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[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
coming up on today's show,we are going to hear from TD SecuritiesChris Whelan on whether the Fed is likely to hold on rates in September after this week's US inflation report.
TD Asset Management's David Mau will give us his outlook for the airlines as travel strength returns.
And Andres Rincon from TD Securities will discuss the trend CCing in the exchange traded fund space.
Plus in today's education segment, Jason Natyk is going to walk us through how TD's Advanced Dashboard platform works and how it differs from WebBroker.
Let's get you an update on the markets. On the TSX Composite Index, there's a modest cane, 10 points to the upside or just five ticks.
Among the most actively traded names on Bay Street right now includes Baytex energy.
Seeing a bit of a bid and continue farming in West Texas intermediate crude, helping some of the energy names. Got Baytex at five bucks and $0.60 per share, up a little more than 2%. Noticing some weakness however and Magna International, and auto parts manufacturer. At 7752, that stock down a little more than 2%.
South of the border, we got a print on broader inflationary measures in the United States this week. It ticked a bit higher but less than expected.
Today we got another read on wholesale prices in the states. They rose as well but a little bit more than expected.
The market is trying to digest this information and what it could mean for the Fed an interest rates going forward. He fought the S&P 500 down about seven points, a little less than 1/5 of a percent.
The tech of the NASDAQ seems to be getting hit a bit harder. Nothing too dramatic but about hundred and 13 point deficit, almost a full percent.
advanced micro devices, this is an area of weakness in the markets today.
it's been a bit of a bumpy ride of late.
You're down about three bucks per share for AMD. It's about 2% to the downside.
And that's your market update.
Of course, inflation is top of mind for investors this year, so we watch every release pretty carefully. We did get the big CPI print today but then this morning we got the wholesale prices we were just talking about. They did rise .3% in July, a bit higher-than-expected. This comes on the heels of the CPI report out of the US which did show prices taking her for consumers but not as high as perhaps was thought by the streets. A bit of a mixed bag of stuff here, isn't there?
Earlier I spoke with Chris Whelan, Senior Canada rates strategist and had a portfolio and ESG strategy TD Securities to get his reaction.
>> It's business as usual.keep calm and carry on kind of print today. The bond market is not reacting very much to it. It makes sense. It's fairly in line. There's really nothing to take away there.
we have talked about this in the past, that we are kind of in a wait-and-see mode, data dependent.
but now, we are in a global manufacturing recession right now and we are waiting for services to tip over.
We are leaning towards that they do. That still has to materialize.
So I think that's the more important thing is we go forward in the coming months. We don't have additional hikes expected in Canada or the US right now, and I think we feel comfortable with that over the next month or two, holding that view.
And I think we would have to have some surprise data basically a revitalization in the economy into the fall winter for us to kind of change our stance on that, that they are not done, that they can hike more. So I think that's what we are waiting to see but any factors are not doing well.
>> You said it manufacturing recession, you said you waiting for services to rollover.
>> Yes.
>> The central banks have said once they get to where they want to be with rates, they will hold them there for a long time.
If we start seeing this kind ofweakness in manufacturing and foster services, how long can they stay at these restrictive levels?
> I think… You can't speak for them, but I think when they say they want to hold them there for a long time, I think they are trying to be careful not sending a message that this… That they are going to relax interest rates too soon, and then drive consumer behaviour. They say, hey, we are going to go back to lower rates next year, don't worry.
>> Spend accordingly.
>> Spend away. I think what they are trying to do is take a tough stance on inflation and I think it's really just a tough stance but I think at the end of the day, you have a bond market that has refused to not pray sin cuts shortly after.
This is a 2024 story. We will see. This cycle has been constantly pricing cuts and then time goes by and remove at the cuts and remove at the cuts. This time, I would say that our conviction is that it's getting a little stickier now, that this is probably the top in rates. We are getting more confident in that story.
There is still a risk there.
We are more biased to hikes being done in North America then we are for further hikes coming, but it's basically impossible to be fully confident that it's truly over but we are getting more and more confident that we are nearing the end.
>> So we are going to hear from the Fed in terms of an actual rate decision next month in September, but we went to Jackson Hole in the coming weeks. Jackson Hole to me it used to be, we would talk about it in financial circles.
Last year, Jerome Powell really laid it down.
It was a short speech, very stern. The markets didn't like what he had to say. He used to love to have talk.
are you watching for anything of that degree Jackson Hole this year?
>> Last year, you had just started rate hikes and rate hikes take time. There is a lagged effect.
Jackson Hole required a tough message.
This year, they are completely in the middle. Generally,as a rough rule of thumb, you have 18 months until the impact of rate hikes really can transpire into the market.
So we're kind of month nine, 10, 11 now.
We are not quite there in terms of the lags having enough time to come into play.
So I think Jackson Hole is very hard for them, how they deal with the messaging,and I think this Jackson Hole, we are settling in to a bit more of a neutral set up.
However, if there is a surprise to Jackson Hole, that probably is market moving because we are probably, the market is probably going to be set up for less, anticipating less of a surprise reaction, so not ready for that. Time will tell, but I think that we won't have seen enough data come through for them to have confidence on a cutting narrative or anything.
So small risk to additional hikes, hike rhetoric.
>> On top of this inflation print from today, as you said, sort of a stay the course kind of thing, nothing to get too excited about, we have been getting job figures out of the states as well.
I think I might've been away but I try to keep on top of the headline. They added jobs but it was a bit softer than expected. Was that the case?
>> There's a bit of softening on the job front.
In Canada, we had a bit of softening as well. SoI think at the end of the day, when you look at the headlines, we are seeing layoffs. We are seeing large companies announced layoffs.
It just a matter of time for that shows up in the data.
We do not see companies announcing large hiring plans. We are seeing equilibrium, we are converging towards equilibrium on demand and supply in the wage market.
And we are getting there. So I think in the end of the day, there is a phenomenon going on right now, corporate earnings and revenue growth, it's strong, but earnings growth is fairly mediocre.
What does that tell you? It tells you the companies, even though you, kind of feel like companies are just passing on price increases, just hoping that we will accept them, they actually aren't fully passing on the true increase of their expense base.
