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[music] Issuing reports this week the market trying to put it all together. Sounding like pressure 5118 the S&P 500 done 32 points. Triple digit loss and some of the heavyweights under pressure today including Apple nothing too dramatic but taking points off the table.
You have Apple down a little more than 1%.
And that's your market update.
> It was a busy week almost behind us in a busy week ahead of us. Money talks Anthony Coley joins is now the look ahead to the big event up next week that would be the Fed rate decision.
>>federate decision of course a lot of hinges on the date it was all this week which drove markets. We will start with some of the inflation reports that wereceived. We got hotter than expected US consumer prices, wholesale inflation as well.
Starting with the CPI, the headline was in line with consensus but on a 12 month basis, CPI came in at 3.2%.
That was slightly harder than what we saw in January. It also marked the second straight month of stronger-than-expected core inflation. Something that the Fed pay close attention to. We also saw US producer prices as well that were stronger-than-expected.
I talked about the treasury yields.
That's at the treasury two-year high two week high as well. Added towards production with US factories rose more than expected in February. So I think markets right now are worried that the recent economic data is too strong for the Fed to start cutting rates.
>> As those reports came in hotter than expected, so interest and watched acne market. It seemed to shut off the wholesale report until it didn't on the same session. And you look at the bond side as you said, the US 10 year yield, we started at about 406 to begin the week.
4.3% and that's about 20% basis move the past couple days. The bond market seems to be getting a more cautious. What we think?
What is TD economics or TD securities thing?
When we will actually get a rate cut?
>> The Fed next week, largely expected that the markets will, the Fed will hold steady on rates but markets have been raining in bets for cutting significantly at least in the current cycle when fed share it's unlikely. But markets have started to slowly price them back in and currently the pricing and only about two basis point of cuts for May so they are not looking for cuts then. But there pricing at a full 25 basis point rate cut by July and another hundred 47 beeps of cuts between 2024 and 2025.
Now, TD securities expects that again next week they will hold but they expect the Fed to start cutting rates at the March meeting.
And they also see the Fed delivering five cuts in 2024. Another five cuts in 2025.
That would bring the terminal rate to 3% and they believe that is going to avoid a recession.
>> Interesting stuff and a lot of stuff on deck next week. Thanks Anthony.
>> My pleasure.
>> Money talks live Anthony Coley.
Now let's take a look at the some of the top stories in the world of business and take a look at how the markets are trading.
We have shares of Adobe in the spotlight today and the design software company didn't beat expectations for its most recent quarter but the sales forecast appears to be what is disappointing investors today. We see Adobe pulling back about 14% now course the share is made sizable gains over the last year or so on excitement around some of its artificial intelligence tools.
I also want to check on altar beauty. In terms of the share price now down 4.7%.
They say rising supply chain costs and promotions are hitting the bottom line.
Beauty retailers also forecasting full-year profit below Wall Street's expectations. Now this stock has been making new highs and recent session so bit of giveback today with all time.
Also want to check in on the fast food giant McDonald's.
Suffered a tech outage earlier today.
It had operations in several countries including here in Canada.
The Japan, the UK among them.
Some reports Japan stopped taking orders before getting those systems back online.
McDonald's said for its part the outage is not a result of a cyber security incident, right now you have McDonald's down modestly, a little more than half percent.
A quick check of the markets.
We have some green of the screen in Toronto cannot say the same about Wall Street but will check in on the TSX competent index.
Right now it is modest.
Very modest.
Up 10 points just five takes.
So the border bursting of a pullback in stocks.
It's been a busy week and a busy week next week. 30 boy deficit right now the S&P 500.
A little more than half a percent.
Let's take on inflation.
We did get a course hotter than inspected REITs on inflation out of the US this week and that has investors thinking about the Fed and when they may be ready to cut.
Look at that old Ian for the recent record making rally we've seen in gold?
Jennifer now ski VP director import fully manager with TD asset management join me earlier to discuss.
>> >> The big demand of central banks.
Central banks have been net buyers of gold for over a decade now as they work to diversify their holdings and move away from the US dollar.
The past two years have seen historically high central bank by as these trends have continued but on top of that, you have rising geopolitical concerns and sanctions and strong buying out of China.
Now, the tricky thing with central bank buying as it is very difficult to say exactly how much they're gonna buy in any one year.
Now, the offset to this has been the rise in real rates in the past couple of years as well as waning investor demand as seen through physical gold ETF outflows. So, if you look at the 10 year US real yields, it was at -1% at the end of 2021.
Today it is nearly 2%. This is a big move in real yields and is a headwind for gold because gold doesn't pay yield.
And you can see that that move is kind of softened investor demand as illustrated by outflows from the physical gold ETF's. Now this outlook for rates though, as you alluded to, that might be changing. Now, inflation has come off its highs and the market is increasingly looking for the Fed to start cutting rates. Nevis is still debated in the market and as you alluded to with the inflation print, you can see rates as well as gold moving in response to changing expectations for those Fed cuts. However, if we do in fact see Fed cuts, that could lower real yields which would be directionally positive for gold and could renew investor interest in the asset class.
> Lots of interest in things happening there the precious metal itself and we've seen that. One of the gold-mining equities? How are they performing given wood gold is been up to?
>> So, in 2023, the gold miners were up, not quite 5%. Where is the gold price was up 13%. So the miners clearly lagged. The big headwind for them was really on the cost side.
Much like the rest of the economy, miners have been dealing with cost inflation running a hotter side of the scale. Things like labour, fuel at times, other inputs have all been up. In terms of the outlook for cost though, judging from the 2024 guidance, cost will still be up in 2024.
However, it won't, it's unlikely to be as significant as it has in the past couple of years.
The other thing that could help the cost side two is if operations were to run a bit smoother.
Last year was not the greatest year for some of the operations at some of the miners which also hurts on the cost side.
So if you get a better cost situation and then if the gold price were to continue to rally, that will be supportive of the gold-mining equities. Now when we talk about gold-mining equities, there is a wide range of types of minors and risk profiles all the way from the explorers which, you know, don't have any production to those senior gold producers that have multiple minus and large production basis.
So if you look at that senior group of large Gold miners, things are changed for them compared to, like, where they were the last cycle.
Financially they are in much better position.
Debt levels are now at the lower end of the scale with net debt even net debt evening off with the seniors a .6 times and Explants are more muted. So a $2000 gold, the senior group has a free clash of free cash flow yield about three now percent.
>> Interesting breakdown there of gold itself not on the presence of the precious metal but the miners are taken out of the ground. What about the energy space? It's been volatile with crude is well?
