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[music] >> Hello, I'm Anthony Okolie in for Greg Bonnell, and welcome to Moneytalk live, which is brough to you by TD Direct Investing.
coming up on today show, Moneytalk's Susan Prince will take a look at whether higher interest rates are beginning to end consumer spending.
We will also hear from Argus Research Pres.
John Ide on his view ofwhether the market rally can continue to the second half of the year. It Nicole Ewing from TD Wealth will take us through the personal finance considerations to keep in mind if you have a child entering university or college.
Plus in today's WebBroker education segment, Caitlin Cormier will show us how you can prepare ETFs and mutual funds using the WebBroker platform.
Before we get to all that, let's get you an update on the markets. we will start here in Canada Which opened higher amid hopes of economic stimulus from China and tighter crude supplies. The S&P TSX index is trading at 117 points, just over half a percent. Take a look at some of the big movers, we will start with energy names.
Cenovus Energy is trading higher today. of course, we are heading into the weekend andthey are heading for 1/4 weekly gain given signs a global markets are currently tightening. Cenovus is almost 1.3% currently. Let's go to the US and will start with the S&P 500. Stocks were modestly trading higher on Wall Street as traders assessed the latest corporate earnings results.
currently, the broad-based S&P 500 is up modestly just over 14 points or .3%.
Now, one notable event today is the expiration of thousands of options contracts on stock indexes and ETFs. Of course, trading volumes typically jump as investors execute the contract to collect their profits or roll them over to the next month.
Turning to the tech heavy NASDAQ composite index, it open to little change in early trading. Currently, the indexes modestly up nearly 14 points or .1%. Now, the other major change that we should talk about is a special rebalance of the Nasdaq-100 Index which takes effect at the start of trading on Monday.
A rally in the largest tech stocks is cause for concern among market watchers who are concerned that the stock market is too concentrated in just a handful of names and the Nasdaq-100 Index rebalance will dilute the impact of the largest stocks in the index.
Taking a look at some of the big movers, shares of CSX are moving lower today. The railroad operator missed second-quarter revenue estimates due to a drop in volumes and lower prices.
Currently, the stock is down about 3 1/2%.
Some other big movers, Booking Holdings are also making some moves in early trade.
The market observers note that pent-up demand for travel continues to boost the travel industry. Currently, the stock is trading up nearly 55 points or 1.9%.
And that's your market update.
Canadian retail sales ticked higher in me as auto sales provided some strength, but with the flash estimate for June showing a flat reading, that there are signs momentum may be stalling.
Moneytalk's Susan Prince is joining us now with more. Susan, thanks for joining us.
>> Happy to be here.
>> When you look at the data, where do you see the weaknesses?
>> Where we are seeing it is very much bearing what we saw earlier this week with the US retail site. We are seeing weakness in building and guarding materials and we are also seeing weakness in clothing and clothing retailers.
If you take a look at the chart there, you are looking at the overall retail sales increase in me and this is a longer trend so goes back to May 2018 and you can see that after a steady rise over the last couple of years, we are seeing a little bit of flatness in the trend. What does that mean in Billions of dollars? In me, we did about $66 billion worth of retail trade.
the month before, it was about 65.7.
So you can see some stabilization there and it sort of softening.
Now, one of the interesting things, and you're just going to have to stick with me on this, the talk about weakness is an interesting thing.
So the sales are weak and building materials and clothing as we talked about.
If we take a look at the second chart, we can see the areas. There you go.
Where the red is, you are seeing weakness.
So building materials, general merchandise, clothing and accessories.
And then you are seeing strengths on the other side and you're still seeing sale strong in cars and car parts.
We saw the same kind of data coming out of the US, and food and beverage.
Now, one is something we can let us something strong?
It plays a funny role when you start to look at inflation because the strong ones are still inflationary and we are trying to watch for a slowing of inflation.
So the strength in some ways it's kind of bad news.
So what?
Car sales and food and beverage stopping strong speaks to inflation.
>> Talked about the differences, the strength of the different subsectors. How does this information impact the outlook for interest rates?
>> Right. So what we are looking at is the Bank of Canada is watching for demand to slow. That's absolutely what we are seeing in the retail sense, that flattening out.
When you look at the bar chart that we were looking at, and that one is 5/9 that we are in positive territory.
If you had an exam back and you got 55% on it, you wouldn't be that thrilled. In this case, the fact that demand is slowing could be positive for the outlook for the Bank of Canada and how they make decisions about what the rate hikes are.
So the other thing to keep in mind though is this is a lagging indicator.
We are looking at me's data. You mentioned that June's data is anticipated to be flat.
So as a lagging indicator, we want to pay attention to it, but you also want to be sure that central bankers don't do too much so that they increase rates and it's two months later before we see, whoa, that really worked and now we are concerned. We want to pay attention to the fact that this is lagging data. And on the bottom line here is that TD economists are looking at this data and thinking about what their forecast for monetary policy is, and basically our economists believe that the bank policy will remain basically restrictive or not lowered until the first quarter of 2024.
>> Great information.
Thank you, Susan. Our thanks to Susan Prince. Susan will join us later on the show with a look at some of the big economic events ahead next week.
Now, sticking with the economy, this week we also got the latest read on Canadian consumer prices and Robert Both, macro strategist from TD Securities, joined me to discuss this report. Here's our conversation.
> Core inflation measures were a little bit stronger than we had expected today.
But you did see headline come in much softer at 2.8%. So while it is certainly encouraging to see inflation back inside the target range, like you said, for the first time in over two years, we are really not going to draw too much comfort from that until we do see a little more progress in those core measures coming Lord.
> Talked to us a little bit about mortgage interest cost which is becoming an outsized influence on headline inflation.
Sure. So that is one of the questions we've been getting quite frequently over the last few months has been the growing importance of mortgage interest costsas a driver of headline inflation.
So mortgage interest costs are running at about 30% year-over-year in June. That's not too different than they were in May.
Without contributing about zero point points to inflation a and when that's only running to present your rear, that's a very large share of the year-over-year increase. However, we think that simply excluding mortgage interest cost because the Bank of Canada does impact both rate hikes would be the wrong approach year. We think it's a little dangerous to simply pick and choosewhich components you would like to draw.
The Bank of Canada, obviously, has its own tools for looking past more volatile changes across the individual basket, those tools like core inflation measures do a good job of stripping out those larger movements that are may be not moving in the same direction as the rest of the basket.
So the Bank of Canada is keenly focused on those core inflation measures because of some of the more volatile changes across the basket.
But as we said, core inflation measures are running quite a bit stronger so there's obviously something else besides mortgage that is driving prices here.