So in the end of the day, when you can't grow earnings but your growing revenue, that shows you that you have an expense issue.
So that's layoff pressure, that is job pressure.
So then there is a lag to that.
So you have the layoffs and the wage inflation pressure down and so that's another lagged defect, so we are waiting that out.
but I think the job data is not strengthening, and headlines are layoff tilted and the revenue versus earnings, that, the revenue growth is much higher than the earnings growth.
That Is not a good fundamental for wages on a go forward basis which just comes back to the lagged argument that pain and softness will come from the rate hikes.
We are in that middle zone, we are in that metal zone. We are getting closer… We are now past the midpoint, so we are getting mid to late now in terms of the lag, so we are getting closer to let's say gametime of cuts becoming a discussion and so time will tell. And I think the risk that is a rejuvenation of the economy into the fall.
That would be a surprise right now.
That's the risk.
>> That was Chris Whelan, Senior Canada rates strategist, had a portfolio and ESG strategy at TD Securities.
Right now, let's get you updated on the top storiesin the world of business and take a look at how the markets are trading.
Strong demand saw Air Canada returned to probability in its latest quarter.
The carriers reporting a 36% jump in its operating revenue to $5.43 billion for those three months. Air Canada did concede that it had a challenging June and July when it came to flight delays, pointing to severe weather and global supply chain issues.
The stock right now up a modest 1.4%.
Take a look at shares of Sleep Country.
They are under pressure. Thus following the company's latest earnings release.
Down right now about 3 1/2%. Key metrics of sales at Sleep Country down almost 11% compared to the same period last year, that is as consumers are shifting their spending away from big-ticket discretionary items such as mattresses in the face of higher household costs.
Shares of Canadian telecom satellite operator Telesat our story today. That is the company announced approximately $2 billion in capital cost savings, that separates which suppliers for its new network of satellites.you can see a 38% pop in the name. It says it's plan global Internet network will be now supplied by a fellow Canadian company MDA. A quick check in on the markets, we will start here at home with the TSX Composite Index, a modest gain of 35 points on this last trading day of the week, a little shy of a fifth of a percent to the upside.
what will things mean for the Fed next month? There is a lot of intrigue on the front. The S&P 500 done a modest five points, little more of 1/10 of a percent.
The disease summer travel season has seen demand for flights return to pre-pandemic levels, butis that strength being reflected in airline talk?
David Mau, portfolio manager with TD Asset Management during the earlier with his view.
>> You are absolutely right to point out the travel demand has returned to kind of 2019, pre-pandemic levels. But what's interesting is that revenue growth or level of revenues projected for 2023, Is actually above 2019 levels. But as you said, they share prices of these actual airlines are well below where they were in 2019.
In fact, I would sayairline share prices are probably as 30 to 50% lower than they were in 2019.
There are a couple of reasons for this, but the biggest reason is expenses have gone up very significantly. So what that means is profitability of these airlines have gone down. Even though revenues are higher, profits are lower. We know that fuel costs have gone up.
Sorry.
The cost of labour has gone on.
And just in this inflationary environment, general operating expenses are much higher than they were four years ago in 2019.
That has been reflected in the stocks. The other thing I think the market is taking into account is pending recession that has been on the horizon for the last two years and hasn't really shown up yet. It's also weighing… It's an overhang on the share prices. That's weighing down on the stocks as well.
>> The recessionary concern, we've been talking about for a long time. We are still waiting for it to arrive.
Some are hoping it doesn't arrive or that land softly. But if it did hit, it seems it might be just as the airlines are recovering, it would be a reason for people not in trouble.
>> You have to remember that 2020, 2021, even part of 2022 was a very, very difficult time for the airlines.
They lost billions and billions of dollars. They haven't recovered from those losses yet. That's reflected in the share price right now.
>> In terms of where people are travelling, I understand it's interesting, there's a difference between domestic travel demand and international travel demand.
They are not keeping pace. Which is winning out?
>> Right now, international, the outlook for international travel is much stronger.
If you look back to 2022, last year, which was the first full year that people were really starting to travel, most of the travel was happening within the respective countries, so domestic travel was very strong.
But international travel was still being held back a lot by various code restrictions that were implement it across various countries. We had things like… You had to wear a mask at the airport and on the plane and there were quarantines restrictions and vaccination requirements.
All of those things really held back a lot of international travel. But we saw most of this restrictions being lifted I would say kind of midway through last year.
So what we are seeing now is that a lot of people got that trip to visit grandma across the country out of the way, and now they are really looking for that European vacation or the trip to Asia that they haven't had a chance to go on.
And so it's been reflected in the travel numbers is domestic demand is really starting to fall off.
In fact, when we look at the Q2 results for most of the major US airlines, the domestic carriers, guys like Southwest or JetBlue or Alaska Airlines, they had a very nice Q2, ahead of excitation generally, but the outlook that they gave for third quarter and beyond is a lot softer than what people were expecting.
And it's so soft, in fact, that most of the domestic carriers will have to start cutting ticket prices starting in the third quarter, after the summer travel season ends. And that's very different from what the international carriers are saying.
So guys like United, Delta, American Airlines, they also had a great Q2 but there outlook for Q3 is very, very strong.
They are seeing very good bookings for the third quarter and throughout the remainder of the year on their international routes.
So they actually upgraded their guidance for the remainder of the year while the domestic carriers actually lowered their guidance for the rest of 2023.
>> Understandable that people who had to vacation within their own borders for a certain amount of time want to get overseas. What about business travel?
Last time we talked about the fact that it might be pretty lucrative for the airlines, with the cost they charge business travellers, is not coming back in any kind of risk potential way to mark >> And has come back but when we compared to 2019 levels, it still 15 to 25% below 2019 levels.
We mentioned companies are trying to be cautious.
Companies are not trying to blow the travel budget for the year,so even though there has been a pretty meaningful recovery and business travel, it's back to it was a few years ago.
>> We talked about rising cost for the airline. One of their biggest costs, I always understood, was a cost of fuel. We do have lower fuel prices than we did last time this year. So not enough to offset those other pressures?