>> Yeah. I think the oil price will continue to have this, maybe perhaps range bound.
The market is still very finely balanced and what it's really the key to it is really OPEC plus and its discipline in keeping production off the market.
If you look at the man the demand for oil, 2023 was actually a very good year for oil demand.
Largely because China ended its lockdowns and its oil demand rebounded. This year, oil demand is likely to resume its normal correlation with global GDP growth.
So it still could be directionally positive but not quite to the magnitude perhaps of last year.
Now the supply side is what is been more of a mixed picture. There is some parts of the world where supply is growing, like the US. Guyana and resulting a couple but the offset of course has been OPEC plus.
They've been keeping production off the market to try to maintain that balance and because of that, they are now sitting on scarce capacities.
So the market needs to see that that disappointed OPEC plus continue in order for the mortgage remain in balance.
>> Again as we see the price of the commodity itself, crude oil bouncing around the range… What is mean for the equity side of this?
For the oil and gasoline's?
>> The equities at the end of the day, the stock prices will still take a cue from the oil price but the company fundamentals underlying them are very strong.
So with the strong oil prices we've had the past few years, that is resulting in real improvements to leverage. So, net debt to even offer the large-cap crew may be 0.6 times, capital discipline is really been the name of the game for the companies and that continues. So they haven't been aggressive on their Explants, we just had 2024 guidance released across the sector and broadly, in various but Is looking flat, production may be up attached.
So that discipline continues in any free cash flow that's generated at these oil prices, much of that is being returned to shareholders in the form of dividend and buybacks.
There has been some in the sector ^.
..¸but overall it would not say it's detracted from this focus on capital discipline. So I call it $75 WTI. The large-cap American producers call it a high single-digit free cash flow yield which gain support some good shareholder returns.
But you will have that exposure to the oil price and changes in the share price.
>> We've done gold, we done the energy space and oil let's get copper and there is well. What is your outlook for copper?
>> I'm constructive on copper over the next year or so.
Really on the supply side.
It kind of has the Mrs. that we've seen.
Demand for copper, probably is coming in stronger than most without last year.
Largely on the back of China. China has really struggled with this property market.
The big offset was continued spending and infrastructure particularly in energy transition areas like renewables and the electrical grid.
The supply side though, that's what's really change the outlook for 2024.
Last year, Chili's production was down.
The guides out of the companies for 2024, a couple of them are lighter of the copper side.
That has removed some supplied a forecast but also, due to geopolitical unrest in protests, cobra Panama has been shut down.
So that also removes another supply.
Now the outlook for cobra Panama is slightly uncertain. The market is looking for the main election in a country to perhaps provide some medications of the future of that mind. In the meantime, the copper balance looks very tight.
Inventories are low.
So that is supportive of prices.
>> I was Jennifer Nowski VP portfolio director with TD asset management.
Let's get more education setting for the day.
>> Artificial intelligence has been one of the big trends in the markets if you're looking for potential investors in that sector, web broker has tools which can help.
Here in Amman, senior client education instructor with TD direct investing has more.
>> When it comes to investing themes, AI gore artificial intelligence is certainly a buzzy word you hear from different pockets of the world.
It goes without saying is a lot of chatter around artificial intelligence and it's a vast potential that holds. So a natural question that might be bubbling at the top of your mind is "how do we get started with researching AI stocks?" It can be difficult since AI is not actually a sector or industry but rather an investment theme.
That spans across multiple sectors.
We got you covered here in web broker and we will show you how to get started.
So with that, let's jump right into web broker and show you how to get started.
Once you've logged into web broker, what were going to do is we are going to head over to our screening tool. That's going to be found in the research tab at the top here.
And the tools column in the drop down and you will see there from the bottom, that's where screeners is.
So just go ahead and click on that. We've Artie got a preloaded up here.
It'll bring you to this page that we are on right now.
One of the ways you can get started with this is one of the good things about the screener tool is the created themes for us. And lo and behold, one of the we have is in fact artificial intelligence.
So you'll notice if I go ahead and click on this, we will see what happens.
It takes us right into the screen.
It already has sound filters applied but one thing important to note is some of the things that Artie applied and this is how you can either do it from the top-down or bottom-up if you want to build it yourself.
So what we've done here is, you can pick of course, your exchanges that we want to look at.
We want to look at both markets, we've already picked a theme out of the ones that we have here.
AI is one of them, among some you can to some other ones but artificial intelligence is what we're looking for today.
So you come here and we can further do from here is you can choose additional filters if you wish to.
Right now, part of this, all they've done is just out of the stock price and price-performance or five days because really the only thing we want to see out of this is just, we just want to see a list of AI stocks that we have over here available to us.
Once we've done that you're in a sealed list of all these different stocks or ones are going to be both a mix of hardware-based ones, software-based ones and there also ranks.
The ranking is important for investors or viewers. It's based on just the filters that you've chosen.
We have chosen only the price-performance and stock price but as I mentioned, choose those additional filters to get further and narrow down those.
Once you have this, really this is what you can look at and then filter the list further and see what you want.
That's what's gonna warrant further research that's a look at how we can get started with doing artificial intelligence research on those stocks and get you going there.
>> All right our thanks to Hiren Amin, senior client educational instructor with TD direct investing. Make sure you check our website for more classesWith all the big banks having reported, money talks Kim barley was joined by the managing director for equity research at TD ^...¸to get his take on the quarter.
>> Precaution on the bank, leverage of a however roughly the Capital Market revenue, weaker capital ratios and uncertainty around capital slower balance, these are all the big reasons why I downgraded the group back in December 22 two market away.
What I'm finding look at the ?
choose capital ratios look solid.
Operating probably going to be positive at the group in Q2 24. Capital markets have improved and it brings back interest rates coming down in the second half. That could support balance sheets. So at least insofar as pretax supervision profits or concern, the environment is improving. I expect better results in our banks and as you said, Canadian banks are not missing earnings.
The way they did somewhat in 2023. In fact in 2024 all the banks met other than BM oh, that's the pre-tax supervision story.
Credit might be deteriorating.
>> I would like to get into, you do highlighting your report of the very top, that this is the seventh consecutive quarter on declining earnings-per-share.
So I guess the question is, is a traffic?
Do we start to see things moving in their direction?
Tell me some of the big things are walking watching.
Let's talk about credit cycle. What are you seeing in terms of just hints that will may be coming?
>> Sure.
It's important to highlight that the pretax supervision profit is growing and that's in a positive part of the story.
The negative is that the president is deteriorating.
