Market Insights

[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. coming up on today show, TD Asset Management's Ben Gossack is going to take as to why he says it's more than just a few stocks that's driving marketing. Bart Melek from TD Securities will give us his view on whether oil prices are headed higher after a week first half of 2023. And Moneytalk's Susan Prince will give us a preview of the big events coming up this week. Plus in today's WebBroker education segment, Bryan Rogers will give us a look at how you can find information about technical analysisusing the platform. Let's get you an update on the market. Of course, it is the July 4 holiday south of the border, markets are closed and volumes are light but we do have some modest Green on the screen as it kicks offat 20,207, you're a fairly decent 53 points on a quiet day, or about 1/4 of a percent. We are seeing a bid into some of the energy names. On the weekend, the Saudisextended their voluntary cut and Russia and Algeria lowered their output for the month of August, putting some support in the crude oil prices and energy stocks. At night 05, you got Crescent Point up right now by about 1/2%. I will show you blackberry because last week on the heel of its earnings, it had a few days to the upside, it seems that today perhaps a little profit being taken aftera bit of a run for blackberry shares. At seven bucks and $0.13, your down about 2.8%. So to the border, they are closed but let's take a look at the S&P 500. You get a sense of the moves we have made in the past year. The moves we have made since the beginning of this year and where we will start off when we get back to trading with the Americans in the second half of 2023. although I think they traded for a shorter session yesterday. At 4455, about five point yesterday or 10 for percent. We will see what the second half of 2023 brings to the equity market. And that's your market update. Well, is a shortened week on both sides of the border for traders but we are getting some pretty big economic data that could have some weight when it comes to further central bank decisions on rates. Moneytalk's Susan Prince joins us. >> We are going to be focused on interest rates for a very long time. this is the first time in a generation that people have seeninflation and interest rates go up. We are paying attention to that. This week on Wednesday, the FOMC meeting releases their minutes and this is a little bit of an opportunity for an economist to say, yeah, but what did they really mean? What does the Fed really mean and can we figure out, can we read between the lines in figure out whether they are going to raise rates on July 26 when they had their interest rate meeting? So there are no prepared remarks expected. What happens is the minutes from the previous meeting come out and people read over them and try to discern, has language changed? And you will see economists actually parse the report and say what wording is different from the previous bed minutes? And then, we will get to hear economists say, we think X wires said about what that will mean for interest rates. We pay attention to that in the hope that it will give some guidance about direction. >>an idea about why the pause, the skip, the high? I like the term nap. You pass out on the couch at night, you're not willing to throw in the towel so you call it a nap. >> I like calling it a nap because particularly research shows that maps help do you think a little better. If there is a nap and it helps the Fed think better, I'm all for that. >> We are on to something here. >> Yeah. That gets Wednesday taking care of. Thursday, we have the US job openings. If you think of unemployment being, what individuals feel, this is what company's intentions are. What the job openings are. And it's been a little bit of a bumpy ride in the numbers. The index has been, it was up in me and then up in April, bouncing along, so the anticipation is that it will be a number gain of 9.93, it's an index. In February, it was up almost as well. So this is a number, it's an interesting number to look at. How many jobs are at their that they are not able to fill? So that's interesting. The downside is that it's considered a lagging indicator. Because it's about two months behind, what you are looking at, you are looking in the rearview mirror. So it's one that the number comes out and it doesn't particularly move the capital markets, but it is an interesting one to pay attention to. >> Of course, Friday is the big one on both sides of the border. If you are talking about central-bank action, very aggressive action over the past 12, 14, maybe 15 months now, trying to pull the economy and bring inflation down, where are the cracks in the labour market? Jobs Friday for Canada and the US. >> That's right. Basically, in the US, the consensus has been for June 3 .6% unemployment is the number we are looking at compared to me which was 3.7%. And this is one of those circumstances where the number by itself doesn't mean a whole lot. Where you want to see meeting is whether there is a trend. Are we seeing unemployment increase or stay stable or decrease? Now, this is a number that while the Fed considers it, it is not at the top of their list about how they are managing inflation. They like to look at it, be aware of it. And then the other thing that sort of feels a little bit contradictory is that increased employment could mean slowing inflation. So what's bad for individuals, because you don't want to be unemployed, so increasing unemployment can mean slowing inflation. Slowing inflation is good. Unemployment, on an individual basis, not so good. So you do the typical economist, on the one