>> Fuel prices are definitely a tailwind.
If you look back in 2022 and the price of oil hit I think about $120 versus what the price of oil is today at about $80, that's a pretty good tailwind. The price is a lot lower.
But when you compare it to 2019, the price of oil was about $60.
So at $80 today, your cost of fuel is still 33% higher, let's call it.
So it has been, the fuel over the last 12 months has been a good tailwind.
But other expenses are still going up and the biggest one is labour.
Right? The cost of labour.
In fact, when you look at what an airlines operating costs are, fuel is we will call at 25 to 30% and labour is another 30 if not more percent.
So when you have both of these things higher than they were just a few years ago, it has a pretty meaningful impact on profit ability.
>> So those are the issues in the here and now and in the short term.
What about the medium to longer-term?
How the airline set up?
>> I think they have a pretty good set up.
What they have to do is get these costs under control.
As I just mentioned, the cost of labour is very significant and it's been on an increasing trend and it doesn't seem like there's an end to be at. Just a couple of weeks ago, we had I believe it was United Airlines had come to an agreement with their pilots, the pilot union, to raise wages by 40% over the next four years.
American Airlines shortly after came up with the same agreement.
And this is because if they don't do this, the pilots are going to go on strike and shut the whole thing down.
So these costs are not going away.
It's just a question of… How much the airlines can offset it with higher ticket prices and how powerful the unions are going to be. There's a pilot union, but there is also a union for cabin crew and mechanics and air-traffic controllers, and so all of these cost, when you put them all together, are going to have a significant impact.
>> That was David Mau, portfolio manager with TD Asset Management speaking to a beardier version of me.
Now let's get to our educational segment of the Day.
in recent shows, we have been having a look at the heat map function of the TD Advanced Dashboard, platform designed for active traders available through TD Direct Investing. Joining us now to discuss a bit more about the platform and how it works is Jason Hnatyk,Senior client education instructor with TD Direct Investing. Good to see you.
Explain to us how Advanced Dashboard differs from WebBroker.
>> Great to be here, as always, Greg, and I'm really excited to have an opportunity to talk about TD Advanced Dashboard.
Yes, as you said, whether or not you're an active trader who is looking for a real-time streaming environment to help really be efficient with your order and order entry and data analysis, or you're somebody who is looking for a customizable experience, Advanced Dashboard might be right for you.
So let's jump into WebBroker. We will show how to launch a platform and then we'll take a look and I've a little deeper. So to get started with Advanced Dashboard, we will notice in the top right hand corner, the advance for button is here. All we are wanting to do from this page is click the web version button and it is going to lunch as a separate tab within your web browser.
No files a download, no extra passwords to say,it's all conveniently through your dashboard. We've got Advanced Dashboard running on my second screen here. So just to orient everybody, we can see if you look at the top left-hand corner, we can to the TD Shield and then to the right, there is a series of tabs that have been preloaded onto everyone's experience.
You can get information about your account, the markets, even some order execution, the experiences preloaded with that.
But one of the great ways to show it off is to create our own customizable workspace.
Will do that by clicking on the + next to the Lord button and then we have an opportunity to choose between multiple layout style so you can find the one that suits you best. I'm going to choose this and the structure. You need to give it a name which will appear at the top of the screen. We will choose MT in honour of MoneyTalk today and now we can see the empty label at the top of the page.
Our next step in the equation is we've got the three pluses in the middle. This is where we really can take control and add in the components that are worthwhile to us. I'm going to start by adding a watchlist on the left-hand side which can be found under the trading menu.
The watch lists and Advanced Dashboard, they are the next step beyond what WebBroker offers you. With WebBroker you have had lists with up to 10 symbols, and you don't have caps in Advanced Dashboard and you have the opportunity to customize the columns.
You can see it's updating in real time.
It's a bit of a Griswold Christmas going on with that, we can see the ups and downs in the market as extremes in real time.
Let's go ahead and add in another feature.
We will go ahead and choose News.
I'm going to select the market depth functionality. This is not available in my broker. Many traders want to see what's going on beyond the best bid and ask, we want to see the pressures building up on either side of the market and this tool can help us identify that.
We are not done customizing it. We want to get things working together. We're going to do that by configuring the channels and we went have the information sent from our wash list and received on our news component and as well on market depth.
This will mean that there one click of a button, I will be able to click on let's say Enbridge from my watchlist, my news component will update and my market depth will update, so it just one click of a button, we have a lot of information to work with. It's a real time streaming customized experience of going to work just for me.
>> All right. Great introduction there to Advanced Dashboard.
Where can someone go to learn even more about the platform?
>> That's a great thing to point out.
There's so much to do in the platform, so many different capabilities. You want to know that you're going to be supported every step of the way in your own journey.
So the first place to start.
Back in Advanced Dashboard here, we've already got preloaded onto the platform some on-demand educational videos which I think are going to be really helpful.
We can see next our MoneyTalk tab, we have our learn tab. And here, there is a number, once again, a very specific targeted lessons that you have the opportunity to scroll through, watch and rewatch so you're going to be an expert on the platform and really use its functions to their fullest.
Additionally, 1 Thing in WebBroker that I want to show you, this is near and dear to my heart, we run live, interactive master classes on a whole host of subjects and Advanced Dashboard is no different.
If you go ahead and click on learn at the top of the page, you will notice a master class button.
You will be able to come hereand find when we have does advance after classes that are being offered so you can join in and ask instructors of questions and alive an interactive session.
That's great love as always, Jason. Thanks a lot.
>> My pleasure.
>> Jason Hnatyk, 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.
Stocks and had a pretty decent run this year, but is thatperformance leading investors put more money to work in stock?
Andres Rincon, head of ETF sales and strategy with TD Securities, join the earlier to discuss.
>> You're right, we have seen the market have quite a bit of a rally.
It's been inching up with the last few months, really.
A lot of analyst now have got on board.
They have seen inflation slow down a little bit. If you look at the ETF space here in Canada, for example, call it $13 billion has gone into fixed income ETF.