The conditions you see that forecast, it's really in personal loans. Think credit cards, auto loans, lines of credit, instalment loans, to capture by 10% of the loan balance in Canada, we are clearly seeing delinquency ratios increase, gross impaired loans increase and it's consistent with… The prophet consumer.
That is now having an effect on credit losses. It is clear the credit losses arising.
What's really relevant about that is as credit losses rise, that's fine, we all expected that. The question is are they rising faster than we expected? Of the rising faster than the bank is expected?
If in fact credit deteriorates at a pace higher than what the banks are guiding or higher than what the average analyst is forecasting, that has a negative effect on earnings and could have a negative effect on ^...
¸and you could make an argument that credit in fact is deteriorating at a pace that is faster than with the bank is expecting or what certainly what I expected.
>> A lot of this, it seems as well to is just the act the expectation on rates. If you look at rate expectations six month ago everyone is expecting cuts now.
Not happening. Looking like it could materialize in June or later. But just tell me so the sensitivity and how that can affect what you're talking about right now.
>> Rates have a pervasive impact on us. As rates come down, the pressure on consumers particularly on their fixed-rate mortgages as they mature, lower rates have a beneficial impact on the credit. There is a lag here. Just as credit deteriorates as rates were rising, the same is true in the way down. As rates fall, with a lag effect you'll see better credit conditions.
The other thing that's important is that lower rates can help fuel loan demand again. That's really relevant to me because there is been a problem with loan demand and loan supply.
The bank's capital have been somewhat constrained. Higher rates constrain demand. Now the capital ratios are solved, lower interest rate might marry the two.
You might in fact have higher loan demand at the same time that the bank is feeling the capacity to make those loans. So lower rates could have a rather beneficial impact the balance sheet growth and loan growth in late this year.
>> And I guess that's what you're waiting to see. You mentioned here that you think it's not wise to upgrade the group at this point. You need to see if a few more things happen.
>> The most important thing here, to me, the prophet is growing. That I can say with a lot of confidence that the underlying fundamentals for our banks, like operating leverage, pretax supervision product profits, tax ratios, all of that looks like it's improving and it is solid.
The reason why am being a little careful here and not upgrading the group yet is I want the credit issue to fall. The credit shoot the credit shoe does not mean that mortgages blow off the Canadian bank struggle with capital ratios.
That's how I'm talking about. I'm saying that the earnings affect the higher credit on personal ^..
.¸that needs to make its way to bank earnings into investors and the investor sentiment.
That, I think, would give me the confidence that I could upgrade the banks.
That's possibly much later this year.
> All right.
Let's see summative visual names. Let's start with CIBC who benefited from an upgrade from you, based on the performance of the quarter. You upgraded them to abide from a whole.
What you see with CIBC?
>> The main thing at CIBC is they had the lowest skip… In the group.
The reason for this is have started to invade. I'll give you an example. They had higher credit losses in the US commercial real estate. Coming out of the quarter, they're telling us that they'll those losses are now moving lower.
They have reached the peak of those losses.
That's important. Losses in US commercial real estate are going down. The banks have a low capital ratio and that was affecting their ability to grow the balance sheet.
They now over 13% capital ratio which is among the highest in the group. On top of that, the bank has pretty strong operating leverage, improving tax provision prophet.
The reason why people are negative on CIBC is all these factors are now turning in their favour. Very reasonable for me in the context of that low valuation, to express more often, CIBC.
>> Let's go to BML which is the other end of performance in the quarter.
I think it was the only bank that did not hit expectations. What's happening there?
>> I think a lot of that emanates from the environment in Q4 23, a lot of optimistic chatter around BMO. The benefit of savings, I think that got estimates a little higher include my own.
(This is…) Margins were weaker, incomes are weaker and capital markets were weaker. Negative operating leverage… All of that played a role in hurting people's results including credit losses. The performing credit losses. I think this, working to look at ? 124 as an inflection block for BMO were to look back at Q1 as the turning point for the performance.
>> Okay Bank of Nova Scotia, they did come in one of the banks that beat expectations. But, just tell me what you're seeing here because you make an interesting comment in your conclusion, you say that they are lower earnings power is now abundantly clear. Just tell me but about what you mean by that.
>> That's really important because banks feed estimates for two reasons. It can either be that the results are really go to the expectation got passed down. No bank saw their estimates for 2024 decline more during 2023 then Scotia. What I mean by that is it was significantly reduced earnings expectations.
It's going to be easier to beat so it's not necessarily that their results are so much better, the expectations are so low.
And that's a good thing.
That makes it easier for investors to buy Scotia, knowing that we are not to have a surprise. The challenge Scotia had is there is still a lot that that others a lot they need to do to shrink their mortgage in Canada, grow in Canada, perhaps shrink their footprint in Latin America.
These are big, messy things that they need to do over the next couple years.
I would like to take the view, I'd rather not be there for the bank, like have a reading on the bank while they're going through all these changes.
They need to convince me that they made the changes successfully at have executed before all get on board. So I'm not there yet.
Certainly not with my rates.
>> Again we will seal that performs in the next few quarters.
Royal, the last one.
You noticed as well that this particular bank is always trading at a premium, 68%.
To the group.
Is that still warranted right now?
What you see?
> I think so.
I look at Royal's business mix very strong in Canada, good insurance business, very large capital market. Among the largest and well-managed in the country.
That diversified business model does give me confidence that Royal is a good one.
Now there are two things, one is that there US business national, it's been messy.
It's been messing out for years.
The bank is doing a lot of improvement but you can't sugarcoat these things when a bank stock you like with a grade valuation delivers bad results in a segment, you gotta be clear with them.
And I think they are cleaning up the situation nationally but no doubt that was a fail.
The other thing that was important about the Royal Bank is that they are acquiring HSBC. A very large transaction.
When you buy an institution that large and you combine them, you tend to have messy quarters from the early going.
So no doubt I think Royal is a great stop great stop to buy.
Look for a bit of sloppiness in the real term as it interest with HSBC.
Longer-term, cross savings and it will be a solid acquisition.
I think it will be. But sure it's going to be choppy to be getting.
>> That was the managing director for equity research at TD speaking with money talks Kim Parlee.
For more information linked to the company had division of TD securities that can be found at the end of the video.
And as always, do your own research before making any investment decisions.
Now for an update on the markets.
>> We are having a look at TD's advanced dashboard, a platform designed for active traders of able for TD direct investing.
The heat map function.
A view of market movers. Let's to go to the TSX 60 swimming by price and volume.
The TSX on the headline number the opposite, particularly flat today.
You can see it's a bit of a mixed picture out there.