>> Okay, so with this number today, what impact will this inflation data have on Bank of Canada monetary policy going forward and do you think the Bank of Canada is done rate hikes this year?
>> Well, I think the Bank of Canada is in a wait-and-see mode after the July policy decision.
Generally, when headline inflation core inflation are surprising in opposite directions, this is a situation where the Bank of Canada is probably going to want to see evidence of how this is going to develop over the next month or twobefore commencing any Pass on future policy decisions. The sharp drop in headline alongside the persistence of cord to speak to a couple of larger one-off factors, that wait on headline CPI in June, one of those was household communications.
So these have been a bit of a drag on the index for several years but cell phone plans fell quite sharply over both May and June. Statistics Canada was attributing some of that to new cell phone plans and promotional events from major telecoms.
That's not something that's going to continue declining at 5% month over month going forward. Similarly, we saw a very large drag in travel services and some of those post-pandemic travel boom subsided and prices started to normalize, that something that might continue to play out over the coming months but the presence of those large one-off moves does speak to the importance of core inflation and that continued persistence of core inflation is something that's probably going to concern the Bank of Canada or add to their already significant concerns.
But September is a long ways off.
headline inflation is back inside the target range, so I think we are going to have to wait and see how this plays outin the next month or two.
>> We know that September is a long way away but what will they be watching closely, what indicators will they be looking at as the Bank of Canada considers its next move?
>> So the bank has laid out what they are watching as they approach the September policy decision. Those factors are the evolution of excess demand, they are the evolution of corporate pricing behaviour, inflation expectations and wage growth.
that's painted a mixed picture of the last few month. It we have seen wage growth, off and progress on inflation excitations but both wages and inflation expectationsremain too high for the banks comfort.
They remained far above three COVID norms and we are going to need to see more evidence of those continuing to trend lower into the fall. Corporate pricing behaviour is a little more opaque to those that don't study it as closely.
That is something I think we are going to have to maybe take the banks word on or at least something we'll see when inflation subsides, but we are mostly focused on the wage growth metrics and the evolution of those core inflation numbers.
>> That was Robert Both, macro strategist with TD Securities.
Now here's an update on the top stories in the world of business today and a look at how the markets are trading.
seven top artificial intelligence companies, including Google, Microsoft and open AI have made voluntary pledges to the White House and developing AI technology.
The commitments include developing ways for consumers to identify AI generated content, such as through watermarks.
The latest commitments are part of an effort by Pres. Biden to ensure AI is developed with appropriate safeguards.
American Express reported better-than-expected second-quarter earnings today.
The credit card company said that its wealthy customer base continued to spend, despite sticky inflation and rising interest rates.
However, the company missed on a revenue and set aside more money for possible default or payments, disappointing some investors.
Finally, chipmaking giant Taiwan Semiconductor has delayed the start of production at its factory in Arizona due to a shortage of skilled workers. The world's largest chipmaker now says production would now begin one year later, in 2025.
Earlier this week, the chipmaker made news after reporting its first profit drop in four years amid a demand slump for electronics.
And here's how the main benchmark index in Canada is trading.
Currently, the S&P TSX composite index is down slightly. It's only about 103 points, that's to the tune of .5%. Taking a look at the US, the S&P 500 is also up modestly, we will call that .3 percent.
Markets have held up better than expected so far this year, but will that trend continue? John Eade, president of Argus Research, join me earlier to discuss his view.
>> We started the year here at Argus a bit contrarian. we were predicting a good year for stocks. here in the US, everyone was still thinking about the 19% decline in the SNP 500 last year, and really forecasting that trend forward, just continuedchallenges for stocks.
it's very rare, Anthony, that you have two negative years in US stocks in a row. So we thought that this year would actually be a more normal year.
Not a great year, not 20% up, but maybe eight, 10, 12% which is your average year here in US stocks. And we thought that would be driven by the Federal Reserve moving to the sidelines after its rate hike campaign, inflation trending downward from the peaks of 9% last summer, an economy that stayed in a growth mode. And so far, we've hit on all of those outlooks. And in the fourth factor is the corporate earnings. And you mentioned in your introductory remarks that we are in the second quarter earnings period here and, so far, so good. We have had to negative earnings quarters here in a row in the US, that is an earnings recession .
But we may be ready to leave dad earnings recession here in the second quarter or if not the second quarter, I would think almost for certain in the third quarter.
>> As mentioned, we are early into the second quarter and so far so good. We have more to come. It let's go through some potential scenarios for the markets going forward.
You have three different outcomes for us.
Talk to us about your base case for the markets for the rest of this year to start.
>> Okay. So let's start out and say that the first half returns, let's call it 15% for the S&P 500.
So what we found is when the US stocks increase at a double-digit rate in the first half of the year, they tend to go on and continue to rally in the second half as well. In fact, the fourth quarter is usually the strongest quarter that we see in all of the quarters in the US.
So our base case is that the bull market continues, but we don't rise at the same pace that we did in the first half.
Maybe the market adds another 5% and ends up for the year 18, 19, 20%, which is an awesome year for stocks but is stronger first half in the second half.
And that would depend on things like maybe GDP growth slows a little bit in the second half, the Federal Reserve, hikes rates, not just one more time but a couple more times. And we've already seen some real good news on CPI.
We had thought that the core CPI could fall to 5% by the end of the year. It's already at 4.8%. So we've beaten that expectation and that 4.8% is down from, like I said earlier, almost 9% this time one year ago.
So that's being a very sharp decline in inflation and while we expect inflation to moderate looking ahead, we don't think it's going to decline at that same rate over those next few months.
So those are some of the things that we are thinking about and looking for as we think about our base case for stocks for the second half of the year.
> Go ahead.
>> In a bullish case, it may be inflation continues to decline faster than expected.
These are earnings common better than Wall Street analysts are expecting and we get to the point where the US has entered a bull market again.
It's up 20% from its bear market lows.
But it hasn't yet reached the previous peak, the peak that we had in I guess it was January 2022.
So in the bullish scenario, we see may be a 25% gain in stocks, again driven by low inflation, lower interest rates and better earnings and we reach an all-time high in the S&P 500, that would be a bullish case, we think, in the US for the second half.
>> So we called the bullish case, talk to us about the bearish scenario.
>> Gotta cover all the ground, Anthony.
For sure. So again, going back to that study we did on the returns in the market.
Remember, the first half returns were up 15%.
Never in the second half of a year or a market has been this strong have we ended up with a full year negative return. So I think returns overall for the year are going to be positive for the S&P 500 in 2023.
But there's a chance that we pull back on these current levels where we are, maybe give back 10% of the gains or so.