Compare that to $7 billion in equity ETFs.
you might say well this is the last few months, I'm talking about the full-year numbers.
but back Is actually widening this year.
Right now we are at five, $6 billion and we are continuing to see that widening gap between fixed income and equities. Just through July, we saw $1.8 billion go into fixed income ETF. It's a staggering number in terms of how much is going in there and I do think that it's a shift in momentum in the direct investing space and the advisor space in that they see the yields that you can get in fixed income and that's why it's so attractive right now and a lot of money is going into that space.
>> So as the funds flow in that direction, kind of ETF products, now we are breaking it down across several kinds of products, with actually seeing the most interest from investors?
>> Is quite broad but there are two areas that have seen a lot of flows. Number one is cash management ETFs or you can also call them high interest savings ETF.
Basically, these are just bank deposits offered through a fun company and these are very, very popular.
They only pay about 5%. We will call it to the tune of $4.8 billion this year alone, so a lot of money going into these ETFs and these gaps are relatively low risk and that they hold just a deposit with banks.
On the other side, you have money market ETFs. These are ultra short-term product.
They have been very popular. These are T-bills, a variety of money market securities that are in these funds and they offerhigh yields of this environment.
They are obviously very attractive to a lot of investors. Apart from those two, but your traditional fixed income investment, you are agreed upon, alternative credit, etc. Daphne comes to these high interest savings accounts vehicles or money market funds, what do investors need to keep in mind? Yield is attracting people into the space. What did they need to be mindful of, that yield is and guaranteed forever.
> Of course, if interest rates are going lower because inflation starts going lower, then obviously rates will go lower and these ETFs returns will go lower.
>> Let's talk about other parts of the market.
Buffer and accelerator ETFs, what are these?
>> Yes, they have become very popular in the US. And slowly more in Canada. In the US, you have a company called innovators ETFs which are really the leaders in the space. In Canada, you had first trust launch a couple of the use and no PMO has filed to launch more of these in Canada.
This is a space that is quickly growing,it is particular popular with the retirement community and the reason they are popular is because they offer defined outcome exposure. Unlike many of your traditional funds when you go up and down with the market, they use options to construct portfolios so they have defined outcome.
So they have a variety of different outcomes offered to clients, some of them have limited production, some have full protection, some have accelerated leverage. So they call it accelerators or buffers and they can play around with the buffers and leverage and with that ultimately gives you is exposure to the market but with a different outcome.
so you might have let's say a 10% buffer on the downside but you might be capped at 15% higher.
So if you hold this product for two years let's say, you might havea certain upside with a limited downside, let's say. Or he might have full downside protection with limited upside participation.
And in the accelerator case, you may have a little bit more leverage but one-to-one downside. So they have many different ways to give you exposure or give the investor's exposure and they have become a lot more popular with those investors that are close to retirement and are worried about their downside potential.
>> When I hear leverage, I think about a certain amount of caveats that come with that.
What we need to be aware of? People take a look at these products in our thinking that some of them are leverage.
>> With leverage, you have leverage to the upside and to the downside sometimes.
Some of these have downside one-to-one, but you have downside exposure with many of these products, simply with the accelerator side. On the buffer side, was really important to remember, not to get into the weeds, is that these are usually popular and bought at the time that they are launched, not one month or two months later because they do move in value as the markets move.
So if the markets move and the market is up 10%, that buffer is 10% lower. So you do have downside in those scenarios. So they are complicated products, they are not as easy to understand, but they have become very popular with investors.
>> An interesting space for people to take a deeper look. I want to remember viewers that Andrews has a show called Buyside Views where he talks with fund industry executives at the trends they are seeing.
The latest episode, I think it came out yesterday, teachers East Coast fund management Mike MacBain and he spoke about why investors may not be as diversified as they think. Have a listen.
>> What happens there is that I don't have any interest rate exposure.
So I'm not correlated to interest rates.
And that creates a separate risk profile for you. Because almost every other asset being invested in today, because of the interventions from central banks, almost every other asset has correlated interest rates so you think you have a diversified 6040 portfolio, really you don't. You've got… And that showed in spades in 2022.
>> Some interesting commentary there from Mike about this idea of the 6040 portfolio, perhaps you are not as diversified as you think.
Tell me a little bit more about the show.
Mike show or even some of the other shows.
> So TD Buyside Views, we host a lot of our clients in the show where they can actually bring their perspectives into what's happening in their world and their markets and we were grateful to have Mike MacBain, CEO and CIO of East Coast fund management in our show and he had the chance to talk a little bit about alternative fixed income, how it fits your portfolio, some of the risks and benefits of that space. I do encourage obviously the listeners to join us@tdsecurities.com, Spotify, Google podcast, and you can find us on Buyside Views and TD Securities.
>> That was Andres Rincon, head of ETF sales and strategy with TD Securities.
Now for an update on the markets.
Let's take a look at TD Advanced Dashboard to heat map function.
This is giving you a view of the market movers on the TSX 60. We are screening by price and volume.
You can see a big block of green on the screen. That would be some of the big energy names on the TSX, including Cenovus.
You can see up about 1 1/3%.
Tourmaline beside up about one but not just oil and gas plays, we have Cameco, CCO in the corner of that energy grid there, this is a uranium play, gains almost 2% on the session.
Not all green on the screen though. You can see that Magna, auto parts maker, down about 2% and Shopify which has had a choppy ride since latest Corley earnings last week is down about 2% on the day.
now we can look to other different screens here.
Let's choose the S&P 100. Let's he was happening south of the border.
As you can see, the chipmakers under pressure today. Got Nvidia down to the tune of almost 3% and right beside it, AMD, advanced micro devices, a little more than 2% to the downside.
As far as green on the screen goes,some of the energy names there are positive, along with Bank of America, BAC, up in the top corner there, up about 1%.
You can find more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard. You want to stay tuned for Monday show. Tarik Aeta, global healthcare analyst with TD Asset Management will be our guest take your questions about the healthcare sector. You can get a head start with this question.
Just email moneytalklive@td.com.
On behalf of me here on the desk and everyone the put the show together for you every day of every week, thanks for watching. We will see you on Monday.