We'll start with the green of the screen.
Positive, last day of the week.
We got first quantum up a little more than five and have percent.
Yes obviously issues with cobra pantomime we've seen the price of copper rallying in recent sessions and that's lifting a lot of the property.
We also have Cameco.
A bit of weakness and shop to find nothing too dramatic. And in a real mixed picture in that energy patch.
South of the border, let's check in the S&P 100. We have the Fed on deck next Wednesday for another rate decision. We have some inflation reads out of the states this week whether was headline CPI or wholesale prices… A little bit hotter than the market was expecting.
We have a mixed picture down there as well. Adobe actually moving back substantially about 14% that of its sales forecast, not pleasing the street but you've got the chipmakers on the move today with AMD to the upside almost 3%,Nvidia just barely in positive territory to territory. You can visit TD.com's website for more. Let's talk big tech. It is led the way to new highs for equity markets in recent weeks.
Some investors may be looking for opportunities beyond the magnificent seven.
The chief US market strategist with MorningStar research joined earlier today to discuss the potential opportunity and value stocks.
… It is starting to feel a little stretched to us at this point. So when we break our valuations down into the MorningStar Starbucks we do note that value is the one area that does storming undervalue for investors today. Now, anything about what's happening with the market over the past, 16 months… A year ago growth was undervalued. In fact one of the most undervalued sectors according to our valuations. But at this point these of all run out, your so much so far, so fast.
A lot of them are now trading at well over value territory and value stocks have lagged. So looking forward, in order to outperform I think investors are enough to start bucking the trend of what's worked for the past year. Start scaling out of some of these that are now overvalued, overextended, lacking profits here.
Under the key really need to work for some more contrarian plays. The areas we really been digging into most recently are those who underperform the market with past year, those that are on unloved, those with the worst market sentiment and of course, most importantly, those we still see is being undervalued today.
>> Already thing we can break those down according to the work you're doing David.
Let's start with utility space.
>> Utilities are highly correlated with interest rates. A lot of investors are been using utilities really, is a fixed income substitute because rates were so low a couple of years ago.
Now, the utility space did sell off last fall we saw the 10 Years Start Skyrocketing in Frisco about 4%. Now, it has recovered a bit.
The utility space that is, has recovered a bit. But fundamentally we still think utilities Outlook is really a strong as it's ever been.
Our utility equity analyst team is noted they just see a long runway of growth here. The transition to renewable energy, certainly a long runway of growth, a lot of government spending and investment infrastructure and upgrading the grid.
So fundamentally, we still think things are looking very positive here and there when I talked to our US economics team, they do expect interest rates are going to decline and decline across the entire curve in the second half of this year. So I think between good positive fundamentals that a tailwind from declining interest rates, that should go well for that sector looking forward.
>> That's the bullish case. What get in the way of the utility thesis?
>> You know of course interest rates. If we do see interest rates continue to keep moving up from here, that really is in a pressure the utility space a lot more than what we expect.
And of course it is budget season. In Washington DC. If we were to see the budget get changed, such they state that they start pulling money out of the investment they plan on spending in the utility space, specifically in the grid and infrastructure, that also would that also pressure a thesis there as well.
>> Another area you've been looking to ensure the value is the energy space.
What's happening here?
>> The energy space overall is still trading at a pretty good discount from our fair value.
And I like energy for couple reasons today. First, fundamentally when I look at our valuations, I would note that we use the to your forward strip price so the market implied price for the next two years for oil, and our model.
And then we project oil prices and actually start declining towards our $55 a barrel midcycle price. So again, once you get past year two, we start looking for lower prices but even based on those lower prices, our models are still telling us that these stocks are undervalued today.
Plus it also gives your portfolio good natural hatch. If we are wrong in inflation straight stays and we have a for longer, that will certainly help out in that case.
But I think it's also just a good natural portfolio hedge for geopolitical risk. I think the downside here is if demand falls off faster than what we expect, and we do expect demand will continue to decline for the next couple years, level off towards the end of this decade before it starts to decline, or if we do see a lot more drilling in the US, or we start seeing a lot more supply coming out of market, that could push oil prices down faster than what we currently expect.
>> Does not make it challenging when you're trying to below thesis around energy and you think of geo-political conflict?
You can think of China's economy and what their appetite will be for crude oil.
Some of the pieces that move. I feel in this bucket.
>> Yeah. That's where energy team works hand-in-hand with our US economics team in order to put together kind of that supply and demand curve.
Where we expect all prices to be not just necessarily coming up here the short term but really throughout the entire economic cycle. So that's how we get to that $55 a barrel of mid economic cycle price forecast for WTI and $60 a barrel for brunch.
>> Let's move to another area now.
Real estate. Clearly very sensitive interest rates.
>> Not only that I think real estate is just gotta be the most hated us in class in the market today.
Personally I would still steer clear of urban office space.
I'm still concerned there could be more downside pressure there valuations. But the good news for investors is that I think the urban office space evaluations of religious broad valuations down across the entire real estate landscape.
So there's a number of different areas that we do find to be attractive for investors today.
Probably the two areas that really the most are to be those defensive areas.
So again think healthcare, medical offices, life science buildings and so forth.
I think there is a good we get over the longer term and even things like class a retail models.
The high-end balls and we've seen foot traffic and rebound. They've changed those malls so they are less reliant on retail track fake. People looking for growth real estate, I would highlight data centres. I think this could be a long tailwind there for artificial intelligence.
And as we talked about with utilities we do expect interest rates to decline and that should be a positive tailwind for the real estate sector as well. Of course if interest rates stay here or actually even increase from here, that certainly would pressure all of the real estate valuations they could bring them down further.
>> Alright so you mentioned artificial intelligence in terms of real estate thesis. Let's talk about the stock that has clearly benefited from all this excitement of the past year, Nvidia.
. >> It's going to hire the upside at this point. When I look at them in our base case, I think the market is expecting too much growth for too long.
When I look at our model, not only has the revenue for the company doubled over the course of this year, we are arty projecting it to double again over the course of next year.
I think increasing 40 or 50% in 2025, looking for a topline, 30%, compounded annual growth rate over the next five years.
Looking for margins that are stronger than they've ever been, over the course of that five-year period as well. Yet the market price is still much higher than what we see today. So unless were completely missed reading just the amount of growth in AI over time, that stock in our view, is just gone to much to highly upside.
>> That was the chief US market strategist with MorningStar research, Dave Sekara.
But make sure you do your own research before making investment decisions. Coming up on Monday, (Greg reads the card) this is lots to talk about with Derek.
