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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 Asset Management set Ben Gossack on the pivot point he's keeping an eye on in the markets.
Plus, we are going to take a look at how bitcoin exchange traded funds work with Andres Rincon from TD Securities. And MoneyTalk's Anthony Okolie is going to have a look at investor sentiment with the results of the latest TD Direct Investing Index.
Plus in today's education segment, Hiren Amin is going to have a look at the different trade types available on the Advanced Dashboard platform.
Before he gets all that, let's get you an update on the markets. We will start here at home with the TSX Composite Index.
Right now we've got 50 points to the upside, about 1/4 of a percent. Nothing too dramatic but some interesting movers among the most actively traded names on the TSX at this hour. I want to start with one of the uranium plays. Denison Mines.
It seems there are some concerns over global supply in the next couple of years and it is boosting the sector as a whole, Denison among them.
Had two bucks and $0.60 per share, the stock is up more than 8%. Delta Airlines came out and although it had a good quarter, their forecast for this year is a little weak. It's not only weighing on their shares but on the shares of the airline industry as a whole.
Air Canada 1883, down a little more than 3%.
Now, we have had the official kickoff to yet another earnings season, the big Wall Street banks coming out today as the market tries to do just that, some of the macro data we got this week. You're down a pretty modest eight points on the S&P 500, a little less than 1/5 of a percent.
Want to check on the tech heavy NASDAQ, how is it bearing against the broader market? Pretty much the same, you're down 20 one point, a little more than 1/10 of a percent. Here's Delta Airlines, strong quarter but the street doesn't like the forecast for this year. That stock is down more than 8% at 30 bucks and change. And that's your market update.
Well, we've got our first full trading week of the year almost under our belts as we head into the afternoon session. It's been an interesting one so far.
MoneyTalk's Anthony Okolie joins us now to discuss.
We can talk about the big banks that kicked off the season.
>> It's been a rough start for the US banks and you can put some blame on the regional banking crisis because it cost the Federal Deposit Insurance Corporation about $23 billion to clean this up and of course it's the large banks that had to foot most of the bill for that.
>> That ended up showing up in quarterly results that were sitting across the board.
We had Delta come out and they are warning about the path ahead and then I think about the fact that we are going to get a crush of earnings over the next couple of weeks. We are going to get a sense of the health of corporate America and Canada as well, we will also have some macro events including inflation. It's a love for investors earlier in the year to make sense of.
>> We got the US inflation numbers which came in hotter than expected. However, when you look at the actual core inflation it's actually bang on. TD Economics believes that the Fed is going to continue to have to see inflation decreasing towards the 2% target before they can consider cuts but certainly we will be getting more economic data and that is going to have an impact on the market.
>> When I took a look at the reaction to the inflation numbers, it's been a long week, has in it, for a first full week back. It was only yesterday morning we got the inflation numbers. The market didn't get too pessimistic to the downside. Went through some of the details. It came in hotter than expected, the US jobs report last week. Another week next week, we will turn the spotlight to Canada. We are going to get our inflation to help us, inform us as to what the Bank of Canada might get up to later this month.
>> Exactly.
Right now, markets are pricing in potential cuts by the Bank of Canada by April. That aligns with TD Economics as well. Again, the Bank of Canada will need to see signs that inflation is moving towards its 2% target and again, this is something that markets will be watching closely and hopefully if we do get that perhaps we can see what we saw in 2023.
>> Maybe this is just because it's our first week back its wake-up week. But now we've got earnings taking off.
Next week we are going to be on our game.
>> Absolutely.
>> Thanks for that, Anthony.
MoneyTalk's Anthony Okolie. He will be back later on the show taking us to the results of the latest TD Direct Investing Index.
Markets had a very strong run in the final innings of last year. Investors consider the potential for interest rate cuts from the Federal Reserve. He got the hotter than expected headline inflation print south of the border later this week.
It raises the question of where the market might go from here. We spoke with David Sekera, chief US market strategist with morning's research, to discuss.
>> We still think the market overall is really very close to our fair value.
And when we think about fair value for the market, we do take a bottoms-up approach.
We compare where the market is trading, so the composite of the fair values of all of the stocks that we cover that trade on US exchanges-- over 700 stocks-- and then compare that where they actually are in the marketplace today. And that's why we think that the market is trading pretty close to fair value.
A lot of other strategists take much more of a top-down approach. They start off with some sort of algorithm or model to come up with S&P 500 earnings for the end of the year and apply some forward multiple to it. But the way that we look at it is what we think the market is actually worth today. And what we mean by fair value is that, for long-term investors, going forward, I expect that you should be able to earn, essentially, the market's cost of equity on a blended basis. So we're looking for much more normalized returns going forward, probably in that 8% to 9% area.
>> So in a market that you say is pretty much fairly valued right now, as we dig in beyond the broader market, where might we be seeing some value?
>> Yeah. So even though the broad market is pretty close to fair value, there are still some dislocations that we do think investors can take advantage of. So when we break it down the valuation into the Morningstar style box, by category, I'd note that the value category is trading at about a 10% discount to fair value.
Whereas, core stocks-- those are the ones that have some attributes of value, some attributes of growth-- they are trading at a slight premium to our fair values. And then the growth category, after the huge run that we've had last year, is now trading up at fair value. And then, when we look at it by capitalization, small cap stocks, in our view, are still very attractive-- trades at about a 16% discount to that blended fair value average.
And I think 2024 is really set up to be probably a pretty good year for value stocks, and especially small cap stocks. I think a lot of the reasons that we saw value in small caps lag the past couple years-- I think a lot of the reasons are behind us at this point. So I do think those are going to be two good areas for investors to look at going forward.
>> So the setup seems, perhaps, promising for value and small caps. What could be the risk to these parts of the market?
What could get in their way?
>> Well, for the overall market, inflation is certainly going to be a risk. We did see CPI numbers come out this morning.
Yeah, I would note-- and, actually, I talked to our economist early this morning. And he's still of the opinion that he thinks that the Fed will cut, and potentially cut as soon as the March meeting.
When we look at those numbers and really dig into them, a couple of the different areas that caused the numbers to be higher than what the market expected, such as used vehicle prices and shelter prices-- we still project those will moderate over the next couple months. And, specifically, we're very focused on core inflation.
And he notes that PCE, the Personal Consumption Expenditure, index for inflation, which is the Fed's real targeted number that they're focused on-- for the six months ending in November, was at 1.9%. So, in his view, given that core CPI was relatively steady on a year over year basis, and we still have that same correlation between CPI and PCE, that allows PCE to come in still below or right at the Fed's target. So it'll give them the room to potentially cut here in March.
>> Interesting. So, if we did see that come to pass, let's talk about the shift to easing from the Fed and what it could mean for the markets.
>> Yeah. So I think, with nothing else, what that's going to do is provide a good floor if we do have some downturns later this year. I am a little concerned with earnings season coming up here that it might be an opportunity that management teams maybe try to look to set the bar lower for their earnings expectations for the year.
We do expect that the rate of economic growth will slow here for the next three quarters. So if management teams have those same kind of projections in their own models, they may try and lower the bar on guidance. And, of course, that could drive some negative sentiment.
However, with the Fed cutting-- easing-- in fact, we're looking for six rate cuts this year.
That would actually put the Fed funds rate in that 3 and 3/4% to 4% area by the end of the year. I do think that that will end up bolstering the economy later this year and going into 2025. So if we do have some sell-offs, that actually would probably be a better opportunity for investors to maybe go back into more overweight positions in equities.