[music]
coming up on today's show,we are going to hear from TD SecuritiesChris Whelan on whether the Fed is likely to hold on rates in September after this week's US inflation report.
TD Asset Management's David Mau will give us his outlook for the airlines as travel strength returns.
And Andres Rincon from TD Securities will discuss the trend CCing in the exchange traded fund space.
Plus in today's education segment, Jason Natyk is going to walk us through how TD's Advanced Dashboard platform works and how it differs from WebBroker.
Let's get you an update on the markets. On the TSX Composite Index, there's a modest cane, 10 points to the upside or just five ticks.
Among the most actively traded names on Bay Street right now includes Baytex energy.
Seeing a bit of a bid and continue farming in West Texas intermediate crude, helping some of the energy names. Got Baytex at five bucks and $0.60 per share, up a little more than 2%. Noticing some weakness however and Magna International, and auto parts manufacturer. At 7752, that stock down a little more than 2%.
South of the border, we got a print on broader inflationary measures in the United States this week. It ticked a bit higher but less than expected.
Today we got another read on wholesale prices in the states. They rose as well but a little bit more than expected.
The market is trying to digest this information and what it could mean for the Fed an interest rates going forward. He fought the S&P 500 down about seven points, a little less than 1/5 of a percent.
The tech of the NASDAQ seems to be getting hit a bit harder. Nothing too dramatic but about hundred and 13 point deficit, almost a full percent.
advanced micro devices, this is an area of weakness in the markets today.
it's been a bit of a bumpy ride of late.
You're down about three bucks per share for AMD. It's about 2% to the downside.
And that's your market update.
Of course, inflation is top of mind for investors this year, so we watch every release pretty carefully. We did get the big CPI print today but then this morning we got the wholesale prices we were just talking about. They did rise .3% in July, a bit higher-than-expected. This comes on the heels of the CPI report out of the US which did show prices taking her for consumers but not as high as perhaps was thought by the streets. A bit of a mixed bag of stuff here, isn't there?
Earlier I spoke with Chris Whelan, Senior Canada rates strategist and had a portfolio and ESG strategy TD Securities to get his reaction.
>> It's business as usual.keep calm and carry on kind of print today. The bond market is not reacting very much to it. It makes sense. It's fairly in line. There's really nothing to take away there.
we have talked about this in the past, that we are kind of in a wait-and-see mode, data dependent.
but now, we are in a global manufacturing recession right now and we are waiting for services to tip over.
We are leaning towards that they do. That still has to materialize.
So I think that's the more important thing is we go forward in the coming months. We don't have additional hikes expected in Canada or the US right now, and I think we feel comfortable with that over the next month or two, holding that view.
And I think we would have to have some surprise data basically a revitalization in the economy into the fall winter for us to kind of change our stance on that, that they are not done, that they can hike more. So I think that's what we are waiting to see but any factors are not doing well.
>> You said it manufacturing recession, you said you waiting for services to rollover.
>> Yes.
>> The central banks have said once they get to where they want to be with rates, they will hold them there for a long time.
If we start seeing this kind ofweakness in manufacturing and foster services, how long can they stay at these restrictive levels?
> I think… You can't speak for them, but I think when they say they want to hold them there for a long time, I think they are trying to be careful not sending a message that this… That they are going to relax interest rates too soon, and then drive consumer behaviour. They say, hey, we are going to go back to lower rates next year, don't worry.
>> Spend accordingly.
>> Spend away. I think what they are trying to do is take a tough stance on inflation and I think it's really just a tough stance but I think at the end of the day, you have a bond market that has refused to not pray sin cuts shortly after.
This is a 2024 story. We will see. This cycle has been constantly pricing cuts and then time goes by and remove at the cuts and remove at the cuts. This time, I would say that our conviction is that it's getting a little stickier now, that this is probably the top in rates. We are getting more confident in that story.
There is still a risk there.
We are more biased to hikes being done in North America then we are for further hikes coming, but it's basically impossible to be fully confident that it's truly over but we are getting more and more confident that we are nearing the end.
>> So we are going to hear from the Fed in terms of an actual rate decision next month in September, but we went to Jackson Hole in the coming weeks. Jackson Hole to me it used to be, we would talk about it in financial circles.
Last year, Jerome Powell really laid it down.
It was a short speech, very stern. The markets didn't like what he had to say. He used to love to have talk.
are you watching for anything of that degree Jackson Hole this year?
>> Last year, you had just started rate hikes and rate hikes take time. There is a lagged effect.
Jackson Hole required a tough message.
This year, they are completely in the middle. Generally,as a rough rule of thumb, you have 18 months until the impact of rate hikes really can transpire into the market.
So we're kind of month nine, 10, 11 now.
We are not quite there in terms of the lags having enough time to come into play.
So I think Jackson Hole is very hard for them, how they deal with the messaging,and I think this Jackson Hole, we are settling in to a bit more of a neutral set up.
However, if there is a surprise to Jackson Hole, that probably is market moving because we are probably, the market is probably going to be set up for less, anticipating less of a surprise reaction, so not ready for that. Time will tell, but I think that we won't have seen enough data come through for them to have confidence on a cutting narrative or anything.
So small risk to additional hikes, hike rhetoric.
>> On top of this inflation print from today, as you said, sort of a stay the course kind of thing, nothing to get too excited about, we have been getting job figures out of the states as well.
I think I might've been away but I try to keep on top of the headline. They added jobs but it was a bit softer than expected. Was that the case?
>> There's a bit of softening on the job front.
In Canada, we had a bit of softening as well. SoI think at the end of the day, when you look at the headlines, we are seeing layoffs. We are seeing large companies announced layoffs.
It just a matter of time for that shows up in the data.
We do not see companies announcing large hiring plans. We are seeing equilibrium, we are converging towards equilibrium on demand and supply in the wage market.
And we are getting there. So I think in the end of the day, there is a phenomenon going on right now, corporate earnings and revenue growth, it's strong, but earnings growth is fairly mediocre.
What does that tell you? It tells you the companies, even though you, kind of feel like companies are just passing on price increases, just hoping that we will accept them, they actually aren't fully passing on the true increase of their expense base.