And what would cause that? Maybe inflation stabilizes hereand transportation costs don't fall, shoulder costs don't fall.
See you get a leveling off of inflation instead of a decline in inflation. Or in an even worse case scenario, maybe inflation picks back up again. The Federal Reserve met a month ago, and while they didn't hike rates at that meeting, they indicated that they plan on hiking rates up to two more times here in 2023.
So they've got a meeting at the end of this month. We think there's going to be one hike and then we don't think that they are going to hike twice but the feds notes from the meeting indicated that they are willing to go at least two more times.
So two more rate hikes, a negative impact on the consumer sector in the economy. We have seen the rate hikes have an impact on the housing market.
We've seen the rate hikes have an impact on the manufacturing market.
We see the rate hikes have an impact on the export market. They haven't yet had an impact on the consumer sector, which is the biggest part of the US economy. Well, okay. Maybe two more rate hikes do have that impact on the consumer sector and unemployment heads back up toward 5%, the economy dips into a recession. Those are some of the bearish case scenarios.
Not entirely likely, but again, the Federal Reserve has said they are not done raising interest rates and that could still have a negative impact on the consumer sector of the economy.
>> And when you talk about inflation remaining sticky, talk to us about wage gains because wages have been coming down but they have been coming down as quickly as possible.
What are your thoughts there as well?
>> So that's a great point, Anthony.
Yeah, let's go back maybe eight or 10 years when there was really almost no wage growth at all.
Maybe 1%, 2% year-over-year wage growth,, barely ahead of inflation which, at that time, was very low.
And then you contrast that to the period right after the pandemic, when people were bringing employees back on. A lot of employees didn't want to go back to work, so companies were having to pay employees more. We were starting to see five, 6% year-over-year wage Rose in 20 21 and early 2022.that starting to cool a little bit. The numbers now are around 4.1, 4.2%.
that's well ahead of what the Fed would like to see. The Fed would like to see all measures of inflation down at 2%. But 4% is betterfor the economy and inflation then 6% was a year ago. And we do expect that trend to move toward 3% perhaps by the end of next year.
So wage growth is moderating but it is still a little bit higher than what the Federal Reserve would like to see.
>> That was John Eade, president of Argus Research.
Now let's get to today's educational segment.
in today's WebBroker educational segment, we will be answering a viewer question we didn't have time to get to you on Monday's MoneyTalk Live show.
Caitlin Cormier, client education instructor with TD Direct Investing has more.
>> Today, we are going to address a customer question coming in.
Is there a way to compare mutual funds to similar ETFs on WebBroker?
And I'm very happy to see the answer to that question is yes.
We have a comparison tool where you can compare both mutual funds and ETFs that we will hop through that. We have two different situations.
One is you already know the mutual funds that you want to compare so we can go directly into the comparison tool. Or we can choose an option to go through the screeners tool first, find some similar mutual funds and ETFs and then do a comparison.
We are going to run through both of those options, select pop into WebBroker and get started.
So for the first option, we choose research. We are going to come under investments and we are going to school down to either mutual funds or ETFs.
Once we get through to the page, we will see appear on the top right hand side, we can type in different mutual fund symbols or ETFs symbols in order to actually do the direct comparison right away.
So we already know what different securities you would like to compare, we can come right here and get started.
If we are looking to do some research first, we can click on research.
Under tools and click on screeners.
I'm going to go ahead and click on the mutual fund tab here to start a mutual fund screen and click create custom screen. Once in here, we can choose different criteria that is important to us about the specific ETFs and mutual funds that we would like to research.
I'm going to start off today by choosing fund category.
And I'm going to actually choose European equities.
I went to scroll down a little bit here, alphabetical. We will go under European equity and come up with 36 results. That's not too bad including ETFs.
So let's go ahead and choose to view matches.
Whatever you put in there might have some more matches so you might need to put some additional criteria in.
Feel free to do that before you click in to see the results.
Now that we are here, there's a bunch of information available on the different funds that actually show up.
Across the top here, you will see lots of different headings even click on to see different information about these different funds that we have actually pulled up.
And then actually go ahead and click on summary here and maybe we'll just go ahead and rearrange these by MER which makes it a little bit easier for us to choose. So I'm going to do is to go ahead and click on this little box beside five different funds. I'm going to choose a mutual fund here, there is an ETF, a mutual fund, an ETF and a mutual fund. Alright. So I just randomly picked five different funds and I'm going to click this compare button at the bottom.
So what I have here is our comparison tool. So we can see all the different funds that we chose and we can see a bunch of different information about those funds.
We have summary information listed here including any MorningStar ratings or management expense ratio. It also has distribution yield there, so we know of this fund pays out distributions to individuals. We can see and the profile a little bit more information about the fund, and he ratings information that's available, performance, either on an annualized or calendar return basis, risk information, holdings allocation and finally purchase information. So there is a ton of detail available within this page for you to kind compare directly these mutual funds and ETFs.right within the same screen.
So this is an excellent tool to be able to use if you would like to make comparisons between those two different types of investments. If you need more information on ETFs or mutual funds,go ahead to to the Learning Center and check out the different videos and master classes we have available and come back next week. We will see you next time to learn more.
>> Our thanks to Caitlin Cormier, client education instructor at TD Direct Investing.
For parents of children starting at college or university in September, there can be plenty to consider from a personal finance perspective.
Nicole Ewing, Dir.
of tax and estate planning at TD Wealth join me earlier to discuss things to keep in mind, and she started by addressing how you may want to approach withdrawing money from an RESP.
>> Presumably, all your contributions have been made and we are now in a moment where we need to start thinking about withdrawing that.
And we want to do that as effectively as possible, to get the biggest bang for the buck.
so just to level set, there are two types of payment that can be withdrawn from your RESP. You have your contributions that you have put in yourself and then you havethe investment growth and the grants that have been paid on that.
The treatment for the tax treatment is different depending on how you are designating that withdrawal. So if it's a contribution, that will come out tax free.
It's a contribution.
The investment growth and the grants are going to be, there are certain limits around them.
So these are educational assistance payments and they are limited in the first 13 weeks of the school year at a qualified educational institution and we have to make sure we are following all of those, that criteria.
But we want to really think about how we are going to pull that money out and what the income of the individual student is going to be at that time.
>> Have to be very thoughtful about how you pull that money out.
>> Yes, the goal is to get it out tax free or the minimum amount of tax possible.
So the government has, for the first time in 25 years, I believe, up to the amount that you can take out in that first 13 weeks.
The reason there's a limit at all as they don't want people signing up and taking all their money and then immediately withdrawing from school, so they put that 13 week limit on their which is usually how long you can't come out of school, you can drop out without being on the hook for the money. So that has increased from $5000-$8000 for full-time students and 4000 for part-time students.