hand, on the other hand. That's what we will pay attention to their, the consensus estimate number and whether it's a trend. If you look at the Canadian numbers, we are also looking at the labour force survey there as well and in me, Canadian unemployment was up. So once again, we are going to be watching for a trend. Is it higher or lower than that number? and are we going to see a trend where me was the first time the unemployment number increased in nine months so are we going to continue to see it increased or stabilized in the same questions are asked. Does that mean slowing inflation? What does that mean for interest rates? So there is a whole lot for economists. They will be going to the cottage this week. >> We are in July now, we have a BOC rate decision to bearing down on us as well. It's a busy week even though it's really short. It will be eventful as well. Great stuff is always from Susan Prince from MoneyTalk. Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading. Meta Platforms launching a new app called Threads and it appears to be a potential competitor for Twitter. The app is described as a, "Textbased conversation app" that will be linked to the Instagram account. Apple's App Store indicates that Threads is expected to go live this Thursday. speaking of Twitter, the company says users will soon need to be verified if they want to access its TweetDeck service. The social media giant made the announcement over the long weekend and indicated the change will come into effect in 30 days. TweetDeck allows users to organize different parts of their feeds into columns. A new report indicates Canada's vacancy rate for office properties is at the highest level ennobles 30 years. Real estate firm CBRE says a vacancy rate hit 18 1% in the second quarter, the highest rate since 1994. A quick check in on the markets. We will start your on Bay Street with the TSX Composite Index as we are trading today, coming off of our holiday long weekend. The American, of course, it's July 4, their Independence Day holiday, so volumes are a little thin but we have green on the screen. At 20,222, we are up 67 points to the upside or 1/3 of a percent. Of course, stocks had a strong performance in the first half of the year, but some pundits claim that only a small handful of those big tech names have been driving the rally. Earlier I spoke with Ben Gossack, portfolio manager with TD Asset ManagementWho says if you look under the hood, there's actually more strength to be found. Have a listen. >> There was a strong narrative exiting last year and beginning this year, earnings expectations were too high, the economy was going to slow, therefore equities were going to underperform and so we have seen actually equities outperform and I think people have just rationalized that to looking at the market cap awaiting indices and say that this rally that we've been experiencing is only driven by seven stocks and we have yet to see this recession. So yes that things have moved but if it's only seven, it can be dismissive. I think we are in the industry that is obsessed with the sun. we care about solar events. Especially rotations around the sun. So when you look at the market, for many of the stocks, especially the biggest weighted stocks, they made bottoms at the end of last year. >> That happen to happily coincide with the calendar year. >> Exactly. Let's say a stock falls 50%. Just to get back to flat, it has to rally 100%. And if that happens, that counting happens to happen around January 1, then yeah, if the stock is up 30, 40%, again, it hasn't made the prior high, but you would say, wow, that's a strong start to the year. So I'm seeing a lot of these bar charts where, again, the NASDAQ has never made quite as strong a search of the year, but it negates the fact that you couldn't only stocks last year and that they closed their lows in terms of their prices. >> Let's start breaking it down. You always bring the charts and we always appreciate that. It's a great way to take a look at the markets. We are talking about seven names. But you are going to break down in little groups. This one, we have Apple, Microsoft and Nvidia. What is to start telling us? >> Greg, what I really wanted to do was put seven stocks on the same chart and then I realized… >> It's too much information. >> I broke it up into two cohorts. We are going to focus on the seven stocks I was talking about, but I broke it into two parts. We are looking at Apple, Microsoft and Nvidia. Let's look at the prices. And you can see that all of last year, the stocks underperformed. In many cases, Nvidia was down 40 to 50%. They made their lows at the end of last year and so they are making their rallies now. Nvidia has seen its prior peak but again, if it sound 50%, it has to rally hundred percent just for you to be flat. I expect most people that are watching us right now only stocks in their portfolios and therefore you're not really up 100% or 50%. You're flat so you have just made your money back and now the real hard work happens in terms of making new highs. Fso that would be in cohort one is just Apple, Microsoft, Nvidia. Yes, they have rallied a lot this year, but as a shareholder and especially a long-term shareholder, you are even Stephen. >> Let's get to the second cohort. We have Meta, Tesla, Amazon and Alphabet in this chart. >> Yes. Again, everyone is talking about these companies making these massive moves, how can they keep going higher? Again, all of the stocks made their lows in terms of their prices at the end of December. They are rallying. Vacancy with this cohort there is still so much more to go before they even hit their prior peaks. So again, fundamentals, weather, in