So in the end of the day, when you can't grow earnings but your growing revenue, that shows you that you have an expense issue.
So that's layoff pressure, that is job pressure.
So then there is a lag to that.
So you have the layoffs and the wage inflation pressure down and so that's another lagged defect, so we are waiting that out.
but I think the job data is not strengthening, and headlines are layoff tilted and the revenue versus earnings, that, the revenue growth is much higher than the earnings growth.
That Is not a good fundamental for wages on a go forward basis which just comes back to the lagged argument that pain and softness will come from the rate hikes.
We are in that middle zone, we are in that metal zone. We are getting closer… We are now past the midpoint, so we are getting mid to late now in terms of the lag, so we are getting closer to let's say gametime of cuts becoming a discussion and so time will tell. And I think the risk that is a rejuvenation of the economy into the fall.
That would be a surprise right now.
That's the risk.
>> That was Chris Whelan, Senior Canada rates strategist, had a portfolio and ESG strategy at TD Securities.
Right now, let's get you updated on the top storiesin the world of business and take a look at how the markets are trading.
Strong demand saw Air Canada returned to probability in its latest quarter.
The carriers reporting a 36% jump in its operating revenue to $5.43 billion for those three months. Air Canada did concede that it had a challenging June and July when it came to flight delays, pointing to severe weather and global supply chain issues.
The stock right now up a modest 1.4%.
Take a look at shares of Sleep Country.
They are under pressure. Thus following the company's latest earnings release.
Down right now about 3 1/2%. Key metrics of sales at Sleep Country down almost 11% compared to the same period last year, that is as consumers are shifting their spending away from big-ticket discretionary items such as mattresses in the face of higher household costs.
Shares of Canadian telecom satellite operator Telesat our story today. That is the company announced approximately $2 billion in capital cost savings, that separates which suppliers for its new network of satellites.you can see a 38% pop in the name. It says it's plan global Internet network will be now supplied by a fellow Canadian company MDA. A quick check in on the markets, we will start here at home with the TSX Composite Index, a modest gain of 35 points on this last trading day of the week, a little shy of a fifth of a percent to the upside.
what will things mean for the Fed next month? There is a lot of intrigue on the front. The S&P 500 done a modest five points, little more of 1/10 of a percent.
The disease summer travel season has seen demand for flights return to pre-pandemic levels, butis that strength being reflected in airline talk?
David Mau, portfolio manager with TD Asset Management during the earlier with his view.
>> You are absolutely right to point out the travel demand has returned to kind of 2019, pre-pandemic levels. But what's interesting is that revenue growth or level of revenues projected for 2023, Is actually above 2019 levels. But as you said, they share prices of these actual airlines are well below where they were in 2019.
In fact, I would sayairline share prices are probably as 30 to 50% lower than they were in 2019.
There are a couple of reasons for this, but the biggest reason is expenses have gone up very significantly. So what that means is profitability of these airlines have gone down. Even though revenues are higher, profits are lower. We know that fuel costs have gone up.
Sorry.
The cost of labour has gone on.
And just in this inflationary environment, general operating expenses are much higher than they were four years ago in 2019.
That has been reflected in the stocks. The other thing I think the market is taking into account is pending recession that has been on the horizon for the last two years and hasn't really shown up yet. It's also weighing… It's an overhang on the share prices. That's weighing down on the stocks as well.
>> The recessionary concern, we've been talking about for a long time. We are still waiting for it to arrive.
Some are hoping it doesn't arrive or that land softly. But if it did hit, it seems it might be just as the airlines are recovering, it would be a reason for people not in trouble.
>> You have to remember that 2020, 2021, even part of 2022 was a very, very difficult time for the airlines.
They lost billions and billions of dollars. They haven't recovered from those losses yet. That's reflected in the share price right now.
>> In terms of where people are travelling, I understand it's interesting, there's a difference between domestic travel demand and international travel demand.
They are not keeping pace. Which is winning out?
>> Right now, international, the outlook for international travel is much stronger.
If you look back to 2022, last year, which was the first full year that people were really starting to travel, most of the travel was happening within the respective countries, so domestic travel was very strong.
But international travel was still being held back a lot by various code restrictions that were implement it across various countries. We had things like… You had to wear a mask at the airport and on the plane and there were quarantines restrictions and vaccination requirements.
All of those things really held back a lot of international travel. But we saw most of this restrictions being lifted I would say kind of midway through last year.
So what we are seeing now is that a lot of people got that trip to visit grandma across the country out of the way, and now they are really looking for that European vacation or the trip to Asia that they haven't had a chance to go on.
And so it's been reflected in the travel numbers is domestic demand is really starting to fall off.
In fact, when we look at the Q2 results for most of the major US airlines, the domestic carriers, guys like Southwest or JetBlue or Alaska Airlines, they had a very nice Q2, ahead of excitation generally, but the outlook that they gave for third quarter and beyond is a lot softer than what people were expecting.
And it's so soft, in fact, that most of the domestic carriers will have to start cutting ticket prices starting in the third quarter, after the summer travel season ends. And that's very different from what the international carriers are saying.
So guys like United, Delta, American Airlines, they also had a great Q2 but there outlook for Q3 is very, very strong.
They are seeing very good bookings for the third quarter and throughout the remainder of the year on their international routes.
So they actually upgraded their guidance for the remainder of the year while the domestic carriers actually lowered their guidance for the rest of 2023.
>> Understandable that people who had to vacation within their own borders for a certain amount of time want to get overseas. What about business travel?
Last time we talked about the fact that it might be pretty lucrative for the airlines, with the cost they charge business travellers, is not coming back in any kind of risk potential way to mark >> And has come back but when we compared to 2019 levels, it still 15 to 25% below 2019 levels.
We mentioned companies are trying to be cautious.
Companies are not trying to blow the travel budget for the year,so even though there has been a pretty meaningful recovery and business travel, it's back to it was a few years ago.
>> We talked about rising cost for the airline. One of their biggest costs, I always understood, was a cost of fuel. We do have lower fuel prices than we did last time this year. So not enough to offset those other pressures?