So it's really, we want to get those educational payments out as quickly as possible and taxed in the hands of the student and presumably they are going to be in a lower tax rate than they otherwise would have been or you would've been and with the $15,000 amount that they are able to earn tax free, no there shouldn't be too many taxes on that. So we want to think about when are we pulling it out and try to get those educational payments out as quickly as possible. Of course, without draining the funds that we are going to need for future years. But be mindful that you get those out without… More quickly.
More quickly.
>> Okay, so no other than withdrawing from your RESP, what else should we be thinking about?
>> For many students, this is their first time being away from home or even if they are still at home, they are being faced with a whole bunch of choices that they may not have before.
So we really, if we can have them understanding really early the impact of debt, that would be, if there's one thing I could tell the students going to school is be wary of people who are standing on outfront's offering for you to sign up for a credit card without really thinking through what that is, will your repayment schedule would be for those sorts of funds, so debt, be really careful about that.
When you're turning 18, you can start thinking about TFSA contribution. There is a part-time job and we have excess money, we want to be mindful about how we are using that an earning income on that, so the financial literacy part is going to be really important, I think, for students to be aware of.
And the great way of doing that is having a budget and thinking through what expenses you're likely going to have is if you're a parent, you have help your child understand.
>> How to manage your money, because that's pretty important.
>> I will say that the credit card, I was one of those people.
I signed up for it and I thought that would be great.
If you are a person on a bursary or scholarship related to your academics, helping your student understand that losing that has a cost and if you are losing it because you want to have a part-time job that really isn't going to advance your career in any way, you are giving a potentially the grades that will maintain your scholarship for some spending money and that something I unfortunately saw a lot of the students I went to school with who came in with these tremendous scholarships and they were great but they were unable to maintain them because they were doing these other extracurricular type activities.
So just be really mindful of the dollar amount and how, if you lose that scholarship, what's going to take to get you back in line.
>> I want to talk a little bit about housing because we've heard so much about the shortage of housing given the new influx of immigrants, international students. What should parents be aware of when it comes to student housing?
>> There's a lot of different options and students may be coming from other jurisdictions and they are here for the first time, so I'd say getting familiar with with the landlord and tenant laws are in the province that you are in because they are quite different, so be aware when you are signing the lease what you are signing up for and the financial obligations that come with it.
So if we are having roommates, for example, what does hourly say? Are we on the hook for the entire amount or are we only responsible for our share? Many parents, of course, purchase homes or condominiums if they have multiple children and sometimes it makes sense to do that, to purchase a condominium or home for your child to stay in and rent out those of the rooms. Again, be very cautious about understanding what the financial obligations are. If you got Hydro bills and telephone… Probably not landlines. I'm dating myself.
These are the sorts of things that we want students to really understand. Contracts with financial consequences, really to be aware of what those extra costs are.
and depending on the type of home you might get, there might be those additional costs of, is it all-inclusive? Is parking included?
Is transit nearby that can help you cut down on some of the cost that you would otherwise be incurring?
There's a lot of factors that go in, depending on what type of housing unit your student find themselves in.
>> That was Nicole Ewing, director of tax and estate planning at TD Wealth.
Now for an update on the markets.
Okay, so now we are having a look at TD's advanced dashboard. The platform designed for active traders available from TD Direct Investing.
Right now, we are looking at the heat map function here, which gives you a view of the market movers on the TSX 60 by both price and volume.
We will start at the top left corner for energy. You can see energy names are getting some bits today. Cenovus is up more than 1%, Suncor Energy as well, Enbridge as well as C and Q.
Taking a look just beside the ad to the right, utilities, we are seeing some strength at Algonquin Power. Utilities are up modestly.
It seeing some modest bids in Shopify and telecom names like Telus.
Let's take a look at the S&P 100.
And starting off with technology, we are seeing some weakness among some of the chipmakers. Microsoft, sorry, Mehta, rather, is down. Shares of Nvidia are down more than 1%.
There is some positive names there.
Oracle is up just over… We will call at 1.
6%. Netflix is seeing some selling today.
Of course, Netflix reported its earnings earlier this week. And then moving to cyclical consumers, there we are seeing some strength in Tesla.
Of course, Tesla reported pretty strong poorly profits earlier this week.
And you can find more information on TD advanced dashboard by visiting TD.com/advanced dashboard.
Now while it is the middle of the summer, there is still some important market moving events ahead to keep an eye on and Moneytalk's Susan Prince joins us now with a preview of what's ahead next week, including a big one on Wednesday.
Susan, of course, we have the big said meeting announcement next week.
What are economists and markets expecting?
>> Well, it's interesting because there's so much that people talk about ahead of time and what we've got right now is we've got all 106 economists polled by Reuters news service are saying there is going to be a rate hike. At the current rate of, the Federal Reserve rate is 5.25%. They are anticipating that it will go to 5 1/2%.
and for context, this time last year, the Federal Reserve rate was 1.
75%. So certainly people who have a variable mortgage have a real keen sense of what that movie is.
Now, Federal Reserve policy to rate in July, so they kept at the 5.25%, and the July 26 date now feels like a done deal and what we are seeing is economists are now looking it will happen in September.
So they are focusing on that. And it's interesting. There's a metaphor that people use on big numbers like this, that it's like turning a tanker in the ocean.
And so you start making a turn early on but you don't see anything for a while until you finally see the tanker moving.
An interest rates are a lot like that.
We've talked about retail sales, we talked about CEPI, we talked about a bunch of data that goes into it.
>> It takes time for those interest rate hikes actually impact the economy.
>> Right. So now we are watching and certainly is central bankers talking about, have we done enough? Have we turned the tanker enough that we will get it into the direction we want to be, or do we need to do more? And there is a lot of back-and-forth on that.
So we will be paying attention to that.
The other thing is, we are in the heart of earnings season and we are going to see banks and some other stuff. What I'm going to be paying attention to next week is whirlpool results. Full disclosure, I don't own whirlpool but the reason I'm interested in it is because they produce durable goods, things like washing machines, dryers, refrigerators, all of that sort of thing and durable goods, we've been talking about retail sales and we seen the weakness and building supplies and that area. So I'm going to be paying attention to whirlpool to see what it tells me about how the economy has felt over the past quarter for people who are making big purchases.
>> Great insights as usual.
Next week we have the Fed rate announcement, more earnings decision, a lot of information coming our way. Thank you, Susan.
Our thanks to Susan Prince.
Stay tuned.
On Monday, Damian Fernandes, portfolio manager at TD Asset Management will be our guest taking your questions about global stocks. A reminder that you get a head start.