some cases companies have change business models, so Netflix, subscriptions, putting ads, there's rationalization of why that might be better. But it was going after the Metaverse and now it's about cutting costs. But just because the stocks have gone up 30, 40% from their lows doesn't mean that there isn't more to go. we rotate around the sun and that's when the stocks made the body. Just because you're 30 or 40% as a shareholder, you still might be underwater, especially from the last four stocks. Dad has we continue to take a look at this narrative about only seven stocks dry but we have seen so far based on the solar calendar, of course, that would suggest that only seven stocks have been making advances. You also a chart showing us the S&P 500 advance decline line. What is this telling us? >> Right, and of come on the show many times talking about the trends underneath the surface of the market. My thesis is that the market made a bottom last year, the market of stocks, and I think if you focus on market cap and large-cap companies, you lose track of the broader market. What we are looking at narrow it is a market breadth indicator. We are looking at accumulation less de-cumulation. If there is 500 stocks in the S&P 500, if the stock closes up for the day, that's a plus oneand if it closes down, that's a -1. so there's 490 stocks up and 10 stocks down, that's how we make our math and we counted every day. So it depends on your starting point. Clearly last year, we were in a downtrend and so the D cumulation picked up, but ever since the October low, if it was only seven stocks, we wouldn't be making an advance in this line. And so every day, there are more stocks that are often stocks that are down and this trend has continued to this day since October last year. So again, it's more than seven stocks. It's just these large market cap stocks our obscuring. There are also people who sat on the sidelines and helps to rationalize and say, hey, I didn't miss out, I'm not wrong, it's just seven stocks. But again, there's way more participation happening in the market given that, again, our belief is that stocks did bottom last year. >> I think if we went back to chose from last fall or even last summer, he would've been on here showing those homebuilder charts and the pickup there. I think lately there has been a sort of broader conversation around the homebuilders finally starting to pick up. So I think you want to show this in terms of one that pickup may have actually began. >> Right, so we found that it's been helpful to look at this market on a relative strength basis versus looking at absolute levels. It's only recently that I'm hearing a lot of chatter about homebuilders. Isn't all thathomebuilder stocks seem to be doing well in an environment where rates are high? We've seen what has happened to activity but we marked the bottom for homebuilders to be March of last year and what was most notable to us and surprising to us, in fact counterintuitive and the definition of contrarian, is that the homebuilders, which would have been the most sensitive to interest rates, bottomed when the Federal Reserve began their unprecedented hiking. Now, does that mean that people who bought homebuilders ignored the fan? I would show people that charred and say, start earlier. They started to underperform in October and November 2021 and lost a lot of value between October 2021 and March 2022. So the market, in his wisdom, took out the value, punished these stocks and then by the time we got to March had priced in the fact that new-home sales would be down, existing home sales would be down, purchasing, all that type of activity would be factored in. The part that I appreciate more and more is just how far stocks can price and bad news. Sometimes we are led to believe it 6 to 9 months. In the case of homebuilders, it's been over a year that they were able to price in the bad news. > That was Ben Gossack, portfolio manager with TD Asset Management. Technical analysis is one method you can use for examining a potential investment. Joining us now to discuss how you can find those tools on the WebBroker platform is Bryan Rogers, Senior client education instructor at TD Direct Investing. Bryan, was good to see you. Hope you had a good long weekend. Let's talk about technical analysis. Let's talk about where you go on the platform to figure all this out. >> Well thanks so much, Greg. One of my favourite features in the WebBroker platform is related to technical analysis. So I'm definitely not an expert on technical analysis and I think that's one of the reasons I like this to because we have a company called trading Central and makes it a little easier for us in terms of analysing or identifying trends and things of that nature using technical analysis. If you're someone like me doesn't know how to identify these friends yourself, you might like to look at these features. I want to show you where you can find this in WebBroker. Like a lot of the stuff we've gone to before, you want to go to the research tab. You can see on my screen here we have research and I want technical. So in the general research tab, if we click on technicals, there's another way you can go in. There's going to be a technical tab, every technicals tab every time you open up a quote in WebBroker as well but if you were just going to go to a starting point and look for ideas, you could research technicals and see here that there is recently viewed, may stocks you viewed recently and you can see there are all these trends. It tells you an up or down percentage within a number of days, usually the last five days or so. You can see there are most viewed bullish. That means most viewed