>> Fuel prices are definitely a tailwind.
If you look back in 2022 and the price of oil hit I think about $120 versus what the price of oil is today at about $80, that's a pretty good tailwind. The price is a lot lower.
But when you compare it to 2019, the price of oil was about $60.
So at $80 today, your cost of fuel is still 33% higher, let's call it.
So it has been, the fuel over the last 12 months has been a good tailwind.
But other expenses are still going up and the biggest one is labour.
Right? The cost of labour.
In fact, when you look at what an airlines operating costs are, fuel is we will call at 25 to 30% and labour is another 30 if not more percent.
So when you have both of these things higher than they were just a few years ago, it has a pretty meaningful impact on profit ability.
>> So those are the issues in the here and now and in the short term.
What about the medium to longer-term?
How the airline set up?
>> I think they have a pretty good set up.
What they have to do is get these costs under control.
As I just mentioned, the cost of labour is very significant and it's been on an increasing trend and it doesn't seem like there's an end to be at. Just a couple of weeks ago, we had I believe it was United Airlines had come to an agreement with their pilots, the pilot union, to raise wages by 40% over the next four years.
American Airlines shortly after came up with the same agreement.
And this is because if they don't do this, the pilots are going to go on strike and shut the whole thing down.
So these costs are not going away.
It's just a question of… How much the airlines can offset it with higher ticket prices and how powerful the unions are going to be. There's a pilot union, but there is also a union for cabin crew and mechanics and air-traffic controllers, and so all of these cost, when you put them all together, are going to have a significant impact.
>> That was David Mau, portfolio manager with TD Asset Management speaking to a beardier version of me.
Now let's get to our educational segment of the Day.
in recent shows, we have been having a look at the heat map function of the TD Advanced Dashboard, platform designed for active traders available through TD Direct Investing. Joining us now to discuss a bit more about the platform and how it works is Jason Hnatyk,Senior client education instructor with TD Direct Investing. Good to see you.
Explain to us how Advanced Dashboard differs from WebBroker.
>> Great to be here, as always, Greg, and I'm really excited to have an opportunity to talk about TD Advanced Dashboard.
Yes, as you said, whether or not you're an active trader who is looking for a real-time streaming environment to help really be efficient with your order and order entry and data analysis, or you're somebody who is looking for a customizable experience, Advanced Dashboard might be right for you.
So let's jump into WebBroker. We will show how to launch a platform and then we'll take a look and I've a little deeper. So to get started with Advanced Dashboard, we will notice in the top right hand corner, the advance for button is here. All we are wanting to do from this page is click the web version button and it is going to lunch as a separate tab within your web browser.
No files a download, no extra passwords to say,it's all conveniently through your dashboard. We've got Advanced Dashboard running on my second screen here. So just to orient everybody, we can see if you look at the top left-hand corner, we can to the TD Shield and then to the right, there is a series of tabs that have been preloaded onto everyone's experience.
You can get information about your account, the markets, even some order execution, the experiences preloaded with that.
But one of the great ways to show it off is to create our own customizable workspace.
Will do that by clicking on the + next to the Lord button and then we have an opportunity to choose between multiple layout style so you can find the one that suits you best. I'm going to choose this and the structure. You need to give it a name which will appear at the top of the screen. We will choose MT in honour of MoneyTalk today and now we can see the empty label at the top of the page.
Our next step in the equation is we've got the three pluses in the middle. This is where we really can take control and add in the components that are worthwhile to us. I'm going to start by adding a watchlist on the left-hand side which can be found under the trading menu.
The watch lists and Advanced Dashboard, they are the next step beyond what WebBroker offers you. With WebBroker you have had lists with up to 10 symbols, and you don't have caps in Advanced Dashboard and you have the opportunity to customize the columns.
You can see it's updating in real time.
It's a bit of a Griswold Christmas going on with that, we can see the ups and downs in the market as extremes in real time.
Let's go ahead and add in another feature.
We will go ahead and choose News.
I'm going to select the market depth functionality. This is not available in my broker. Many traders want to see what's going on beyond the best bid and ask, we want to see the pressures building up on either side of the market and this tool can help us identify that.
We are not done customizing it. We want to get things working together. We're going to do that by configuring the channels and we went have the information sent from our wash list and received on our news component and as well on market depth.
This will mean that there one click of a button, I will be able to click on let's say Enbridge from my watchlist, my news component will update and my market depth will update, so it just one click of a button, we have a lot of information to work with. It's a real time streaming customized experience of going to work just for me.
>> All right. Great introduction there to Advanced Dashboard.
Where can someone go to learn even more about the platform?
>> That's a great thing to point out.
There's so much to do in the platform, so many different capabilities. You want to know that you're going to be supported every step of the way in your own journey.
So the first place to start.
Back in Advanced Dashboard here, we've already got preloaded onto the platform some on-demand educational videos which I think are going to be really helpful.
We can see next our MoneyTalk tab, we have our learn tab. And here, there is a number, once again, a very specific targeted lessons that you have the opportunity to scroll through, watch and rewatch so you're going to be an expert on the platform and really use its functions to their fullest.
Additionally, 1 Thing in WebBroker that I want to show you, this is near and dear to my heart, we run live, interactive master classes on a whole host of subjects and Advanced Dashboard is no different.
If you go ahead and click on learn at the top of the page, you will notice a master class button.
You will be able to come hereand find when we have does advance after classes that are being offered so you can join in and ask instructors of questions and alive an interactive session.
That's great love as always, Jason. Thanks a lot.
>> My pleasure.
>> Jason Hnatyk, 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.
Stocks and had a pretty decent run this year, but is thatperformance leading investors put more money to work in stock?
Andres Rincon, head of ETF sales and strategy with TD Securities, join the earlier to discuss.
>> You're right, we have seen the market have quite a bit of a rally.
It's been inching up with the last few months, really.
A lot of analyst now have got on board.
They have seen inflation slow down a little bit. If you look at the ETF space here in Canada, for example, call it $13 billion has gone into fixed income ETF.