>> I guess the wild card here, just like when we were speaking earlier in terms of risk, would just be in the end that inflation doesn't come down the way we hoped it did.
>> Yeah, that is really the big risk-- that, if inflation doesn't come down and the Fed decides that they need to keep rates higher for longer, yeah, I think that would have a lot of negative implications, not just in the equity market, but also in the fixed income market.
Yeah, we do think that interest rates also should subside this year, even in the longer end of the curve. So if interest rates stay high, and, in fact, if the 10 year were to start actually moving back up again, I do think that would pressure both equity and fixed income very significantly.
>> Well, let's talk about 2024 in terms of something very interesting in talking the significance of it. I have found in my work-- and it's been gradual over the past year and a half-- I say the word "pandemic" less and less. You're saying that 2024 might be the year we can actually put all that really behind us for good?
>> I do think so. And so, in my opinion, I think this is really the first year after the pandemic that it's not only those initial disruptions that are behind us, but all the dislocations that were then caused by those disruptions. So when we think about initially during the pandemic, we had a huge shift in consumer behavior, a big shift in consumer spending.
We're starting to see that revert back to pre-pandemic norms. The amount of spending on goods and services going back to more normally historical levels.
We had the office workers, such as myself, all working from home. People are now returning back to office. But, even thinking about monetary policy and fiscal policy, we had some of the largest stimulus programs in history. Those are all moving back towards more normal type of spending going forward. We had zero interest rate policy for the first couple years. And then inflation ramped up too high. The Fed had to catch back up.
So we've had some restrictive monetary policy for the past six to nine months, which we do think that the Fed will take the foot off the brake and get back to more of a neutral policy. So, again, looking at the market, I think this year is really going to be back to basics, back to looking at individual company fundamentals, looking back at individual sector fundamentals. And I think stock picking and selection is going to be increasingly much more idiosyncratic this year going forward.
>> That was David Sekera, chief US market strategist with Morningstar Research.
Now let's get you caught up on some of the top stories in the world of business today.
Earnings season kicking off with a plethora of releases from the Wall Street banks. J.P. Morgan Chase reported lower profit on charges ties to regional bank failures last year. Bank of America also saw a weaker bottom line on regulatory charges. Citigroup says it will cut 20,000 jobs as it reports a $1.8 billion loss for the quarter.
Let's check in on shares of Delta Airlines. They are under pressure today.
Despite a strong quarterly earnings report. Let's start with the strength. The air carrier doubled its profit in the fourth quarter compared to the same period last year, that of course on strong travel demand.
All that said, Delta's profit outlook for this year is coming in below the streets expectations. Delta itself down about 8%.
Other airline stocks down in sympathy.
Let's talk about uranium stocks, including Cameco and Denison Mines, they are on the move today.
That is as the world's largest uranium miner, Kazatomprom, warns it will likely fall short of its production targets for the next few years.
The miner says it's facing construction delays and shortages of sulphuric acid, a key substance in uranium extraction.
Denison up 8%, Cameco, the whole space up today. A quick check in on the markets, we will start with the TSX Composite Index.
We are about 1/4 of a percent. South of the border, the Wall Street banks kicking off the US earnings and Delta in there as well. A little bit of pressure to the downside, nothing too dramatic. You down eight points, shy of 1/5 of a percent.
Earlier this week, the US Securities and Exchange Commission approved the availability of 11 spot bitcoin ETS trading on the US markets. Andres Rincon, head of ETF sales and strategy at TD Securities joined me to discuss the change.
>> After many, many years of working between issuers and regulars, the SEC has finally approved the first spot Bitcoin ETF in the US. Now, there was already an approval for several futures-based Bitcoin ETFs in the US. But this is the first ones for spot Bitcoin ETF. And with that, as you mentioned, they've approved 11 spot Bitcoin ETFs in the US with a variety of management fees, and different indices, and whatnot. So although it's still spot Bitcoin ETF, there is a lot of diversity in there in how to get exposure to spot Bitcoin ETF. Whether the regulators like that or not, what that has actually done is it has provided a little bit more legitimacy to the crypto space, and also, really, a lot of encouragement to investors to invest in this very big and growing market through the regulated market of ETFs.
And also what it does is it gives access to a lot of people and investors that probably didn't have access to spot Bitcoin ETFs or spot Bitcoin before. For example, if you were an advisor, you probably did not have access to a wallet for your clients as a cold or a hot wallet. Now you do through spot Bitcoin ETFs.
>> So these are very interesting developments. We were just showing the audience the list of the 11 that the SEC has said can begin trading. How do they actually work? If someone's wondering, OK, I understand that the SEC has done something here, what is the product?
>> So these spot Bitcoin ETFs that have been launched, all they do is, really, they hold crypto. They hold, in this case, specifically Bitcoin that they hold. So you, the investor, gives money to the ETF to buy units of the ETF. The ETF then goes and buys crypto on behalf of the unit holders. And they store it in a cold wallet on behalf of that unit holder, in the same way that you would do if you had a wallet on a crypto exchange. But they do that for you.
So what we've seen now is the launch of many, many different ETFs. As you mentioned, 11. And the management fee varies quite a bit between these ETFs.
So you have as low as 20 bips, or a fifth of a percent, to as high as 1 and 1/2%. So it varies quite a bit. And what's really interesting is that we have already seen a fee war-- >> I was going to ask you about that because you and I talk about ETFs all the time. We talk about fee wars. So this is already happening in this very, very new space.
>> It hasn't-- well, before I forget, these ETFs start trading today. And we've already seen a fee war in these ETFs.
Seven of these ETFs have already waived their fee for half a year.
So zero management fee to start the year, many of these ETFs. And we're going to very likely see a lot of trading in these ETFs.
>> Could be a very interesting space. Of course, we are talking about what the SEC has allowed in the United States. Of course, Canada has had a market, I believe, in products like this for a bit of a time now.
>> Yes. So as I mentioned earlier, we've had futures-based ETFs for some time now.
And the market is sizable in the US. Call it 12 products.
But Canada has had both a futures-based Bitcoin ETF and a spot Bitcoin ETF. We're actually the leaders in the world to be the first to launch a Bitcoin ETF in the world. Purpose did so, and Evolve, and many other issuers did so here in Canada.
So we have a fairly large market. We have about 28 crypto ETFs already in Canada, and we cover about 4 and 1/2 billion dollars. What's going to be really interesting is that one of the ETFs that launched today, the Grayscale one, is really a conversion from a different fund structure. So the crypto industry in the US on the ETF side will already have $30 billion just as of today.
>> All right. So these are very interesting developments. Obviously, with any asset class, you talk about legitimacy, right? I feel like this has been the cryptocurrency story for several years, whether Wall Street and Bay Street will start to adopt, and clearly that they have. But what are the risks here in an asset class like Bitcoin, a cryptocurrency?
>> As many of your guests would understand, many of your viewers, there are a lot of risks with crypto. There's obviously volatility risks. This is a very volatile asset. So obviously, there's also principal risk, that you could lose a big portion of your investments.
But I'm going to paraphrase the very person that approved these ETFs, Chair Gensler from the SEC. When he approved them, he said that, although they approved all these ETFs, this is not really an encouragement to investors to invest in crypto. And they obviously are citing or saying a lot of the risks that are out there.
And they're saying, although we approved them, this is not necessarily an approval of Bitcoin in itself or the appropriateness of it. So it's important to understand a lot of the risks still for investors when you're investing in these.
And from our perspective on the ETF side, something to bear in mind is that, in the same way that when you invest in crypto through a crypto exchange and then you store in a cold wallet, these assets are also stored in a cold wallet.