Email your questions@moneytalkliveit.com.
That's all the time we have for today.
We are back on Monday and thanks for tuning in.
[music]
You have Apple down a little more than 1%.
And that's your market update.
> It was a busy week almost behind us in a busy week ahead of us. Money talks Anthony Coley joins is now the look ahead to the big event up next week that would be the Fed rate decision.
>>federate decision of course a lot of hinges on the date it was all this week which drove markets. We will start with some of the inflation reports that wereceived. We got hotter than expected US consumer prices, wholesale inflation as well.
Starting with the CPI, the headline was in line with consensus but on a 12 month basis, CPI came in at 3.2%.
That was slightly harder than what we saw in January. It also marked the second straight month of stronger-than-expected core inflation. Something that the Fed pay close attention to. We also saw US producer prices as well that were stronger-than-expected.
I talked about the treasury yields.
That's at the treasury two-year high two week high as well. Added towards production with US factories rose more than expected in February. So I think markets right now are worried that the recent economic data is too strong for the Fed to start cutting rates.
>> As those reports came in hotter than expected, so interest and watched acne market. It seemed to shut off the wholesale report until it didn't on the same session. And you look at the bond side as you said, the US 10 year yield, we started at about 406 to begin the week.
4.3% and that's about 20% basis move the past couple days. The bond market seems to be getting a more cautious. What we think?
What is TD economics or TD securities thing?
When we will actually get a rate cut?
>> The Fed next week, largely expected that the markets will, the Fed will hold steady on rates but markets have been raining in bets for cutting significantly at least in the current cycle when fed share it's unlikely. But markets have started to slowly price them back in and currently the pricing and only about two basis point of cuts for May so they are not looking for cuts then. But there pricing at a full 25 basis point rate cut by July and another hundred 47 beeps of cuts between 2024 and 2025.
Now, TD securities expects that again next week they will hold but they expect the Fed to start cutting rates at the March meeting.
And they also see the Fed delivering five cuts in 2024. Another five cuts in 2025.
That would bring the terminal rate to 3% and they believe that is going to avoid a recession.
>> Interesting stuff and a lot of stuff on deck next week. Thanks Anthony.
>> My pleasure.
>> Money talks live Anthony Coley.
Now let's take a look at the some of the top stories in the world of business and take a look at how the markets are trading.
We have shares of Adobe in the spotlight today and the design software company didn't beat expectations for its most recent quarter but the sales forecast appears to be what is disappointing investors today. We see Adobe pulling back about 14% now course the share is made sizable gains over the last year or so on excitement around some of its artificial intelligence tools.
I also want to check on altar beauty. In terms of the share price now down 4.7%.
They say rising supply chain costs and promotions are hitting the bottom line.
Beauty retailers also forecasting full-year profit below Wall Street's expectations. Now this stock has been making new highs and recent session so bit of giveback today with all time.
Also want to check in on the fast food giant McDonald's.
Suffered a tech outage earlier today.
It had operations in several countries including here in Canada.
The Japan, the UK among them.
Some reports Japan stopped taking orders before getting those systems back online.
McDonald's said for its part the outage is not a result of a cyber security incident, right now you have McDonald's down modestly, a little more than half percent.
A quick check of the markets.
We have some green of the screen in Toronto cannot say the same about Wall Street but will check in on the TSX competent index.
Right now it is modest.
Very modest.
Up 10 points just five takes.
So the border bursting of a pullback in stocks.
It's been a busy week and a busy week next week. 30 boy deficit right now the S&P 500.
A little more than half a percent.
Let's take on inflation.
We did get a course hotter than inspected REITs on inflation out of the US this week and that has investors thinking about the Fed and when they may be ready to cut.
Look at that old Ian for the recent record making rally we've seen in gold?
Jennifer now ski VP director import fully manager with TD asset management join me earlier to discuss.
>> >> The big demand of central banks.
Central banks have been net buyers of gold for over a decade now as they work to diversify their holdings and move away from the US dollar.
The past two years have seen historically high central bank by as these trends have continued but on top of that, you have rising geopolitical concerns and sanctions and strong buying out of China.
Now, the tricky thing with central bank buying as it is very difficult to say exactly how much they're gonna buy in any one year.
Now, the offset to this has been the rise in real rates in the past couple of years as well as waning investor demand as seen through physical gold ETF outflows. So, if you look at the 10 year US real yields, it was at -1% at the end of 2021.
Today it is nearly 2%. This is a big move in real yields and is a headwind for gold because gold doesn't pay yield.
And you can see that that move is kind of softened investor demand as illustrated by outflows from the physical gold ETF's. Now this outlook for rates though, as you alluded to, that might be changing. Now, inflation has come off its highs and the market is increasingly looking for the Fed to start cutting rates. Nevis is still debated in the market and as you alluded to with the inflation print, you can see rates as well as gold moving in response to changing expectations for those Fed cuts. However, if we do in fact see Fed cuts, that could lower real yields which would be directionally positive for gold and could renew investor interest in the asset class.
> Lots of interest in things happening there the precious metal itself and we've seen that. One of the gold-mining equities? How are they performing given wood gold is been up to?
>> So, in 2023, the gold miners were up, not quite 5%. Where is the gold price was up 13%. So the miners clearly lagged. The big headwind for them was really on the cost side.
Much like the rest of the economy, miners have been dealing with cost inflation running a hotter side of the scale. Things like labour, fuel at times, other inputs have all been up. In terms of the outlook for cost though, judging from the 2024 guidance, cost will still be up in 2024.
However, it won't, it's unlikely to be as significant as it has in the past couple of years.
The other thing that could help the cost side two is if operations were to run a bit smoother.
Last year was not the greatest year for some of the operations at some of the miners which also hurts on the cost side.
So if you get a better cost situation and then if the gold price were to continue to rally, that will be supportive of the gold-mining equities. Now when we talk about gold-mining equities, there is a wide range of types of minors and risk profiles all the way from the explorers which, you know, don't have any production to those senior gold producers that have multiple minus and large production basis.
So if you look at that senior group of large Gold miners, things are changed for them compared to, like, where they were the last cycle.
Financially they are in much better position.
Debt levels are now at the lower end of the scale with net debt even net debt evening off with the seniors a .6 times and Explants are more muted. So a $2000 gold, the senior group has a free clash of free cash flow yield about three now percent.
>> Interesting breakdown there of gold itself not on the presence of the precious metal but the miners are taken out of the ground. What about the energy space? It's been volatile with crude is well?
>> Yeah. I think the oil price will continue to have this, maybe perhaps range bound.