Just email moneytalklive@td.com.
That's all for our show today. Take care.
[music]
coming up on today show, Moneytalk's Susan Prince will take a look at whether higher interest rates are beginning to end consumer spending.
We will also hear from Argus Research Pres.
John Ide on his view ofwhether the market rally can continue to the second half of the year. It Nicole Ewing from TD Wealth will take us through the personal finance considerations to keep in mind if you have a child entering university or college.
Plus in today's WebBroker education segment, Caitlin Cormier will show us how you can prepare ETFs and mutual funds using the WebBroker platform.
Before we get to all that, let's get you an update on the markets. we will start here in Canada Which opened higher amid hopes of economic stimulus from China and tighter crude supplies. The S&P TSX index is trading at 117 points, just over half a percent. Take a look at some of the big movers, we will start with energy names.
Cenovus Energy is trading higher today. of course, we are heading into the weekend andthey are heading for 1/4 weekly gain given signs a global markets are currently tightening. Cenovus is almost 1.3% currently. Let's go to the US and will start with the S&P 500. Stocks were modestly trading higher on Wall Street as traders assessed the latest corporate earnings results.
currently, the broad-based S&P 500 is up modestly just over 14 points or .3%.
Now, one notable event today is the expiration of thousands of options contracts on stock indexes and ETFs. Of course, trading volumes typically jump as investors execute the contract to collect their profits or roll them over to the next month.
Turning to the tech heavy NASDAQ composite index, it open to little change in early trading. Currently, the indexes modestly up nearly 14 points or .1%. Now, the other major change that we should talk about is a special rebalance of the Nasdaq-100 Index which takes effect at the start of trading on Monday.
A rally in the largest tech stocks is cause for concern among market watchers who are concerned that the stock market is too concentrated in just a handful of names and the Nasdaq-100 Index rebalance will dilute the impact of the largest stocks in the index.
Taking a look at some of the big movers, shares of CSX are moving lower today. The railroad operator missed second-quarter revenue estimates due to a drop in volumes and lower prices.
Currently, the stock is down about 3 1/2%.
Some other big movers, Booking Holdings are also making some moves in early trade.
The market observers note that pent-up demand for travel continues to boost the travel industry. Currently, the stock is trading up nearly 55 points or 1.9%.
And that's your market update.
Canadian retail sales ticked higher in me as auto sales provided some strength, but with the flash estimate for June showing a flat reading, that there are signs momentum may be stalling.
Moneytalk's Susan Prince is joining us now with more. Susan, thanks for joining us.
>> Happy to be here.
>> When you look at the data, where do you see the weaknesses?
>> Where we are seeing it is very much bearing what we saw earlier this week with the US retail site. We are seeing weakness in building and guarding materials and we are also seeing weakness in clothing and clothing retailers.
If you take a look at the chart there, you are looking at the overall retail sales increase in me and this is a longer trend so goes back to May 2018 and you can see that after a steady rise over the last couple of years, we are seeing a little bit of flatness in the trend. What does that mean in Billions of dollars? In me, we did about $66 billion worth of retail trade.
the month before, it was about 65.7.
So you can see some stabilization there and it sort of softening.
Now, one of the interesting things, and you're just going to have to stick with me on this, the talk about weakness is an interesting thing.
So the sales are weak and building materials and clothing as we talked about.
If we take a look at the second chart, we can see the areas. There you go.
Where the red is, you are seeing weakness.
So building materials, general merchandise, clothing and accessories.
And then you are seeing strengths on the other side and you're still seeing sale strong in cars and car parts.
We saw the same kind of data coming out of the US, and food and beverage.
Now, one is something we can let us something strong?
It plays a funny role when you start to look at inflation because the strong ones are still inflationary and we are trying to watch for a slowing of inflation.
So the strength in some ways it's kind of bad news.
So what?
Car sales and food and beverage stopping strong speaks to inflation.
>> Talked about the differences, the strength of the different subsectors. How does this information impact the outlook for interest rates?
>> Right. So what we are looking at is the Bank of Canada is watching for demand to slow. That's absolutely what we are seeing in the retail sense, that flattening out.
When you look at the bar chart that we were looking at, and that one is 5/9 that we are in positive territory.
If you had an exam back and you got 55% on it, you wouldn't be that thrilled. In this case, the fact that demand is slowing could be positive for the outlook for the Bank of Canada and how they make decisions about what the rate hikes are.
So the other thing to keep in mind though is this is a lagging indicator.
We are looking at me's data. You mentioned that June's data is anticipated to be flat.
So as a lagging indicator, we want to pay attention to it, but you also want to be sure that central bankers don't do too much so that they increase rates and it's two months later before we see, whoa, that really worked and now we are concerned. We want to pay attention to the fact that this is lagging data. And on the bottom line here is that TD economists are looking at this data and thinking about what their forecast for monetary policy is, and basically our economists believe that the bank policy will remain basically restrictive or not lowered until the first quarter of 2024.
>> Great information.
Thank you, Susan. Our thanks to Susan Prince. Susan will join us later on the show with a look at some of the big economic events ahead next week.
Now, sticking with the economy, this week we also got the latest read on Canadian consumer prices and Robert Both, macro strategist from TD Securities, joined me to discuss this report. Here's our conversation.
> Core inflation measures were a little bit stronger than we had expected today.
But you did see headline come in much softer at 2.8%. So while it is certainly encouraging to see inflation back inside the target range, like you said, for the first time in over two years, we are really not going to draw too much comfort from that until we do see a little more progress in those core measures coming Lord.
> Talked to us a little bit about mortgage interest cost which is becoming an outsized influence on headline inflation.
Sure. So that is one of the questions we've been getting quite frequently over the last few months has been the growing importance of mortgage interest costsas a driver of headline inflation.
So mortgage interest costs are running at about 30% year-over-year in June. That's not too different than they were in May.
Without contributing about zero point points to inflation a and when that's only running to present your rear, that's a very large share of the year-over-year increase. However, we think that simply excluding mortgage interest cost because the Bank of Canada does impact both rate hikes would be the wrong approach year. We think it's a little dangerous to simply pick and choosewhich components you would like to draw.
The Bank of Canada, obviously, has its own tools for looking past more volatile changes across the individual basket, those tools like core inflation measures do a good job of stripping out those larger movements that are may be not moving in the same direction as the rest of the basket.
So the Bank of Canada is keenly focused on those core inflation measures because of some of the more volatile changes across the basket.
But as we said, core inflation measures are running quite a bit stronger so there's obviously something else besides mortgage that is driving prices here.
>> Okay, so with this number today, what impact will this inflation data have on Bank of Canada monetary policy going forward and do you think the Bank of Canada is done rate hikes this year?