And we've known that, historically, some of these cold wallets could be at risk from theft and whatnot. So it's important to understand those risks as an investor.
And so it's important to do your due diligence. Now, a lot of these crypto ETFs have very professional, large custodians, so the risk is very low in those circumstances. But it's a risk that it's important to mention.
>> That was Andres Rincon, head of ETF sales and strategy at TD Securities.
As always, make sure you do your own research before making any investment decisions.
Now, let's get our education segment of the day.
In today's education segment, we are taking a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing.
Hiren Amin, Senior client education instructor with TD Direct Investing has this look at some of the different types of trades you can make on the platform.
>> Hello and welcome to today's education hit. We are going to be talking about our platform Advanced Dashboard here today, specifically we are going to look at how to place additional orders on our trading platform. Those are ones we are going to be looking at how to do profit taking orders and ones on how you can limit losses. No conditional orders in general, they at a certain level of automation to traders for their trading and helps them execute on those trading plans and state discipline. But it also helps us take out the emotions of trading and we know that we can get caught up, especially when it comes to money.
So let's hop into our platform today, Advanced Dashboard, and show you how you can go about doing this.
All right, so I got Advanced Dashboard pulled up and you could be on any screen.
We are going into order entry. For me to do that first, I'm going to pick a security. So I'm on the markets tab over here. You can see all of the major indices we have.
I'm going to focus on one of the Dow 30 company. You can see the Dow Jones here and I will expend that list to populate the companies.
What I'm going to pay today as we are going to go with Nike. Let's open up the bubble over here and enter our by order.
Now, with this order set up, I'm just going to minimize the index as well so we can focus on the order entry box.
What we are going to do here is we are going to add both a profit-taking order as well as a loss minimizing order.
We can do either or and I will show you how to do that. First of all, we're looking to buy Nike.
10 chairs. And we will put a limit price of let's say $100 if it does get to that price. Then you will notice there is little function here that says attach profit loss exit. Let's click on that.
Once you do that, it's went to open up additional sets of orders you can input.
Now, it is up to you whether you want to do a profit-taking order alone or you could click the bottom order into a stop loss which is going to minimize losses, or both.
Let's show you how you can do just the one first and we call this simply a one triggers another order.
Let's do our profit loss order. Let's assume we get to buy our Nike at 100 bucks and we just want to put an order now to sell but at a profit so maybe I'll see if I can get it at, you know what, if we can run up to about 110, we want to take out profits, that $10 off the table there.
By the same token as well, we are also going to do what we call a first triggers another order in which we are going to also attach a stop loss. What we are seeing here now as you're going to get this order first bought and then it's either going to get us our profit-taking order or stop loss.
The way stop loss works is to send a trigger limit and price, let's say it's on the downside, if the stock falls to $90, alert me or get this order activated and at the very least, I want a minimum price of just about a dollar below call that $89. At the very least, get me $89 is my limit price once this order gets activated at the $90 threshold.
With this is basically saying is we are going to buy the order and then said both of these up together and whatever the price goes to first, whichever direction Nike had to first, if it goes to a limit price on the profit, we are ready to take out profits, but if it go south on us, we are going to get out of the stock and locking our losses at the $10 threshold that we have or $11 in this case.
And that is a look at how you can place these profit and loss minimizing orders on this platform. It's useful and I would recommend traders consider this especially during heightened market volatility or also give you the peace of mind if you happen to be away, relaxing notice of the beach, this will be taking care for you.
That's it for our hit for today.
>> That was Hiren Amin, Senior client education instructor with 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.
Signals from the US Federal Reserve that rate cuts could be on the table set off a market rally in the final weeks of 2023, marking an inflection point of sorts for several sectors. Eager to walk us through what he seeing in the markets is Ben Gossack, Managing Director and portfolio manager with TD Asset Management.
>> So we definitely saw a pivot in, we'll call it, the large cap indices-- so an S&P 500, TSX 60. We saw this move and then for the full year, when we reflect back on 2023, we'll say, well, that was a great year because the S&P was up 20-something percent. Why were we sitting in cash all year?
We have been talking about a market of stocks, I think, all of 2023, and that market of stocks has actually been in a bull market, we think, for about 18 to 19 months, so that takes us back to the summer of 2022. And throughout that bull market, there has been some key pivot points. In particular, one was around March and April of '22, which was when the Feds started their hiking cycle.
We saw sectors like housing and trucking-- so these are sectors that you would think would lead an economic cycle-- outperform and still outperform. And then when the market made its bottom in November, so the S&P of that year, we saw other sectors like semiconductors make their bottom and move. With this last Fed announcement, what was notable to me were three sectors that made a pivot, and that would be banks, health care, and real estate.
>> So let's talk about them, I know, because last year, you and I would have discussions about financials, but the discussion was more around the life co's having the leadership there and not so much the banks. So maybe we start walking through some of those sectors.
>> Yeah. So definitely, there's a broader secular trend that I can chart even to prior to the financial crisis of US insurance outperforming US banks. But we are in a period where we are now seeing a leadership change towards the banks. I know I brought some charts, as I normally do. I was just checking to see if they were up there.
>> So here they are, financials versus the S&P 500. We got market cap weighted and equal weighted, so walk us through these charts. What are they telling us?
>> And again, just to level set or remind people, the way that we like to look at the market is to look for relative strength, so think of it as a tug of war.
On the left-hand side, what you're looking at is S&P 500 financials, and that's a tug of war versus the S&P 500.
It's all market cap, so you have to understand that companies like a JPMorgan or a Berkshire or Bank of America would represent the majority of that index.
And you could see 2023 was a really tough year for banks, and it's not until we get to that November, around that Fed decision, that we see a little lift. And so I'd say that's notable.
What's really interesting is-- and we've talked about this, about looking at things on an equal weight basis. So let's make JP Morgan equal to the tiniest regional bank in the index, and then let's put that over an equal weight S&P 500. And you could say-- I'd say since spring of last year, we've actually been on a 45-degree angle, but what you can't tell is about that leadership change.
So a lot of it was being driven by insurance, so you could really see the strength of insurance. And then around that Fed pivot, we saw insurance take a break, and we saw a rotation into banks.
And so we have banks that are going to start the reporting season this Friday, but heading into those earnings, they're carrying some interesting momentum.
>> OK. So that's a very interesting move in the financial space. You mentioned health care and real estate as well and this idea that when the Fed finally tipped its hand, despite what the market had been predicting they would do this year, some sectors woke up.
>> Yes. And one last point on the banks. I think the reason why they're performing is you could tell that people were more worried about credit provisions and the fear of credit provisions and loans that wouldn't perform.
>> So that was definitely a Canadian bank story too, and I think we might have a picture of that.
>> And this move that we're seeing in terms of banks is that we're seeing in the US, we're seeing it in Canada. And so what we're looking at here is at the top is equal weight Canadian banks. So we treat all six Canadian banks as equal in this index, and we put it over the market cap TSX 60.
And what's really notable about Canadian banks-- and this is why, I think, so many people own Canadian banks, is that, look, banking is a cyclical sector. And when you look at this chart, you can really see that banks can go on a four-year run. So when we had the oil collapse in 2014, 2015, we saw banks depress because we were worried about their exposure to the energy sector. That fear was not warranted, and so then they went on a four-year outperformance.
And then sometimes they run into issues like banks, again, economic cycle, and they go through two years of underperformance. Canadian banks have been underperforming since, call it, the end of '21. So we've had two years of underperformance, and then just like with the US banks, we've seen a notable shift in the banks. Again, I think it's driven by the fear of the credit provision.