bullish by all WebBroker users that are using this technical tab, these are the most viewed stocks based on technical analysis. You can see the most popular, trending now, most viewed bearish as well if you are looking at the downward trend. Needless to say, these are all things you can click on. I want to show you some of the other details. As another tab reading the featured ideas and there is also another section, if you click on that, I will click on it now just because it comes up and asks if you want to register. I've already registered but there's a newsletter where you can get ideas sent to you on a daily basis, either on bullish ideasand it usually gives you a view bearish ideas as well. >> An interesting overview there. Of course when it comes to technical analysis, I'm like you. I understand a bit but it's a pretty big field. What other resources are there if someone really wants to get into the space? >> Yeah, so probably the best ways to show you, Greg. When we jump back into WebBroker, there is the learn tab and other features. On the right within the technical tab itself, I know I was saying if you click on one of these, just a quick view of that, I would say that one of the things is just taking a look at the ideas that are there. If I click on this Home Depot tab, there are all these events, all of these little daughter technical analysis. You can learn a lot just looking at what's thereand what they are providing. If you are not quite understanding it, you can drill this down a little bit further. I go into this commodity channel index for example. It's telling you what it is. What does this tell me, what is actually trying to say? You can click on read more and learn a little bit more about this concept. So that's just on an individual basis going into an individual stock and you can click on any of these other dogs and it will take you to what those other studies are. But if we go back up at the top, you can see there's a little graduation. I know we've all been in this graduation season, last part of June. You can click there and there's a number of really specific topics in terms of classic patterns, short-term, etc. If you click on any of these links here, you can learn more about all of the studies here as well. And then lastly, remember, you can go to our Learning Center at the very top and you can either look at the Master classes on technical analysis, those are live events that you will have to put in your calendar and make sure you are available, but if you want to do something at any time of day, you go to webinars and you can filter by technical analysis. So these are a number some of the topics. We have a five-part course with Patrick… And a number of industry experts that go into technical analysis. >> Great stuff as always, Bryan. Thanks for that. >> All right. Thanks, Greg. >> Bryan Rogers, Senior client education instructor at TD Direct Investing. And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars. Let's talk about crude prices. They've been on a downward path in recent months, despite supply concerns. In June, political instability. It appears the global economic outlook is weighing on oil but are traders being too pessimistic? Bart Melek, global head of commodity strategy at TD Securities joined me earlier to discuss. >> China has been underperforming expectations. When, a few months ago, we thought that China was going to reopen, there was going to be huge surge in demand and that was going to tighten up markets, we thought that may be a slowdown is going to materialize to the extent that we think now and we thought that cuts from OPEC that were proposed were going to have to tighten that market up, so you're looking at very strong demand, limited supply, tight markets and higher prices. Well, that didn't materialize so far and traders have decided maybe to take profits or get out of their positions. The concern is that we are headed for recession in the Western world. That implies somewhat slower growth and of course there continues to be a problem in Chinese growth. Taking all that in mind, we believe that with previous cuts announced back in April and the more recent one, we will see a million barrels of production cuts from Saudi Arabiaand probably continued spotty performance from Iran which recently had a bit of a increase in experts we still think there is going to be a deficit at the end of the year. yes, Chinese growth is probably a little weaker than we would've hoped. But in the final analysis, as we rebound from COVID, everything from air travel to other fuels and even industrial demand and that part of the world will contribute to a pretty robust increase. And indeed, when we look at demand growth for 2023, we are still looking north of 2 million barrels per day, and we continue to expect OPEC+ to be fairly well disciplined on the supply side. >> At this point, do you think OPEC has done enough to cut the supply side? >> I think they probably have. I much or they have convinced all traders at this stage. But I think some of them might've gone a little too bearish on oil and we do expect crude to rebound in the second half of the year. We think approaching $90, probably not unreasonable, in the next six months or so has the worst of the fears about a recession moderate and as the Federal Reserve pivots towards the dovish side. Of course, that is not what's happening right now. If anything, the pivot seems to be to an even more hawkish policy by the Federal Reserve. We continue to hear Jerome Powell pound on those hawkish drums. And the market is starting to reconsider the position and had a few months ago that perhaps they are not kidding when they say that two more hikes are quite