The market is still very finely balanced and what it's really the key to it is really OPEC plus and its discipline in keeping production off the market.
If you look at the man the demand for oil, 2023 was actually a very good year for oil demand.
Largely because China ended its lockdowns and its oil demand rebounded. This year, oil demand is likely to resume its normal correlation with global GDP growth.
So it still could be directionally positive but not quite to the magnitude perhaps of last year.
Now the supply side is what is been more of a mixed picture. There is some parts of the world where supply is growing, like the US. Guyana and resulting a couple but the offset of course has been OPEC plus.
They've been keeping production off the market to try to maintain that balance and because of that, they are now sitting on scarce capacities.
So the market needs to see that that disappointed OPEC plus continue in order for the mortgage remain in balance.
>> Again as we see the price of the commodity itself, crude oil bouncing around the range… What is mean for the equity side of this?
For the oil and gasoline's?
>> The equities at the end of the day, the stock prices will still take a cue from the oil price but the company fundamentals underlying them are very strong.
So with the strong oil prices we've had the past few years, that is resulting in real improvements to leverage. So, net debt to even offer the large-cap crew may be 0.6 times, capital discipline is really been the name of the game for the companies and that continues. So they haven't been aggressive on their Explants, we just had 2024 guidance released across the sector and broadly, in various but Is looking flat, production may be up attached.
So that discipline continues in any free cash flow that's generated at these oil prices, much of that is being returned to shareholders in the form of dividend and buybacks.
There has been some in the sector ^.
..¸but overall it would not say it's detracted from this focus on capital discipline. So I call it $75 WTI. The large-cap American producers call it a high single-digit free cash flow yield which gain support some good shareholder returns.
But you will have that exposure to the oil price and changes in the share price.
>> We've done gold, we done the energy space and oil let's get copper and there is well. What is your outlook for copper?
>> I'm constructive on copper over the next year or so.
Really on the supply side.
It kind of has the Mrs. that we've seen.
Demand for copper, probably is coming in stronger than most without last year.
Largely on the back of China. China has really struggled with this property market.
The big offset was continued spending and infrastructure particularly in energy transition areas like renewables and the electrical grid.
The supply side though, that's what's really change the outlook for 2024.
Last year, Chili's production was down.
The guides out of the companies for 2024, a couple of them are lighter of the copper side.
That has removed some supplied a forecast but also, due to geopolitical unrest in protests, cobra Panama has been shut down.
So that also removes another supply.
Now the outlook for cobra Panama is slightly uncertain. The market is looking for the main election in a country to perhaps provide some medications of the future of that mind. In the meantime, the copper balance looks very tight.
Inventories are low.
So that is supportive of prices.
>> I was Jennifer Nowski VP portfolio director with TD asset management.
Let's get more education setting for the day.
>> Artificial intelligence has been one of the big trends in the markets if you're looking for potential investors in that sector, web broker has tools which can help.
Here in Amman, senior client education instructor with TD direct investing has more.
>> When it comes to investing themes, AI gore artificial intelligence is certainly a buzzy word you hear from different pockets of the world.
It goes without saying is a lot of chatter around artificial intelligence and it's a vast potential that holds. So a natural question that might be bubbling at the top of your mind is "how do we get started with researching AI stocks?" It can be difficult since AI is not actually a sector or industry but rather an investment theme.
That spans across multiple sectors.
We got you covered here in web broker and we will show you how to get started.
So with that, let's jump right into web broker and show you how to get started.
Once you've logged into web broker, what were going to do is we are going to head over to our screening tool. That's going to be found in the research tab at the top here.
And the tools column in the drop down and you will see there from the bottom, that's where screeners is.
So just go ahead and click on that. We've Artie got a preloaded up here.
It'll bring you to this page that we are on right now.
One of the ways you can get started with this is one of the good things about the screener tool is the created themes for us. And lo and behold, one of the we have is in fact artificial intelligence.
So you'll notice if I go ahead and click on this, we will see what happens.
It takes us right into the screen.
It already has sound filters applied but one thing important to note is some of the things that Artie applied and this is how you can either do it from the top-down or bottom-up if you want to build it yourself.
So what we've done here is, you can pick of course, your exchanges that we want to look at.
We want to look at both markets, we've already picked a theme out of the ones that we have here.
AI is one of them, among some you can to some other ones but artificial intelligence is what we're looking for today.
So you come here and we can further do from here is you can choose additional filters if you wish to.
Right now, part of this, all they've done is just out of the stock price and price-performance or five days because really the only thing we want to see out of this is just, we just want to see a list of AI stocks that we have over here available to us.
Once we've done that you're in a sealed list of all these different stocks or ones are going to be both a mix of hardware-based ones, software-based ones and there also ranks.
The ranking is important for investors or viewers. It's based on just the filters that you've chosen.
We have chosen only the price-performance and stock price but as I mentioned, choose those additional filters to get further and narrow down those.
Once you have this, really this is what you can look at and then filter the list further and see what you want.
That's what's gonna warrant further research that's a look at how we can get started with doing artificial intelligence research on those stocks and get you going there.
>> All right our thanks to Hiren Amin, senior client educational instructor with TD direct investing. Make sure you check our website for more classesWith all the big banks having reported, money talks Kim barley was joined by the managing director for equity research at TD ^...¸to get his take on the quarter.
>> Precaution on the bank, leverage of a however roughly the Capital Market revenue, weaker capital ratios and uncertainty around capital slower balance, these are all the big reasons why I downgraded the group back in December 22 two market away.
What I'm finding look at the ?
choose capital ratios look solid.
Operating probably going to be positive at the group in Q2 24. Capital markets have improved and it brings back interest rates coming down in the second half. That could support balance sheets. So at least insofar as pretax supervision profits or concern, the environment is improving. I expect better results in our banks and as you said, Canadian banks are not missing earnings.
The way they did somewhat in 2023. In fact in 2024 all the banks met other than BM oh, that's the pre-tax supervision story.
Credit might be deteriorating.
>> I would like to get into, you do highlighting your report of the very top, that this is the seventh consecutive quarter on declining earnings-per-share.
So I guess the question is, is a traffic?
Do we start to see things moving in their direction?
Tell me some of the big things are walking watching.
Let's talk about credit cycle. What are you seeing in terms of just hints that will may be coming?
>> Sure.
It's important to highlight that the pretax supervision profit is growing and that's in a positive part of the story.
The negative is that the president is deteriorating.
The conditions you see that forecast, it's really in personal loans. Think credit cards, auto loans, lines of credit, instalment loans, to capture by 10% of the loan balance in Canada, we are clearly seeing delinquency ratios increase, gross impaired loans increase and it's consistent with… The prophet consumer.