So I was marketing across the country.
Everyone is saying, aren't we worried about the Canadian banks? All these mortgages are going to reset. Doesn't the stock market understand what's going on?
And it's like, yes, it reflected that in the fear. We don't need the Fed to cut to see the benefits already because we've already seen it across the yield curve.
The market has already taken a percent off rates across the board. We burrowed those rates today.
And so already, we have provided, let's say, financial pressure release across the board, and that's why you can see the banks perform now, as opposed to having to wait for a Bank of Canada cut or a Federal Reserve to cut.
>> Very interesting stuff there. We went a bit deeper there on the financial stuff. I think we're going to move on to the health care space now and what you're seeing here.
>> Yeah. So on our left-hand chart, again, we're talking about market cap. What's really notable about the health care sector, it's very dominated by really big companies. So if you think about a Johnson & Johnson and an Abbott and a Merck and a Pfizer. And so in 2022, when the market was selling off, these are typically defensive areas. People have to take their medicine, have to continue dialysis, all that type of stuff.
And so you can see that in 2022, health care just outperformed. And then in '23, it was the reverse. And so those large cap companies underperformed, and most people would say in '23, health care was a bad sector to be in. But it goes back to being an active manager, doing stock selection.
If you owned Eli Lilly, then you were not-- or other sort of GLP, one-type drug companies-- you were like, hey, this has been great in health care.
And it really shows up on our equal-weight chart on the right-hand side.
You can see that while large-cap companies are underperforming, equal weight was steadily working, and then it stopped working. And we talked a lot about this last year in that there are lots of companies in the health care industry that were facing some existential crisis because these obesity drugs might impair their business model.
So if people who would have been disposed to diabetes don't become diabetic because their weight is under management, those are billion dollar franchises where people are saying, are you able to earn the dollars in the future that you're earning today?
>> Let's talk about real estate because, our story, we want to talk about, yeah-- no, we're going to talk about real estate.
We've got so much to get through.
>> There is so much to get through, yes.
>> I'm getting ahead of myself, but let's talk about real estate because, obviously, when we saw aggressive interest rate hikes, there was an impact here.
>> Yeah. And so that's-- you would expect.
A lot of times, you're looking at the market and you're like, I expect certain things to happen.
You see it, and you're like OK, not surprised. And sometimes you look and you're like, hey, I expected something. I didn't see it happen.
With real estate, very bond-like. We saw interest rates go up. We saw real estate underperform. Throw on top of that issues with office, issues regarding commercial real estate, all that type of stuff, a wall of debt, all that type of stuff. Yes, it's just fuel on the fire.
It's underperformed. We're seeing a turn in US real estate sector, and I see it on market cap and equal weight.
So it's not just one or two stocks that are moving. It's all stocks are moving.
Not only that, Greg, I see it in Canada, and I see it in Europe. It's a global phenomenon where real estate had underperformed, and it pivots. Now, if I look at those charts, they seem to be in secular decline, and so it's very possible that what we're seeing in real estate is, yeah, we declined. We're going to unwind, and we could continue that decline.
So I'm not saying there's going to be some bonanza in real estate, but it does look like there is a relief rally tied to the fact that interest rates have fallen.
>> A lot of those charts have something in common where we saw where the Fed came in, stepped in, changed the market's thinking about what they might be up to this year, the inflection point. We are told that telecoms and utilities are also very rate sensitive. They didn't appear to wake up, I think, from the charts you're going to show us. What's going on there?
>> And that's why I find even more notable. There's stuff that you would expect. You see it show up on the chart, and you're like, yeah, the market is doing what you would expect it to be doing. I find it more fascinating when you expected a result and you saw something else happen. So we've seen staples decline even more. We've seen utilities decline more and telecom stocks.
And you would think, well, they were declining all this time before. The narrative was, yes, this is being driven by interest rates. So we lower interest rates across the yield curve by 1%. We see certain sectors perform, and then these ones got worse? And so now, it's just like, what's going on? And that's something that I continue to ask myself.
Why aren't they participating?
And I don't have that answer right now, but that's the beauty of looking at charts, looking at patterns. I find they're not crystal balls, but they help you to direct where to focus and where to ask the right questions.
>> That was Ben Gossack, Managing Director and portfolio manager with TD Asset Management.
Now, for an update on the markets.
Okay, we are back into TD's Advanced Dashboard, a PlatForm designed for active traders available through TD Direct Investing. Let's take a look at the heat map function, gives us a view of the market movers.
We are screening through the TSX 60 by Price and volume.
Uranium plays are on the move substantially a higher including Cameco on the TSX 60, a little more than 8% at this hour.
Taking a look at the material space, you are seeing some green on the screen for some gold miners. The price of gold is moving higher. Barrick Gold is up 2% and Kinross up 3%.
Nutrien, that is potash, seeing some downward pressure there.
Not much notable happening in the other spaces.
The financials just modestly to the downside for the most part.
Let's check in south of the border to the SNP 100. Earnings season is underway. The majority of what we got today was from the big Wall Street banks.
Checking in on those in the financials bucket, got Bank of America down a little less than 1 1/2%, Wells Fargo down about 3 1/2%.
Not a lot of green on the screen in that space. Tesla has had a few sessions after the downside, it today giving back 3.7%.
You can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
Every month TD Direct Investing releases an index that measures investor sentiment and MoneyTalk's Anthony Okolie has this look at housing shaped up for December.
>> The big take away was that self-directed investors were bullish for a second straight month. Here are the details. Let's start with overall TD Direct Investing index. It came in at +12, that's down 20 points month over month.
The stock market rally that started in November shifted into overdrive in December after the Federal Reserve open the door to US federal interest rate cuts in 2024.
It was up a massive 78 points compared to last December one sentiment was at -66.
When we look at components that make up the DII, to core proxies help us understand why positive sentiment slipped in December.
First, the proxy for net equity demand or bought versus sold came in at -14, that's down 14 points month over month.
Self-directed investors sold more securities last month. Positive value would indicate investors bought more than they sold.
Another bearish indicator was flight to safety and the measure came in at +1, falling nine points month over month, indicating more investors pulled back into safer, less risky investments.
Keep in mind, the lower value means risk off actual flight to safety.
A few key points that still actually stood out.
Ecology came out on top once again as the most heavily traded sector, boosted by sustained interest from active traders, those with 30 or more trades in the past three months.
Secondly, baby boomers born into 1946 until 1964 were the least optimistic age group last month.
Leading the way was the tech sector, sitting at +13 and December versus +15 the prior month.
The most heavily bought tech stocks last month included chip giant Nvidia, a lot of those crypto current see minors, Bitfarms, Hut 8 and Marathon Digital Holdings.
Crypto stocks rallied in December on hopes that US regulators may loosen up rules around the types of crypto current see ETFs.
When we look at trading actually based on age, baby boomers were the least positive on sentiment, falling 11 points to -2.
Boomers spread their securities into separate banks like CIBC and take names like Nvidia, Tesla and Shopify.
And that's your TD Direct Investing index eyelets for December 2023.
>> Our thanks to MoneyTalk's Anthony Okolie.
As always, make sure you do your own research before making any investment decisions.
That's all the time we have for today show. Stay tuned. We will be back on Monday with three perspectives on some personal finance questions facing Canadians: Georgia Swan is going to have a look at the new it TFSA limit and what you may want to do with that extra room.
Mindi Banach is going to discuss the rules around wills for Canadians living outside the country and naming a beneficiary if you convert your RSP into a riff.
That's all the time we have for the show today. Thanks for watching. We will see you next week.