>> Well, I think the Bank of Canada is in a wait-and-see mode after the July policy decision.
Generally, when headline inflation core inflation are surprising in opposite directions, this is a situation where the Bank of Canada is probably going to want to see evidence of how this is going to develop over the next month or twobefore commencing any Pass on future policy decisions. The sharp drop in headline alongside the persistence of cord to speak to a couple of larger one-off factors, that wait on headline CPI in June, one of those was household communications.
So these have been a bit of a drag on the index for several years but cell phone plans fell quite sharply over both May and June. Statistics Canada was attributing some of that to new cell phone plans and promotional events from major telecoms.
That's not something that's going to continue declining at 5% month over month going forward. Similarly, we saw a very large drag in travel services and some of those post-pandemic travel boom subsided and prices started to normalize, that something that might continue to play out over the coming months but the presence of those large one-off moves does speak to the importance of core inflation and that continued persistence of core inflation is something that's probably going to concern the Bank of Canada or add to their already significant concerns.
But September is a long ways off.
headline inflation is back inside the target range, so I think we are going to have to wait and see how this plays outin the next month or two.
>> We know that September is a long way away but what will they be watching closely, what indicators will they be looking at as the Bank of Canada considers its next move?
>> So the bank has laid out what they are watching as they approach the September policy decision. Those factors are the evolution of excess demand, they are the evolution of corporate pricing behaviour, inflation expectations and wage growth.
that's painted a mixed picture of the last few month. It we have seen wage growth, off and progress on inflation excitations but both wages and inflation expectationsremain too high for the banks comfort.
They remained far above three COVID norms and we are going to need to see more evidence of those continuing to trend lower into the fall. Corporate pricing behaviour is a little more opaque to those that don't study it as closely.
That is something I think we are going to have to maybe take the banks word on or at least something we'll see when inflation subsides, but we are mostly focused on the wage growth metrics and the evolution of those core inflation numbers.
>> That was Robert Both, macro strategist with TD Securities.
Now here's an update on the top stories in the world of business today and a look at how the markets are trading.
seven top artificial intelligence companies, including Google, Microsoft and open AI have made voluntary pledges to the White House and developing AI technology.
The commitments include developing ways for consumers to identify AI generated content, such as through watermarks.
The latest commitments are part of an effort by Pres. Biden to ensure AI is developed with appropriate safeguards.
American Express reported better-than-expected second-quarter earnings today.
The credit card company said that its wealthy customer base continued to spend, despite sticky inflation and rising interest rates.
However, the company missed on a revenue and set aside more money for possible default or payments, disappointing some investors.
Finally, chipmaking giant Taiwan Semiconductor has delayed the start of production at its factory in Arizona due to a shortage of skilled workers. The world's largest chipmaker now says production would now begin one year later, in 2025.
Earlier this week, the chipmaker made news after reporting its first profit drop in four years amid a demand slump for electronics.
And here's how the main benchmark index in Canada is trading.
Currently, the S&P TSX composite index is down slightly. It's only about 103 points, that's to the tune of .5%. Taking a look at the US, the S&P 500 is also up modestly, we will call that .3 percent.
Markets have held up better than expected so far this year, but will that trend continue? John Eade, president of Argus Research, join me earlier to discuss his view.
>> We started the year here at Argus a bit contrarian. we were predicting a good year for stocks. here in the US, everyone was still thinking about the 19% decline in the SNP 500 last year, and really forecasting that trend forward, just continuedchallenges for stocks.
it's very rare, Anthony, that you have two negative years in US stocks in a row. So we thought that this year would actually be a more normal year.
Not a great year, not 20% up, but maybe eight, 10, 12% which is your average year here in US stocks. And we thought that would be driven by the Federal Reserve moving to the sidelines after its rate hike campaign, inflation trending downward from the peaks of 9% last summer, an economy that stayed in a growth mode. And so far, we've hit on all of those outlooks. And in the fourth factor is the corporate earnings. And you mentioned in your introductory remarks that we are in the second quarter earnings period here and, so far, so good. We have had to negative earnings quarters here in a row in the US, that is an earnings recession .
But we may be ready to leave dad earnings recession here in the second quarter or if not the second quarter, I would think almost for certain in the third quarter.
>> As mentioned, we are early into the second quarter and so far so good. We have more to come. It let's go through some potential scenarios for the markets going forward.
You have three different outcomes for us.
Talk to us about your base case for the markets for the rest of this year to start.
>> Okay. So let's start out and say that the first half returns, let's call it 15% for the S&P 500.
So what we found is when the US stocks increase at a double-digit rate in the first half of the year, they tend to go on and continue to rally in the second half as well. In fact, the fourth quarter is usually the strongest quarter that we see in all of the quarters in the US.
So our base case is that the bull market continues, but we don't rise at the same pace that we did in the first half.
Maybe the market adds another 5% and ends up for the year 18, 19, 20%, which is an awesome year for stocks but is stronger first half in the second half.
And that would depend on things like maybe GDP growth slows a little bit in the second half, the Federal Reserve, hikes rates, not just one more time but a couple more times. And we've already seen some real good news on CPI.
We had thought that the core CPI could fall to 5% by the end of the year. It's already at 4.8%. So we've beaten that expectation and that 4.8% is down from, like I said earlier, almost 9% this time one year ago.
So that's being a very sharp decline in inflation and while we expect inflation to moderate looking ahead, we don't think it's going to decline at that same rate over those next few months.
So those are some of the things that we are thinking about and looking for as we think about our base case for stocks for the second half of the year.
> Go ahead.
>> In a bullish case, it may be inflation continues to decline faster than expected.
These are earnings common better than Wall Street analysts are expecting and we get to the point where the US has entered a bull market again.
It's up 20% from its bear market lows.
But it hasn't yet reached the previous peak, the peak that we had in I guess it was January 2022.
So in the bullish scenario, we see may be a 25% gain in stocks, again driven by low inflation, lower interest rates and better earnings and we reach an all-time high in the S&P 500, that would be a bullish case, we think, in the US for the second half.
>> So we called the bullish case, talk to us about the bearish scenario.
>> Gotta cover all the ground, Anthony.
For sure. So again, going back to that study we did on the returns in the market.
Remember, the first half returns were up 15%.
Never in the second half of a year or a market has been this strong have we ended up with a full year negative return. So I think returns overall for the year are going to be positive for the S&P 500 in 2023.
But there's a chance that we pull back on these current levels where we are, maybe give back 10% of the gains or so.
And what would cause that? Maybe inflation stabilizes hereand transportation costs don't fall, shoulder costs don't fall.