possible by the end of the year. And when we look at data, today is a case and point with revisions to GDP and a bit of a reversal and unemployment claims, the high-frequency weekly data and the conclusion is that it is quite possible that the Federal Reserve could lift rates higher and that certainly there is a distinct possibility that higher levels could be around for longer than I think many had hoped and hence a lot of risk assets on the commodity side had been trading lower. >> I feel like over a large part of my career tracking all this kind of stuff and talking to very smart people, if there was a big geopolitical event, the first thing I would look to his oil or gold to try to figure out what's the market reaction. We had pretty dramatic events over the course of a weekend in Russia and by the time I came back to work on Monday morning, it was like nothing happened, almost. At least from the oil markets point of view. >> Certainly, we had that interesting march on Moscow from the a mercenary group in Russia. Of course, Russia is a key global producer. Typically, you would expect some sort ofvolatility, some sort of angst in the market. You would tend to may be position in gold. You would worry may be about oil markets multiplying enough material or conversely the reverse. But either way, you would expect some sort of risk and at the end within a day, it was all over and the market looked at it with a big yawn and no one cared. But even with geopolitical events, for gold for example, it really doesn't matter for a longer term. What really matters is if these geopolitical events will have a long lasting impact on the global economy or the core performance of economies around the world. And if that's not the case, then it's probably unlikely that policy will change. And these markets, gold in particular, tend to respond to policy. And underlying supply demand trends. And if a political event doesn't change that, then there's really no need to react for a longer term and that holds true for oil as well. So the market decided that this was a nonevent in terms of an impact on the global economy broadly and oil supplies, and therefore they looked at it, saw it and didn't worry about it. >> That's an important perspective. The longer term, if it actually matters in the longer term. In terms of oil, I've been reading conflicting headlines. The International energy agency feeling that we will reach peak oil at some point before demand starts dropping off but OPEC+ is singing a different tune. There will be growing demand for oil for years to come. If we pull back the land, realistically, would we think in the near, medium and far term about oiland its place in the economy? >> It's always tough to put a pin in it and be accurate. I think beyond a few years time is very difficult to focus. But we have a view of the next two years. We think this year oil demand moves up 2 million barrels for the next few years. Probably north of a million barrels a bit increase, so that's a net increase. Medium-term, probably those rates of growth moderated as the world continues to move to EVs and they take an increasing share of the transportation sector. But we have some pretty significant limits on the grid, on the power generation side, uncritical mineral side, so perhaps the transformation or transition towards EVs and carbon free sources of energy may not be as quick as people had hoped and if that is the case, if we don't have enough copper, zinc, lithium and other cobalt, nickel, all the minerals that go into EVs, silver for that matter as well, if the investment there isn't as robust as it needs to be to achieve those pairs of court targets, then maybe oil sticks around for a lot longer with a positive growth path. The very long term, yes, I think it's very true. We probably will start seeing oil drop lower as we transition into primarily electric driven vehicles and the need for hydrocarbons is going to diminish. But is that five years away? 20 years away? I think it's a tough call, and I think we are going to have to follow critical minerals and where investment is going from governments and private industry to facilitate these changes. But I think it's murky at this point. >> That was Bart Melek, global head of commodity strategy at TD Securities. On to Bart's point about OPEC+ remaining disciplined, yesterday, Saudi Arabia and Russia extended voluntary production cuts for another month into August, and it did push the price of crude oil but above $70 per barrel. Now for an update on the markets. We are having a look at TD's Advanced Dashboard, platform designed it for active traders available to the TD direct and platform. The mapping gives us a view of the market movers. We are screening by the TSX 60, the biggest 60 biggest names on the TSX Composite Index. We are looking at price and volume. Thursday, July 4 holiday in America so volumes are a bitdepressed. CVE, Cenovus upalso names like Suncor, SU, up. You can see that in the financial space it's a bit of a mixed bag but you have TD shares dominating in terms of value at 1/2% and down in the material space, a bit of a mixed bag. First Quantum, the taker FM, up a little more than 3%. You can find out more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard. You want to stay tuned for tomorrow show. Scott Colbourne, managing director for active fixed income on TD Asset Management will be our guest, taking your questions about active fixed income. An interesting space considering what's happening with central banks. Get a head start with your questions. You can email moneytalklive@td.com. that's all the time we have for the show today. Thanks for watching. We will see you tomorrow. [music]