That is now having an effect on credit losses. It is clear the credit losses arising.
What's really relevant about that is as credit losses rise, that's fine, we all expected that. The question is are they rising faster than we expected? Of the rising faster than the bank is expected?
If in fact credit deteriorates at a pace higher than what the banks are guiding or higher than what the average analyst is forecasting, that has a negative effect on earnings and could have a negative effect on ^...
¸and you could make an argument that credit in fact is deteriorating at a pace that is faster than with the bank is expecting or what certainly what I expected.
>> A lot of this, it seems as well to is just the act the expectation on rates. If you look at rate expectations six month ago everyone is expecting cuts now.
Not happening. Looking like it could materialize in June or later. But just tell me so the sensitivity and how that can affect what you're talking about right now.
>> Rates have a pervasive impact on us. As rates come down, the pressure on consumers particularly on their fixed-rate mortgages as they mature, lower rates have a beneficial impact on the credit. There is a lag here. Just as credit deteriorates as rates were rising, the same is true in the way down. As rates fall, with a lag effect you'll see better credit conditions.
The other thing that's important is that lower rates can help fuel loan demand again. That's really relevant to me because there is been a problem with loan demand and loan supply.
The bank's capital have been somewhat constrained. Higher rates constrain demand. Now the capital ratios are solved, lower interest rate might marry the two.
You might in fact have higher loan demand at the same time that the bank is feeling the capacity to make those loans. So lower rates could have a rather beneficial impact the balance sheet growth and loan growth in late this year.
>> And I guess that's what you're waiting to see. You mentioned here that you think it's not wise to upgrade the group at this point. You need to see if a few more things happen.
>> The most important thing here, to me, the prophet is growing. That I can say with a lot of confidence that the underlying fundamentals for our banks, like operating leverage, pretax supervision product profits, tax ratios, all of that looks like it's improving and it is solid.
The reason why am being a little careful here and not upgrading the group yet is I want the credit issue to fall. The credit shoot the credit shoe does not mean that mortgages blow off the Canadian bank struggle with capital ratios.
That's how I'm talking about. I'm saying that the earnings affect the higher credit on personal ^..
.¸that needs to make its way to bank earnings into investors and the investor sentiment.
That, I think, would give me the confidence that I could upgrade the banks.
That's possibly much later this year.
> All right.
Let's see summative visual names. Let's start with CIBC who benefited from an upgrade from you, based on the performance of the quarter. You upgraded them to abide from a whole.
What you see with CIBC?
>> The main thing at CIBC is they had the lowest skip… In the group.
The reason for this is have started to invade. I'll give you an example. They had higher credit losses in the US commercial real estate. Coming out of the quarter, they're telling us that they'll those losses are now moving lower.
They have reached the peak of those losses.
That's important. Losses in US commercial real estate are going down. The banks have a low capital ratio and that was affecting their ability to grow the balance sheet.
They now over 13% capital ratio which is among the highest in the group. On top of that, the bank has pretty strong operating leverage, improving tax provision prophet.
The reason why people are negative on CIBC is all these factors are now turning in their favour. Very reasonable for me in the context of that low valuation, to express more often, CIBC.
>> Let's go to BML which is the other end of performance in the quarter.
I think it was the only bank that did not hit expectations. What's happening there?
>> I think a lot of that emanates from the environment in Q4 23, a lot of optimistic chatter around BMO. The benefit of savings, I think that got estimates a little higher include my own.
(This is…) Margins were weaker, incomes are weaker and capital markets were weaker. Negative operating leverage… All of that played a role in hurting people's results including credit losses. The performing credit losses. I think this, working to look at ? 124 as an inflection block for BMO were to look back at Q1 as the turning point for the performance.
>> Okay Bank of Nova Scotia, they did come in one of the banks that beat expectations. But, just tell me what you're seeing here because you make an interesting comment in your conclusion, you say that they are lower earnings power is now abundantly clear. Just tell me but about what you mean by that.
>> That's really important because banks feed estimates for two reasons. It can either be that the results are really go to the expectation got passed down. No bank saw their estimates for 2024 decline more during 2023 then Scotia. What I mean by that is it was significantly reduced earnings expectations.
It's going to be easier to beat so it's not necessarily that their results are so much better, the expectations are so low.
And that's a good thing.
That makes it easier for investors to buy Scotia, knowing that we are not to have a surprise. The challenge Scotia had is there is still a lot that that others a lot they need to do to shrink their mortgage in Canada, grow in Canada, perhaps shrink their footprint in Latin America.
These are big, messy things that they need to do over the next couple years.
I would like to take the view, I'd rather not be there for the bank, like have a reading on the bank while they're going through all these changes.
They need to convince me that they made the changes successfully at have executed before all get on board. So I'm not there yet.
Certainly not with my rates.
>> Again we will seal that performs in the next few quarters.
Royal, the last one.
You noticed as well that this particular bank is always trading at a premium, 68%.
To the group.
Is that still warranted right now?
What you see?
> I think so.
I look at Royal's business mix very strong in Canada, good insurance business, very large capital market. Among the largest and well-managed in the country.
That diversified business model does give me confidence that Royal is a good one.
Now there are two things, one is that there US business national, it's been messy.
It's been messing out for years.
The bank is doing a lot of improvement but you can't sugarcoat these things when a bank stock you like with a grade valuation delivers bad results in a segment, you gotta be clear with them.
And I think they are cleaning up the situation nationally but no doubt that was a fail.
The other thing that was important about the Royal Bank is that they are acquiring HSBC. A very large transaction.
When you buy an institution that large and you combine them, you tend to have messy quarters from the early going.
So no doubt I think Royal is a great stop great stop to buy.
Look for a bit of sloppiness in the real term as it interest with HSBC.
Longer-term, cross savings and it will be a solid acquisition.
I think it will be. But sure it's going to be choppy to be getting.
>> That was the managing director for equity research at TD speaking with money talks Kim Parlee.
For more information linked to the company had division of TD securities that can be found at the end of the video.
And as always, do your own research before making any investment decisions.
Now for an update on the markets.
>> We are having a look at TD's advanced dashboard, a platform designed for active traders of able for TD direct investing.
The heat map function.
A view of market movers. Let's to go to the TSX 60 swimming by price and volume.
The TSX on the headline number the opposite, particularly flat today.
You can see it's a bit of a mixed picture out there.
We'll start with the green of the screen.
Positive, last day of the week.
We got first quantum up a little more than five and have percent.