[music]
coming up on today's show, we are going to hear from TD Asset Management set Ben Gossack on the pivot point he's keeping an eye on in the markets.
Plus, we are going to take a look at how bitcoin exchange traded funds work with Andres Rincon from TD Securities. And MoneyTalk's Anthony Okolie is going to have a look at investor sentiment with the results of the latest TD Direct Investing Index.
Plus in today's education segment, Hiren Amin is going to have a look at the different trade types available on the Advanced Dashboard platform.
Before he gets all that, let's get you an update on the markets. We will start here at home with the TSX Composite Index.
Right now we've got 50 points to the upside, about 1/4 of a percent. Nothing too dramatic but some interesting movers among the most actively traded names on the TSX at this hour. I want to start with one of the uranium plays. Denison Mines.
It seems there are some concerns over global supply in the next couple of years and it is boosting the sector as a whole, Denison among them.
Had two bucks and $0.60 per share, the stock is up more than 8%. Delta Airlines came out and although it had a good quarter, their forecast for this year is a little weak. It's not only weighing on their shares but on the shares of the airline industry as a whole.
Air Canada 1883, down a little more than 3%.
Now, we have had the official kickoff to yet another earnings season, the big Wall Street banks coming out today as the market tries to do just that, some of the macro data we got this week. You're down a pretty modest eight points on the S&P 500, a little less than 1/5 of a percent.
Want to check on the tech heavy NASDAQ, how is it bearing against the broader market? Pretty much the same, you're down 20 one point, a little more than 1/10 of a percent. Here's Delta Airlines, strong quarter but the street doesn't like the forecast for this year. That stock is down more than 8% at 30 bucks and change. And that's your market update.
Well, we've got our first full trading week of the year almost under our belts as we head into the afternoon session. It's been an interesting one so far.
MoneyTalk's Anthony Okolie joins us now to discuss.
We can talk about the big banks that kicked off the season.
>> It's been a rough start for the US banks and you can put some blame on the regional banking crisis because it cost the Federal Deposit Insurance Corporation about $23 billion to clean this up and of course it's the large banks that had to foot most of the bill for that.
>> That ended up showing up in quarterly results that were sitting across the board.
We had Delta come out and they are warning about the path ahead and then I think about the fact that we are going to get a crush of earnings over the next couple of weeks. We are going to get a sense of the health of corporate America and Canada as well, we will also have some macro events including inflation. It's a love for investors earlier in the year to make sense of.
>> We got the US inflation numbers which came in hotter than expected. However, when you look at the actual core inflation it's actually bang on. TD Economics believes that the Fed is going to continue to have to see inflation decreasing towards the 2% target before they can consider cuts but certainly we will be getting more economic data and that is going to have an impact on the market.
>> When I took a look at the reaction to the inflation numbers, it's been a long week, has in it, for a first full week back. It was only yesterday morning we got the inflation numbers. The market didn't get too pessimistic to the downside. Went through some of the details. It came in hotter than expected, the US jobs report last week. Another week next week, we will turn the spotlight to Canada. We are going to get our inflation to help us, inform us as to what the Bank of Canada might get up to later this month.
>> Exactly.
Right now, markets are pricing in potential cuts by the Bank of Canada by April. That aligns with TD Economics as well. Again, the Bank of Canada will need to see signs that inflation is moving towards its 2% target and again, this is something that markets will be watching closely and hopefully if we do get that perhaps we can see what we saw in 2023.
>> Maybe this is just because it's our first week back its wake-up week. But now we've got earnings taking off.
Next week we are going to be on our game.
>> Absolutely.
>> Thanks for that, Anthony.
MoneyTalk's Anthony Okolie. He will be back later on the show taking us to the results of the latest TD Direct Investing Index.
Markets had a very strong run in the final innings of last year. Investors consider the potential for interest rate cuts from the Federal Reserve. He got the hotter than expected headline inflation print south of the border later this week.
It raises the question of where the market might go from here. We spoke with David Sekera, chief US market strategist with morning's research, to discuss.
>> We still think the market overall is really very close to our fair value.
And when we think about fair value for the market, we do take a bottoms-up approach.
We compare where the market is trading, so the composite of the fair values of all of the stocks that we cover that trade on US exchanges-- over 700 stocks-- and then compare that where they actually are in the marketplace today. And that's why we think that the market is trading pretty close to fair value.
A lot of other strategists take much more of a top-down approach. They start off with some sort of algorithm or model to come up with S&P 500 earnings for the end of the year and apply some forward multiple to it. But the way that we look at it is what we think the market is actually worth today. And what we mean by fair value is that, for long-term investors, going forward, I expect that you should be able to earn, essentially, the market's cost of equity on a blended basis. So we're looking for much more normalized returns going forward, probably in that 8% to 9% area.
>> So in a market that you say is pretty much fairly valued right now, as we dig in beyond the broader market, where might we be seeing some value?
>> Yeah. So even though the broad market is pretty close to fair value, there are still some dislocations that we do think investors can take advantage of. So when we break it down the valuation into the Morningstar style box, by category, I'd note that the value category is trading at about a 10% discount to fair value.
Whereas, core stocks-- those are the ones that have some attributes of value, some attributes of growth-- they are trading at a slight premium to our fair values. And then the growth category, after the huge run that we've had last year, is now trading up at fair value. And then, when we look at it by capitalization, small cap stocks, in our view, are still very attractive-- trades at about a 16% discount to that blended fair value average.
And I think 2024 is really set up to be probably a pretty good year for value stocks, and especially small cap stocks. I think a lot of the reasons that we saw value in small caps lag the past couple years-- I think a lot of the reasons are behind us at this point. So I do think those are going to be two good areas for investors to look at going forward.
>> So the setup seems, perhaps, promising for value and small caps. What could be the risk to these parts of the market?
What could get in their way?
>> Well, for the overall market, inflation is certainly going to be a risk. We did see CPI numbers come out this morning.
Yeah, I would note-- and, actually, I talked to our economist early this morning. And he's still of the opinion that he thinks that the Fed will cut, and potentially cut as soon as the March meeting.
When we look at those numbers and really dig into them, a couple of the different areas that caused the numbers to be higher than what the market expected, such as used vehicle prices and shelter prices-- we still project those will moderate over the next couple months. And, specifically, we're very focused on core inflation.
And he notes that PCE, the Personal Consumption Expenditure, index for inflation, which is the Fed's real targeted number that they're focused on-- for the six months ending in November, was at 1.9%. So, in his view, given that core CPI was relatively steady on a year over year basis, and we still have that same correlation between CPI and PCE, that allows PCE to come in still below or right at the Fed's target. So it'll give them the room to potentially cut here in March.
>> Interesting. So, if we did see that come to pass, let's talk about the shift to easing from the Fed and what it could mean for the markets.
>> Yeah. So I think, with nothing else, what that's going to do is provide a good floor if we do have some downturns later this year. I am a little concerned with earnings season coming up here that it might be an opportunity that management teams maybe try to look to set the bar lower for their earnings expectations for the year.
We do expect that the rate of economic growth will slow here for the next three quarters. So if management teams have those same kind of projections in their own models, they may try and lower the bar on guidance. And, of course, that could drive some negative sentiment.
However, with the Fed cutting-- easing-- in fact, we're looking for six rate cuts this year.
That would actually put the Fed funds rate in that 3 and 3/4% to 4% area by the end of the year. I do think that that will end up bolstering the economy later this year and going into 2025. So if we do have some sell-offs, that actually would probably be a better opportunity for investors to maybe go back into more overweight positions in equities.
