rates and it will be very interesting, sort of a fresh start as we start the second half of the year. Have a great Canada Day weekend and we will see you on the other side of it. [music]