See you get a leveling off of inflation instead of a decline in inflation. Or in an even worse case scenario, maybe inflation picks back up again. The Federal Reserve met a month ago, and while they didn't hike rates at that meeting, they indicated that they plan on hiking rates up to two more times here in 2023.
So they've got a meeting at the end of this month. We think there's going to be one hike and then we don't think that they are going to hike twice but the feds notes from the meeting indicated that they are willing to go at least two more times.
So two more rate hikes, a negative impact on the consumer sector in the economy. We have seen the rate hikes have an impact on the housing market.
We've seen the rate hikes have an impact on the manufacturing market.
We see the rate hikes have an impact on the export market. They haven't yet had an impact on the consumer sector, which is the biggest part of the US economy. Well, okay. Maybe two more rate hikes do have that impact on the consumer sector and unemployment heads back up toward 5%, the economy dips into a recession. Those are some of the bearish case scenarios.
Not entirely likely, but again, the Federal Reserve has said they are not done raising interest rates and that could still have a negative impact on the consumer sector of the economy.
>> And when you talk about inflation remaining sticky, talk to us about wage gains because wages have been coming down but they have been coming down as quickly as possible.
What are your thoughts there as well?
>> So that's a great point, Anthony.
Yeah, let's go back maybe eight or 10 years when there was really almost no wage growth at all.
Maybe 1%, 2% year-over-year wage growth,, barely ahead of inflation which, at that time, was very low.
And then you contrast that to the period right after the pandemic, when people were bringing employees back on. A lot of employees didn't want to go back to work, so companies were having to pay employees more. We were starting to see five, 6% year-over-year wage Rose in 20 21 and early 2022.that starting to cool a little bit. The numbers now are around 4.1, 4.2%.
that's well ahead of what the Fed would like to see. The Fed would like to see all measures of inflation down at 2%. But 4% is betterfor the economy and inflation then 6% was a year ago. And we do expect that trend to move toward 3% perhaps by the end of next year.
So wage growth is moderating but it is still a little bit higher than what the Federal Reserve would like to see.
>> That was John Eade, president of Argus Research.
Now let's get to today's educational segment.
in today's WebBroker educational segment, we will be answering a viewer question we didn't have time to get to you on Monday's MoneyTalk Live show.
Caitlin Cormier, client education instructor with TD Direct Investing has more.
>> Today, we are going to address a customer question coming in.
Is there a way to compare mutual funds to similar ETFs on WebBroker?
And I'm very happy to see the answer to that question is yes.
We have a comparison tool where you can compare both mutual funds and ETFs that we will hop through that. We have two different situations.
One is you already know the mutual funds that you want to compare so we can go directly into the comparison tool. Or we can choose an option to go through the screeners tool first, find some similar mutual funds and ETFs and then do a comparison.
We are going to run through both of those options, select pop into WebBroker and get started.
So for the first option, we choose research. We are going to come under investments and we are going to school down to either mutual funds or ETFs.
Once we get through to the page, we will see appear on the top right hand side, we can type in different mutual fund symbols or ETFs symbols in order to actually do the direct comparison right away.
So we already know what different securities you would like to compare, we can come right here and get started.
If we are looking to do some research first, we can click on research.
Under tools and click on screeners.
I'm going to go ahead and click on the mutual fund tab here to start a mutual fund screen and click create custom screen. Once in here, we can choose different criteria that is important to us about the specific ETFs and mutual funds that we would like to research.
I'm going to start off today by choosing fund category.
And I'm going to actually choose European equities.
I went to scroll down a little bit here, alphabetical. We will go under European equity and come up with 36 results. That's not too bad including ETFs.
So let's go ahead and choose to view matches.
Whatever you put in there might have some more matches so you might need to put some additional criteria in.
Feel free to do that before you click in to see the results.
Now that we are here, there's a bunch of information available on the different funds that actually show up.
Across the top here, you will see lots of different headings even click on to see different information about these different funds that we have actually pulled up.
And then actually go ahead and click on summary here and maybe we'll just go ahead and rearrange these by MER which makes it a little bit easier for us to choose. So I'm going to do is to go ahead and click on this little box beside five different funds. I'm going to choose a mutual fund here, there is an ETF, a mutual fund, an ETF and a mutual fund. Alright. So I just randomly picked five different funds and I'm going to click this compare button at the bottom.
So what I have here is our comparison tool. So we can see all the different funds that we chose and we can see a bunch of different information about those funds.
We have summary information listed here including any MorningStar ratings or management expense ratio. It also has distribution yield there, so we know of this fund pays out distributions to individuals. We can see and the profile a little bit more information about the fund, and he ratings information that's available, performance, either on an annualized or calendar return basis, risk information, holdings allocation and finally purchase information. So there is a ton of detail available within this page for you to kind compare directly these mutual funds and ETFs.right within the same screen.
So this is an excellent tool to be able to use if you would like to make comparisons between those two different types of investments. If you need more information on ETFs or mutual funds,go ahead to to the Learning Center and check out the different videos and master classes we have available and come back next week. We will see you next time to learn more.
>> Our thanks to Caitlin Cormier, client education instructor at TD Direct Investing.
For parents of children starting at college or university in September, there can be plenty to consider from a personal finance perspective.
Nicole Ewing, Dir.
of tax and estate planning at TD Wealth join me earlier to discuss things to keep in mind, and she started by addressing how you may want to approach withdrawing money from an RESP.
>> Presumably, all your contributions have been made and we are now in a moment where we need to start thinking about withdrawing that.
And we want to do that as effectively as possible, to get the biggest bang for the buck.
so just to level set, there are two types of payment that can be withdrawn from your RESP. You have your contributions that you have put in yourself and then you havethe investment growth and the grants that have been paid on that.
The treatment for the tax treatment is different depending on how you are designating that withdrawal. So if it's a contribution, that will come out tax free.
It's a contribution.
The investment growth and the grants are going to be, there are certain limits around them.
So these are educational assistance payments and they are limited in the first 13 weeks of the school year at a qualified educational institution and we have to make sure we are following all of those, that criteria.
But we want to really think about how we are going to pull that money out and what the income of the individual student is going to be at that time.
>> Have to be very thoughtful about how you pull that money out.
>> Yes, the goal is to get it out tax free or the minimum amount of tax possible.
So the government has, for the first time in 25 years, I believe, up to the amount that you can take out in that first 13 weeks.
The reason there's a limit at all as they don't want people signing up and taking all their money and then immediately withdrawing from school, so they put that 13 week limit on their which is usually how long you can't come out of school, you can drop out without being on the hook for the money. So that has increased from $5000-$8000 for full-time students and 4000 for part-time students.