>> I guess the wild card here, just like when we were speaking earlier in terms of risk, would just be in the end that inflation doesn't come down the way we hoped it did.
>> Yeah, that is really the big risk-- that, if inflation doesn't come down and the Fed decides that they need to keep rates higher for longer, yeah, I think that would have a lot of negative implications, not just in the equity market, but also in the fixed income market.
Yeah, we do think that interest rates also should subside this year, even in the longer end of the curve. So if interest rates stay high, and, in fact, if the 10 year were to start actually moving back up again, I do think that would pressure both equity and fixed income very significantly.
>> Well, let's talk about 2024 in terms of something very interesting in talking the significance of it. I have found in my work-- and it's been gradual over the past year and a half-- I say the word "pandemic" less and less. You're saying that 2024 might be the year we can actually put all that really behind us for good?
>> I do think so. And so, in my opinion, I think this is really the first year after the pandemic that it's not only those initial disruptions that are behind us, but all the dislocations that were then caused by those disruptions. So when we think about initially during the pandemic, we had a huge shift in consumer behavior, a big shift in consumer spending.
We're starting to see that revert back to pre-pandemic norms. The amount of spending on goods and services going back to more normally historical levels.
We had the office workers, such as myself, all working from home. People are now returning back to office. But, even thinking about monetary policy and fiscal policy, we had some of the largest stimulus programs in history. Those are all moving back towards more normal type of spending going forward. We had zero interest rate policy for the first couple years. And then inflation ramped up too high. The Fed had to catch back up.
So we've had some restrictive monetary policy for the past six to nine months, which we do think that the Fed will take the foot off the brake and get back to more of a neutral policy. So, again, looking at the market, I think this year is really going to be back to basics, back to looking at individual company fundamentals, looking back at individual sector fundamentals. And I think stock picking and selection is going to be increasingly much more idiosyncratic this year going forward.
>> That was David Sekera, chief US market strategist with Morningstar Research.
Now let's get you caught up on some of the top stories in the world of business today.
Earnings season kicking off with a plethora of releases from the Wall Street banks. J.P. Morgan Chase reported lower profit on charges ties to regional bank failures last year. Bank of America also saw a weaker bottom line on regulatory charges. Citigroup says it will cut 20,000 jobs as it reports a $1.8 billion loss for the quarter.
Let's check in on shares of Delta Airlines. They are under pressure today.
Despite a strong quarterly earnings report. Let's start with the strength. The air carrier doubled its profit in the fourth quarter compared to the same period last year, that of course on strong travel demand.
All that said, Delta's profit outlook for this year is coming in below the streets expectations. Delta itself down about 8%.
Other airline stocks down in sympathy.
Let's talk about uranium stocks, including Cameco and Denison Mines, they are on the move today.
That is as the world's largest uranium miner, Kazatomprom, warns it will likely fall short of its production targets for the next few years.
The miner says it's facing construction delays and shortages of sulphuric acid, a key substance in uranium extraction.
Denison up 8%, Cameco, the whole space up today. A quick check in on the markets, we will start with the TSX Composite Index.
We are about 1/4 of a percent. South of the border, the Wall Street banks kicking off the US earnings and Delta in there as well. A little bit of pressure to the downside, nothing too dramatic. You down eight points, shy of 1/5 of a percent.
Earlier this week, the US Securities and Exchange Commission approved the availability of 11 spot bitcoin ETS trading on the US markets. Andres Rincon, head of ETF sales and strategy at TD Securities joined me to discuss the change.
>> After many, many years of working between issuers and regulars, the SEC has finally approved the first spot Bitcoin ETF in the US. Now, there was already an approval for several futures-based Bitcoin ETFs in the US. But this is the first ones for spot Bitcoin ETF. And with that, as you mentioned, they've approved 11 spot Bitcoin ETFs in the US with a variety of management fees, and different indices, and whatnot. So although it's still spot Bitcoin ETF, there is a lot of diversity in there in how to get exposure to spot Bitcoin ETF. Whether the regulators like that or not, what that has actually done is it has provided a little bit more legitimacy to the crypto space, and also, really, a lot of encouragement to investors to invest in this very big and growing market through the regulated market of ETFs.
And also what it does is it gives access to a lot of people and investors that probably didn't have access to spot Bitcoin ETFs or spot Bitcoin before. For example, if you were an advisor, you probably did not have access to a wallet for your clients as a cold or a hot wallet. Now you do through spot Bitcoin ETFs.
>> So these are very interesting developments. We were just showing the audience the list of the 11 that the SEC has said can begin trading. How do they actually work? If someone's wondering, OK, I understand that the SEC has done something here, what is the product?
>> So these spot Bitcoin ETFs that have been launched, all they do is, really, they hold crypto. They hold, in this case, specifically Bitcoin that they hold. So you, the investor, gives money to the ETF to buy units of the ETF. The ETF then goes and buys crypto on behalf of the unit holders. And they store it in a cold wallet on behalf of that unit holder, in the same way that you would do if you had a wallet on a crypto exchange. But they do that for you.
So what we've seen now is the launch of many, many different ETFs. As you mentioned, 11. And the management fee varies quite a bit between these ETFs.
So you have as low as 20 bips, or a fifth of a percent, to as high as 1 and 1/2%. So it varies quite a bit. And what's really interesting is that we have already seen a fee war-- >> I was going to ask you about that because you and I talk about ETFs all the time. We talk about fee wars. So this is already happening in this very, very new space.
>> It hasn't-- well, before I forget, these ETFs start trading today. And we've already seen a fee war in these ETFs.
Seven of these ETFs have already waived their fee for half a year.
So zero management fee to start the year, many of these ETFs. And we're going to very likely see a lot of trading in these ETFs.
>> Could be a very interesting space. Of course, we are talking about what the SEC has allowed in the United States. Of course, Canada has had a market, I believe, in products like this for a bit of a time now.
>> Yes. So as I mentioned earlier, we've had futures-based ETFs for some time now.
And the market is sizable in the US. Call it 12 products.
But Canada has had both a futures-based Bitcoin ETF and a spot Bitcoin ETF. We're actually the leaders in the world to be the first to launch a Bitcoin ETF in the world. Purpose did so, and Evolve, and many other issuers did so here in Canada.
So we have a fairly large market. We have about 28 crypto ETFs already in Canada, and we cover about 4 and 1/2 billion dollars. What's going to be really interesting is that one of the ETFs that launched today, the Grayscale one, is really a conversion from a different fund structure. So the crypto industry in the US on the ETF side will already have $30 billion just as of today.
>> All right. So these are very interesting developments. Obviously, with any asset class, you talk about legitimacy, right? I feel like this has been the cryptocurrency story for several years, whether Wall Street and Bay Street will start to adopt, and clearly that they have. But what are the risks here in an asset class like Bitcoin, a cryptocurrency?
>> As many of your guests would understand, many of your viewers, there are a lot of risks with crypto. There's obviously volatility risks. This is a very volatile asset. So obviously, there's also principal risk, that you could lose a big portion of your investments.
But I'm going to paraphrase the very person that approved these ETFs, Chair Gensler from the SEC. When he approved them, he said that, although they approved all these ETFs, this is not really an encouragement to investors to invest in crypto. And they obviously are citing or saying a lot of the risks that are out there.
And they're saying, although we approved them, this is not necessarily an approval of Bitcoin in itself or the appropriateness of it. So it's important to understand a lot of the risks still for investors when you're investing in these.
And from our perspective on the ETF side, something to bear in mind is that, in the same way that when you invest in crypto through a crypto exchange and then you store in a cold wallet, these assets are also stored in a cold wallet.