Compare that to $7 billion in equity ETFs.
you might say well this is the last few months, I'm talking about the full-year numbers.
but back Is actually widening this year.
Right now we are at five, $6 billion and we are continuing to see that widening gap between fixed income and equities. Just through July, we saw $1.8 billion go into fixed income ETF. It's a staggering number in terms of how much is going in there and I do think that it's a shift in momentum in the direct investing space and the advisor space in that they see the yields that you can get in fixed income and that's why it's so attractive right now and a lot of money is going into that space.
>> So as the funds flow in that direction, kind of ETF products, now we are breaking it down across several kinds of products, with actually seeing the most interest from investors?
>> Is quite broad but there are two areas that have seen a lot of flows. Number one is cash management ETFs or you can also call them high interest savings ETF.
Basically, these are just bank deposits offered through a fun company and these are very, very popular.
They only pay about 5%. We will call it to the tune of $4.8 billion this year alone, so a lot of money going into these ETFs and these gaps are relatively low risk and that they hold just a deposit with banks.
On the other side, you have money market ETFs. These are ultra short-term product.
They have been very popular. These are T-bills, a variety of money market securities that are in these funds and they offerhigh yields of this environment.
They are obviously very attractive to a lot of investors. Apart from those two, but your traditional fixed income investment, you are agreed upon, alternative credit, etc. Daphne comes to these high interest savings accounts vehicles or money market funds, what do investors need to keep in mind? Yield is attracting people into the space. What did they need to be mindful of, that yield is and guaranteed forever.
> Of course, if interest rates are going lower because inflation starts going lower, then obviously rates will go lower and these ETFs returns will go lower.
>> Let's talk about other parts of the market.
Buffer and accelerator ETFs, what are these?
>> Yes, they have become very popular in the US. And slowly more in Canada. In the US, you have a company called innovators ETFs which are really the leaders in the space. In Canada, you had first trust launch a couple of the use and no PMO has filed to launch more of these in Canada.
This is a space that is quickly growing,it is particular popular with the retirement community and the reason they are popular is because they offer defined outcome exposure. Unlike many of your traditional funds when you go up and down with the market, they use options to construct portfolios so they have defined outcome.
So they have a variety of different outcomes offered to clients, some of them have limited production, some have full protection, some have accelerated leverage. So they call it accelerators or buffers and they can play around with the buffers and leverage and with that ultimately gives you is exposure to the market but with a different outcome.
so you might have let's say a 10% buffer on the downside but you might be capped at 15% higher.
So if you hold this product for two years let's say, you might havea certain upside with a limited downside, let's say. Or he might have full downside protection with limited upside participation.
And in the accelerator case, you may have a little bit more leverage but one-to-one downside. So they have many different ways to give you exposure or give the investor's exposure and they have become a lot more popular with those investors that are close to retirement and are worried about their downside potential.
>> When I hear leverage, I think about a certain amount of caveats that come with that.
What we need to be aware of? People take a look at these products in our thinking that some of them are leverage.
>> With leverage, you have leverage to the upside and to the downside sometimes.
Some of these have downside one-to-one, but you have downside exposure with many of these products, simply with the accelerator side. On the buffer side, was really important to remember, not to get into the weeds, is that these are usually popular and bought at the time that they are launched, not one month or two months later because they do move in value as the markets move.
So if the markets move and the market is up 10%, that buffer is 10% lower. So you do have downside in those scenarios. So they are complicated products, they are not as easy to understand, but they have become very popular with investors.
>> An interesting space for people to take a deeper look. I want to remember viewers that Andrews has a show called Buyside Views where he talks with fund industry executives at the trends they are seeing.
The latest episode, I think it came out yesterday, teachers East Coast fund management Mike MacBain and he spoke about why investors may not be as diversified as they think. Have a listen.
>> What happens there is that I don't have any interest rate exposure.
So I'm not correlated to interest rates.
And that creates a separate risk profile for you. Because almost every other asset being invested in today, because of the interventions from central banks, almost every other asset has correlated interest rates so you think you have a diversified 6040 portfolio, really you don't. You've got… And that showed in spades in 2022.
>> Some interesting commentary there from Mike about this idea of the 6040 portfolio, perhaps you are not as diversified as you think.
Tell me a little bit more about the show.
Mike show or even some of the other shows.
> So TD Buyside Views, we host a lot of our clients in the show where they can actually bring their perspectives into what's happening in their world and their markets and we were grateful to have Mike MacBain, CEO and CIO of East Coast fund management in our show and he had the chance to talk a little bit about alternative fixed income, how it fits your portfolio, some of the risks and benefits of that space. I do encourage obviously the listeners to join us@tdsecurities.com, Spotify, Google podcast, and you can find us on Buyside Views and TD Securities.
>> That was Andres Rincon, head of ETF sales and strategy with TD Securities.
Now for an update on the markets.
Let's take a look at TD Advanced Dashboard to heat map function.
This is giving you a view of the market movers on the TSX 60. We are screening by price and volume.
You can see a big block of green on the screen. That would be some of the big energy names on the TSX, including Cenovus.
You can see up about 1 1/3%.
Tourmaline beside up about one but not just oil and gas plays, we have Cameco, CCO in the corner of that energy grid there, this is a uranium play, gains almost 2% on the session.
Not all green on the screen though. You can see that Magna, auto parts maker, down about 2% and Shopify which has had a choppy ride since latest Corley earnings last week is down about 2% on the day.
now we can look to other different screens here.
Let's choose the S&P 100. Let's he was happening south of the border.
As you can see, the chipmakers under pressure today. Got Nvidia down to the tune of almost 3% and right beside it, AMD, advanced micro devices, a little more than 2% to the downside.
As far as green on the screen goes,some of the energy names there are positive, along with Bank of America, BAC, up in the top corner there, up about 1%.
You can find more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard. You want to stay tuned for Monday show. Tarik Aeta, global healthcare analyst with TD Asset Management will be our guest take your questions about the healthcare sector. You can get a head start with this question.
Just email moneytalklive@td.com.
On behalf of me here on the desk and everyone the put the show together for you every day of every week, thanks for watching. We will see you on Monday.
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