So it's really, we want to get those educational payments out as quickly as possible and taxed in the hands of the student and presumably they are going to be in a lower tax rate than they otherwise would have been or you would've been and with the $15,000 amount that they are able to earn tax free, no there shouldn't be too many taxes on that. So we want to think about when are we pulling it out and try to get those educational payments out as quickly as possible. Of course, without draining the funds that we are going to need for future years. But be mindful that you get those out without… More quickly.
More quickly.
>> Okay, so no other than withdrawing from your RESP, what else should we be thinking about?
>> For many students, this is their first time being away from home or even if they are still at home, they are being faced with a whole bunch of choices that they may not have before.
So we really, if we can have them understanding really early the impact of debt, that would be, if there's one thing I could tell the students going to school is be wary of people who are standing on outfront's offering for you to sign up for a credit card without really thinking through what that is, will your repayment schedule would be for those sorts of funds, so debt, be really careful about that.
When you're turning 18, you can start thinking about TFSA contribution. There is a part-time job and we have excess money, we want to be mindful about how we are using that an earning income on that, so the financial literacy part is going to be really important, I think, for students to be aware of.
And the great way of doing that is having a budget and thinking through what expenses you're likely going to have is if you're a parent, you have help your child understand.
>> How to manage your money, because that's pretty important.
>> I will say that the credit card, I was one of those people.
I signed up for it and I thought that would be great.
If you are a person on a bursary or scholarship related to your academics, helping your student understand that losing that has a cost and if you are losing it because you want to have a part-time job that really isn't going to advance your career in any way, you are giving a potentially the grades that will maintain your scholarship for some spending money and that something I unfortunately saw a lot of the students I went to school with who came in with these tremendous scholarships and they were great but they were unable to maintain them because they were doing these other extracurricular type activities.
So just be really mindful of the dollar amount and how, if you lose that scholarship, what's going to take to get you back in line.
>> I want to talk a little bit about housing because we've heard so much about the shortage of housing given the new influx of immigrants, international students. What should parents be aware of when it comes to student housing?
>> There's a lot of different options and students may be coming from other jurisdictions and they are here for the first time, so I'd say getting familiar with with the landlord and tenant laws are in the province that you are in because they are quite different, so be aware when you are signing the lease what you are signing up for and the financial obligations that come with it.
So if we are having roommates, for example, what does hourly say? Are we on the hook for the entire amount or are we only responsible for our share? Many parents, of course, purchase homes or condominiums if they have multiple children and sometimes it makes sense to do that, to purchase a condominium or home for your child to stay in and rent out those of the rooms. Again, be very cautious about understanding what the financial obligations are. If you got Hydro bills and telephone… Probably not landlines. I'm dating myself.
These are the sorts of things that we want students to really understand. Contracts with financial consequences, really to be aware of what those extra costs are.
and depending on the type of home you might get, there might be those additional costs of, is it all-inclusive? Is parking included?
Is transit nearby that can help you cut down on some of the cost that you would otherwise be incurring?
There's a lot of factors that go in, depending on what type of housing unit your student find themselves in.
>> That was Nicole Ewing, director of tax and estate planning at TD Wealth.
Now for an update on the markets.
Okay, so now we are having a look at TD's advanced dashboard. The platform designed for active traders available from TD Direct Investing.
Right now, we are looking at the heat map function here, which gives you a view of the market movers on the TSX 60 by both price and volume.
We will start at the top left corner for energy. You can see energy names are getting some bits today. Cenovus is up more than 1%, Suncor Energy as well, Enbridge as well as C and Q.
Taking a look just beside the ad to the right, utilities, we are seeing some strength at Algonquin Power. Utilities are up modestly.
It seeing some modest bids in Shopify and telecom names like Telus.
Let's take a look at the S&P 100.
And starting off with technology, we are seeing some weakness among some of the chipmakers. Microsoft, sorry, Mehta, rather, is down. Shares of Nvidia are down more than 1%.
There is some positive names there.
Oracle is up just over… We will call at 1.
6%. Netflix is seeing some selling today.
Of course, Netflix reported its earnings earlier this week. And then moving to cyclical consumers, there we are seeing some strength in Tesla.
Of course, Tesla reported pretty strong poorly profits earlier this week.
And you can find more information on TD advanced dashboard by visiting TD.com/advanced dashboard.
Now while it is the middle of the summer, there is still some important market moving events ahead to keep an eye on and Moneytalk's Susan Prince joins us now with a preview of what's ahead next week, including a big one on Wednesday.
Susan, of course, we have the big said meeting announcement next week.
What are economists and markets expecting?
>> Well, it's interesting because there's so much that people talk about ahead of time and what we've got right now is we've got all 106 economists polled by Reuters news service are saying there is going to be a rate hike. At the current rate of, the Federal Reserve rate is 5.25%. They are anticipating that it will go to 5 1/2%.
and for context, this time last year, the Federal Reserve rate was 1.
75%. So certainly people who have a variable mortgage have a real keen sense of what that movie is.
Now, Federal Reserve policy to rate in July, so they kept at the 5.25%, and the July 26 date now feels like a done deal and what we are seeing is economists are now looking it will happen in September.
So they are focusing on that. And it's interesting. There's a metaphor that people use on big numbers like this, that it's like turning a tanker in the ocean.
And so you start making a turn early on but you don't see anything for a while until you finally see the tanker moving.
An interest rates are a lot like that.
We've talked about retail sales, we talked about CEPI, we talked about a bunch of data that goes into it.
>> It takes time for those interest rate hikes actually impact the economy.
>> Right. So now we are watching and certainly is central bankers talking about, have we done enough? Have we turned the tanker enough that we will get it into the direction we want to be, or do we need to do more? And there is a lot of back-and-forth on that.
So we will be paying attention to that.
The other thing is, we are in the heart of earnings season and we are going to see banks and some other stuff. What I'm going to be paying attention to next week is whirlpool results. Full disclosure, I don't own whirlpool but the reason I'm interested in it is because they produce durable goods, things like washing machines, dryers, refrigerators, all of that sort of thing and durable goods, we've been talking about retail sales and we seen the weakness and building supplies and that area. So I'm going to be paying attention to whirlpool to see what it tells me about how the economy has felt over the past quarter for people who are making big purchases.
>> Great insights as usual.
Next week we have the Fed rate announcement, more earnings decision, a lot of information coming our way. Thank you, Susan.
Our thanks to Susan Prince.
Stay tuned.
On Monday, Damian Fernandes, portfolio manager at TD Asset Management will be our guest taking your questions about global stocks. A reminder that you get a head start.
Just email moneytalklive@td.com.
That's all for our show today. Take care.
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