Yes obviously issues with cobra pantomime we've seen the price of copper rallying in recent sessions and that's lifting a lot of the property.
We also have Cameco.
A bit of weakness and shop to find nothing too dramatic. And in a real mixed picture in that energy patch.
South of the border, let's check in the S&P 100. We have the Fed on deck next Wednesday for another rate decision. We have some inflation reads out of the states this week whether was headline CPI or wholesale prices… A little bit hotter than the market was expecting.
We have a mixed picture down there as well. Adobe actually moving back substantially about 14% that of its sales forecast, not pleasing the street but you've got the chipmakers on the move today with AMD to the upside almost 3%,Nvidia just barely in positive territory to territory. You can visit TD.com's website for more. Let's talk big tech. It is led the way to new highs for equity markets in recent weeks.
Some investors may be looking for opportunities beyond the magnificent seven.
The chief US market strategist with MorningStar research joined earlier today to discuss the potential opportunity and value stocks.
… It is starting to feel a little stretched to us at this point. So when we break our valuations down into the MorningStar Starbucks we do note that value is the one area that does storming undervalue for investors today. Now, anything about what's happening with the market over the past, 16 months… A year ago growth was undervalued. In fact one of the most undervalued sectors according to our valuations. But at this point these of all run out, your so much so far, so fast.
A lot of them are now trading at well over value territory and value stocks have lagged. So looking forward, in order to outperform I think investors are enough to start bucking the trend of what's worked for the past year. Start scaling out of some of these that are now overvalued, overextended, lacking profits here.
Under the key really need to work for some more contrarian plays. The areas we really been digging into most recently are those who underperform the market with past year, those that are on unloved, those with the worst market sentiment and of course, most importantly, those we still see is being undervalued today.
>> Already thing we can break those down according to the work you're doing David.
Let's start with utility space.
>> Utilities are highly correlated with interest rates. A lot of investors are been using utilities really, is a fixed income substitute because rates were so low a couple of years ago.
Now, the utility space did sell off last fall we saw the 10 Years Start Skyrocketing in Frisco about 4%. Now, it has recovered a bit.
The utility space that is, has recovered a bit. But fundamentally we still think utilities Outlook is really a strong as it's ever been.
Our utility equity analyst team is noted they just see a long runway of growth here. The transition to renewable energy, certainly a long runway of growth, a lot of government spending and investment infrastructure and upgrading the grid.
So fundamentally, we still think things are looking very positive here and there when I talked to our US economics team, they do expect interest rates are going to decline and decline across the entire curve in the second half of this year. So I think between good positive fundamentals that a tailwind from declining interest rates, that should go well for that sector looking forward.
>> That's the bullish case. What get in the way of the utility thesis?
>> You know of course interest rates. If we do see interest rates continue to keep moving up from here, that really is in a pressure the utility space a lot more than what we expect.
And of course it is budget season. In Washington DC. If we were to see the budget get changed, such they state that they start pulling money out of the investment they plan on spending in the utility space, specifically in the grid and infrastructure, that also would that also pressure a thesis there as well.
>> Another area you've been looking to ensure the value is the energy space.
What's happening here?
>> The energy space overall is still trading at a pretty good discount from our fair value.
And I like energy for couple reasons today. First, fundamentally when I look at our valuations, I would note that we use the to your forward strip price so the market implied price for the next two years for oil, and our model.
And then we project oil prices and actually start declining towards our $55 a barrel midcycle price. So again, once you get past year two, we start looking for lower prices but even based on those lower prices, our models are still telling us that these stocks are undervalued today.
Plus it also gives your portfolio good natural hatch. If we are wrong in inflation straight stays and we have a for longer, that will certainly help out in that case.
But I think it's also just a good natural portfolio hedge for geopolitical risk. I think the downside here is if demand falls off faster than what we expect, and we do expect demand will continue to decline for the next couple years, level off towards the end of this decade before it starts to decline, or if we do see a lot more drilling in the US, or we start seeing a lot more supply coming out of market, that could push oil prices down faster than what we currently expect.
>> Does not make it challenging when you're trying to below thesis around energy and you think of geo-political conflict?
You can think of China's economy and what their appetite will be for crude oil.
Some of the pieces that move. I feel in this bucket.
>> Yeah. That's where energy team works hand-in-hand with our US economics team in order to put together kind of that supply and demand curve.
Where we expect all prices to be not just necessarily coming up here the short term but really throughout the entire economic cycle. So that's how we get to that $55 a barrel of mid economic cycle price forecast for WTI and $60 a barrel for brunch.
>> Let's move to another area now.
Real estate. Clearly very sensitive interest rates.
>> Not only that I think real estate is just gotta be the most hated us in class in the market today.
Personally I would still steer clear of urban office space.
I'm still concerned there could be more downside pressure there valuations. But the good news for investors is that I think the urban office space evaluations of religious broad valuations down across the entire real estate landscape.
So there's a number of different areas that we do find to be attractive for investors today.
Probably the two areas that really the most are to be those defensive areas.
So again think healthcare, medical offices, life science buildings and so forth.
I think there is a good we get over the longer term and even things like class a retail models.
The high-end balls and we've seen foot traffic and rebound. They've changed those malls so they are less reliant on retail track fake. People looking for growth real estate, I would highlight data centres. I think this could be a long tailwind there for artificial intelligence.
And as we talked about with utilities we do expect interest rates to decline and that should be a positive tailwind for the real estate sector as well. Of course if interest rates stay here or actually even increase from here, that certainly would pressure all of the real estate valuations they could bring them down further.
>> Alright so you mentioned artificial intelligence in terms of real estate thesis. Let's talk about the stock that has clearly benefited from all this excitement of the past year, Nvidia.
. >> It's going to hire the upside at this point. When I look at them in our base case, I think the market is expecting too much growth for too long.
When I look at our model, not only has the revenue for the company doubled over the course of this year, we are arty projecting it to double again over the course of next year.
I think increasing 40 or 50% in 2025, looking for a topline, 30%, compounded annual growth rate over the next five years.
Looking for margins that are stronger than they've ever been, over the course of that five-year period as well. Yet the market price is still much higher than what we see today. So unless were completely missed reading just the amount of growth in AI over time, that stock in our view, is just gone to much to highly upside.
>> That was the chief US market strategist with MorningStar research, Dave Sekara.
But make sure you do your own research before making investment decisions. Coming up on Monday, (Greg reads the card) this is lots to talk about with Derek.
Email your questions@moneytalkliveit.com.
That's all the time we have for today.
We are back on Monday and thanks for tuning in.
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