And we've known that, historically, some of these cold wallets could be at risk from theft and whatnot. So it's important to understand those risks as an investor.
And so it's important to do your due diligence. Now, a lot of these crypto ETFs have very professional, large custodians, so the risk is very low in those circumstances. But it's a risk that it's important to mention.
>> That was Andres Rincon, head of ETF sales and strategy at TD Securities.
As always, make sure you do your own research before making any investment decisions.
Now, let's get our education segment of the day.
In today's education segment, we are taking a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing.
Hiren Amin, Senior client education instructor with TD Direct Investing has this look at some of the different types of trades you can make on the platform.
>> Hello and welcome to today's education hit. We are going to be talking about our platform Advanced Dashboard here today, specifically we are going to look at how to place additional orders on our trading platform. Those are ones we are going to be looking at how to do profit taking orders and ones on how you can limit losses. No conditional orders in general, they at a certain level of automation to traders for their trading and helps them execute on those trading plans and state discipline. But it also helps us take out the emotions of trading and we know that we can get caught up, especially when it comes to money.
So let's hop into our platform today, Advanced Dashboard, and show you how you can go about doing this.
All right, so I got Advanced Dashboard pulled up and you could be on any screen.
We are going into order entry. For me to do that first, I'm going to pick a security. So I'm on the markets tab over here. You can see all of the major indices we have.
I'm going to focus on one of the Dow 30 company. You can see the Dow Jones here and I will expend that list to populate the companies.
What I'm going to pay today as we are going to go with Nike. Let's open up the bubble over here and enter our by order.
Now, with this order set up, I'm just going to minimize the index as well so we can focus on the order entry box.
What we are going to do here is we are going to add both a profit-taking order as well as a loss minimizing order.
We can do either or and I will show you how to do that. First of all, we're looking to buy Nike.
10 chairs. And we will put a limit price of let's say $100 if it does get to that price. Then you will notice there is little function here that says attach profit loss exit. Let's click on that.
Once you do that, it's went to open up additional sets of orders you can input.
Now, it is up to you whether you want to do a profit-taking order alone or you could click the bottom order into a stop loss which is going to minimize losses, or both.
Let's show you how you can do just the one first and we call this simply a one triggers another order.
Let's do our profit loss order. Let's assume we get to buy our Nike at 100 bucks and we just want to put an order now to sell but at a profit so maybe I'll see if I can get it at, you know what, if we can run up to about 110, we want to take out profits, that $10 off the table there.
By the same token as well, we are also going to do what we call a first triggers another order in which we are going to also attach a stop loss. What we are seeing here now as you're going to get this order first bought and then it's either going to get us our profit-taking order or stop loss.
The way stop loss works is to send a trigger limit and price, let's say it's on the downside, if the stock falls to $90, alert me or get this order activated and at the very least, I want a minimum price of just about a dollar below call that $89. At the very least, get me $89 is my limit price once this order gets activated at the $90 threshold.
With this is basically saying is we are going to buy the order and then said both of these up together and whatever the price goes to first, whichever direction Nike had to first, if it goes to a limit price on the profit, we are ready to take out profits, but if it go south on us, we are going to get out of the stock and locking our losses at the $10 threshold that we have or $11 in this case.
And that is a look at how you can place these profit and loss minimizing orders on this platform. It's useful and I would recommend traders consider this especially during heightened market volatility or also give you the peace of mind if you happen to be away, relaxing notice of the beach, this will be taking care for you.
That's it for our hit for today.
>> That was Hiren Amin, Senior client education instructor with 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.
Signals from the US Federal Reserve that rate cuts could be on the table set off a market rally in the final weeks of 2023, marking an inflection point of sorts for several sectors. Eager to walk us through what he seeing in the markets is Ben Gossack, Managing Director and portfolio manager with TD Asset Management.
>> So we definitely saw a pivot in, we'll call it, the large cap indices-- so an S&P 500, TSX 60. We saw this move and then for the full year, when we reflect back on 2023, we'll say, well, that was a great year because the S&P was up 20-something percent. Why were we sitting in cash all year?
We have been talking about a market of stocks, I think, all of 2023, and that market of stocks has actually been in a bull market, we think, for about 18 to 19 months, so that takes us back to the summer of 2022. And throughout that bull market, there has been some key pivot points. In particular, one was around March and April of '22, which was when the Feds started their hiking cycle.
We saw sectors like housing and trucking-- so these are sectors that you would think would lead an economic cycle-- outperform and still outperform. And then when the market made its bottom in November, so the S&P of that year, we saw other sectors like semiconductors make their bottom and move. With this last Fed announcement, what was notable to me were three sectors that made a pivot, and that would be banks, health care, and real estate.
>> So let's talk about them, I know, because last year, you and I would have discussions about financials, but the discussion was more around the life co's having the leadership there and not so much the banks. So maybe we start walking through some of those sectors.
>> Yeah. So definitely, there's a broader secular trend that I can chart even to prior to the financial crisis of US insurance outperforming US banks. But we are in a period where we are now seeing a leadership change towards the banks. I know I brought some charts, as I normally do. I was just checking to see if they were up there.
>> So here they are, financials versus the S&P 500. We got market cap weighted and equal weighted, so walk us through these charts. What are they telling us?
>> And again, just to level set or remind people, the way that we like to look at the market is to look for relative strength, so think of it as a tug of war.
On the left-hand side, what you're looking at is S&P 500 financials, and that's a tug of war versus the S&P 500.
It's all market cap, so you have to understand that companies like a JPMorgan or a Berkshire or Bank of America would represent the majority of that index.
And you could see 2023 was a really tough year for banks, and it's not until we get to that November, around that Fed decision, that we see a little lift. And so I'd say that's notable.
What's really interesting is-- and we've talked about this, about looking at things on an equal weight basis. So let's make JP Morgan equal to the tiniest regional bank in the index, and then let's put that over an equal weight S&P 500. And you could say-- I'd say since spring of last year, we've actually been on a 45-degree angle, but what you can't tell is about that leadership change.
So a lot of it was being driven by insurance, so you could really see the strength of insurance. And then around that Fed pivot, we saw insurance take a break, and we saw a rotation into banks.
And so we have banks that are going to start the reporting season this Friday, but heading into those earnings, they're carrying some interesting momentum.
>> OK. So that's a very interesting move in the financial space. You mentioned health care and real estate as well and this idea that when the Fed finally tipped its hand, despite what the market had been predicting they would do this year, some sectors woke up.
>> Yes. And one last point on the banks. I think the reason why they're performing is you could tell that people were more worried about credit provisions and the fear of credit provisions and loans that wouldn't perform.
>> So that was definitely a Canadian bank story too, and I think we might have a picture of that.
>> And this move that we're seeing in terms of banks is that we're seeing in the US, we're seeing it in Canada. And so what we're looking at here is at the top is equal weight Canadian banks. So we treat all six Canadian banks as equal in this index, and we put it over the market cap TSX 60.
And what's really notable about Canadian banks-- and this is why, I think, so many people own Canadian banks, is that, look, banking is a cyclical sector. And when you look at this chart, you can really see that banks can go on a four-year run. So when we had the oil collapse in 2014, 2015, we saw banks depress because we were worried about their exposure to the energy sector. That fear was not warranted, and so then they went on a four-year outperformance.
And then sometimes they run into issues like banks, again, economic cycle, and they go through two years of underperformance. Canadian banks have been underperforming since, call it, the end of '21. So we've had two years of underperformance, and then just like with the US banks, we've seen a notable shift in the banks. Again, I think it's driven by the fear of the credit provision.
So I was marketing across the country.
Everyone is saying, aren't we worried about the Canadian banks? All these mortgages are going to reset. Doesn't the stock market understand what's going on?
And it's like, yes, it reflected that in the fear. We don't need the Fed to cut to see the benefits already because we've already seen it across the yield curve.
The market has already taken a percent off rates across the board. We burrowed those rates today.
And so already, we have provided, let's say, financial pressure release across the board, and that's why you can see the banks perform now, as opposed to having to wait for a Bank of Canada cut or a Federal Reserve to cut.
>> Very interesting stuff there. We went a bit deeper there on the financial stuff. I think we're going to move on to the health care space now and what you're seeing here.
>> Yeah. So on our left-hand chart, again, we're talking about market cap. What's really notable about the health care sector, it's very dominated by really big companies. So if you think about a Johnson & Johnson and an Abbott and a Merck and a Pfizer. And so in 2022, when the market was selling off, these are typically defensive areas. People have to take their medicine, have to continue dialysis, all that type of stuff.
And so you can see that in 2022, health care just outperformed. And then in '23, it was the reverse. And so those large cap companies underperformed, and most people would say in '23, health care was a bad sector to be in. But it goes back to being an active manager, doing stock selection.
If you owned Eli Lilly, then you were not-- or other sort of GLP, one-type drug companies-- you were like, hey, this has been great in health care.
And it really shows up on our equal-weight chart on the right-hand side.
You can see that while large-cap companies are underperforming, equal weight was steadily working, and then it stopped working. And we talked a lot about this last year in that there are lots of companies in the health care industry that were facing some existential crisis because these obesity drugs might impair their business model.
So if people who would have been disposed to diabetes don't become diabetic because their weight is under management, those are billion dollar franchises where people are saying, are you able to earn the dollars in the future that you're earning today?
>> Let's talk about real estate because, our story, we want to talk about, yeah-- no, we're going to talk about real estate.
We've got so much to get through.
>> There is so much to get through, yes.
>> I'm getting ahead of myself, but let's talk about real estate because, obviously, when we saw aggressive interest rate hikes, there was an impact here.
>> Yeah. And so that's-- you would expect.
A lot of times, you're looking at the market and you're like, I expect certain things to happen.
You see it, and you're like OK, not surprised. And sometimes you look and you're like, hey, I expected something. I didn't see it happen.
With real estate, very bond-like. We saw interest rates go up. We saw real estate underperform. Throw on top of that issues with office, issues regarding commercial real estate, all that type of stuff, a wall of debt, all that type of stuff. Yes, it's just fuel on the fire.
It's underperformed. We're seeing a turn in US real estate sector, and I see it on market cap and equal weight.
So it's not just one or two stocks that are moving. It's all stocks are moving.
Not only that, Greg, I see it in Canada, and I see it in Europe. It's a global phenomenon where real estate had underperformed, and it pivots. Now, if I look at those charts, they seem to be in secular decline, and so it's very possible that what we're seeing in real estate is, yeah, we declined. We're going to unwind, and we could continue that decline.
So I'm not saying there's going to be some bonanza in real estate, but it does look like there is a relief rally tied to the fact that interest rates have fallen.
>> A lot of those charts have something in common where we saw where the Fed came in, stepped in, changed the market's thinking about what they might be up to this year, the inflection point. We are told that telecoms and utilities are also very rate sensitive. They didn't appear to wake up, I think, from the charts you're going to show us. What's going on there?
>> And that's why I find even more notable. There's stuff that you would expect. You see it show up on the chart, and you're like, yeah, the market is doing what you would expect it to be doing. I find it more fascinating when you expected a result and you saw something else happen. So we've seen staples decline even more. We've seen utilities decline more and telecom stocks.
And you would think, well, they were declining all this time before. The narrative was, yes, this is being driven by interest rates. So we lower interest rates across the yield curve by 1%. We see certain sectors perform, and then these ones got worse? And so now, it's just like, what's going on? And that's something that I continue to ask myself.
Why aren't they participating?
And I don't have that answer right now, but that's the beauty of looking at charts, looking at patterns. I find they're not crystal balls, but they help you to direct where to focus and where to ask the right questions.
>> That was Ben Gossack, Managing Director and portfolio manager with TD Asset Management.
Now, for an update on the markets.
Okay, we are back into TD's Advanced Dashboard, a PlatForm designed for active traders available through TD Direct Investing. Let's take a look at the heat map function, gives us a view of the market movers.
We are screening through the TSX 60 by Price and volume.
Uranium plays are on the move substantially a higher including Cameco on the TSX 60, a little more than 8% at this hour.
Taking a look at the material space, you are seeing some green on the screen for some gold miners. The price of gold is moving higher. Barrick Gold is up 2% and Kinross up 3%.
Nutrien, that is potash, seeing some downward pressure there.
Not much notable happening in the other spaces.
The financials just modestly to the downside for the most part.
Let's check in south of the border to the SNP 100. Earnings season is underway. The majority of what we got today was from the big Wall Street banks.
Checking in on those in the financials bucket, got Bank of America down a little less than 1 1/2%, Wells Fargo down about 3 1/2%.
Not a lot of green on the screen in that space. Tesla has had a few sessions after the downside, it today giving back 3.7%.
You can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
Every month TD Direct Investing releases an index that measures investor sentiment and MoneyTalk's Anthony Okolie has this look at housing shaped up for December.
>> The big take away was that self-directed investors were bullish for a second straight month. Here are the details. Let's start with overall TD Direct Investing index. It came in at +12, that's down 20 points month over month.
The stock market rally that started in November shifted into overdrive in December after the Federal Reserve open the door to US federal interest rate cuts in 2024.
It was up a massive 78 points compared to last December one sentiment was at -66.
When we look at components that make up the DII, to core proxies help us understand why positive sentiment slipped in December.
First, the proxy for net equity demand or bought versus sold came in at -14, that's down 14 points month over month.
Self-directed investors sold more securities last month. Positive value would indicate investors bought more than they sold.
Another bearish indicator was flight to safety and the measure came in at +1, falling nine points month over month, indicating more investors pulled back into safer, less risky investments.
Keep in mind, the lower value means risk off actual flight to safety.
A few key points that still actually stood out.
Ecology came out on top once again as the most heavily traded sector, boosted by sustained interest from active traders, those with 30 or more trades in the past three months.
Secondly, baby boomers born into 1946 until 1964 were the least optimistic age group last month.
Leading the way was the tech sector, sitting at +13 and December versus +15 the prior month.
The most heavily bought tech stocks last month included chip giant Nvidia, a lot of those crypto current see minors, Bitfarms, Hut 8 and Marathon Digital Holdings.
Crypto stocks rallied in December on hopes that US regulators may loosen up rules around the types of crypto current see ETFs.
When we look at trading actually based on age, baby boomers were the least positive on sentiment, falling 11 points to -2.
Boomers spread their securities into separate banks like CIBC and take names like Nvidia, Tesla and Shopify.
And that's your TD Direct Investing index eyelets for December 2023.
>> Our thanks to MoneyTalk's Anthony Okolie.
As always, make sure you do your own research before making any investment decisions.
That's all the time we have for today show. Stay tuned. We will be back on Monday with three perspectives on some personal finance questions facing Canadians: Georgia Swan is going to have a look at the new it TFSA limit and what you may want to do with that extra room.
Mindi Banach is going to discuss the rules around wills for Canadians living outside the country and naming a beneficiary if you convert your RSP into a riff.
That's all the time we have for the show today. Thanks for watching. We will see you next week.
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