Market Insights

[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.

coming up on today show, we are going to hear from TD Wealth Brad Simpson on why investors may be missing out if they are sitting in cash.

TD Asset Management Colin Lynch will discuss potential opportunities in the alternative investment space.

And MoneyTalk's Anthony Okolie is going to have a look at the state of investor sentiment, bringing us the latest TD Direct Investing Index.

Plus in today's web broker education segment, Caitlin Cormier is going to be entering a viewer question related to tax documents are on the platform.

Before he gets all of that, let's get you an update on the markets. First trading day of the week. We see the prices of oil and gold moderating today off of recent highs and it has the TSX and modestly negative territory, down about eight points, just vortex, nothing too dramatic.

The most actively traded names or in the mining and oil and gas space.

We will start with B2Gold, pulling back 6%. A lot of gold miners heading into the weekend saw a healthy bid, giving back some of it today. Including B2Gold, down $0.23 per share. Athabasca Oil, one of the major movers among oil producers today at $5.20 per share, down about 3%. South of the border, we did have Goldman Sachs out with its latest report this morning.

It was favourable to the street, Anthony will tell us about it in a moment, it has the markets rebounding a little bit. Up 17 points, about one third of a percent for that broad read of the market.

The NASDAQ, what's happening in the tech heavy index? It's pretty much flat, up four points or three ticks. We will show you Goldman Sachs. At the open they were received favourably and indeed $404 and change, Goldman is up almost 4%. And that's your market update.

Resilience has been a word we've been using for a while to describe the US economy.

Well, we add another piece of strong economic data today. Retail sales.

MoneyTalk's Anthony Okolie now joins us with the detail.

Again, exceeding expectations.

>> US consumers continue to spend and we saw this in the first quarter. It boosted retail spending in March held close out the first quarter on an upswing. Retail sales were up .7% month over month.

That adds to February's print which was revised 2.9%, which is up from the 0.6%.

This headline print was modestly above expectations. Breaking down some key numbers, we saw sales were up at gas stations. That is largely reflecting the higher gas prices.

Trading in the sector was down which was partially offset by rising automotive parts. Some other areas we did see a modest gain in bars and restaurants. This is the service category.

Overall, this continue to surprise to the upside.

>> The markets take this as good news but they are there are probably applications here for the feds. When he talked with the strength of the labour market, the stickiness of inflation, the consumer that wants to keep spending, what are we thinking?

>> I think coming into this, there is an assumption that Americans pandemic savings are are coming down, impact of inflation has been eating into wage gains so many analysts were expecting consumer spending would slow but it's not what we saw.

Given this latest data and recent inflation data which came in much hotter than expected, it probably raises the bar for the Fed to actually cut interest rates so TD Economics is still calling for a July rate cut but again they say that persistence in inflation, as we saw in the last month, it does pose a risk to this view going forward.

>> I noticed that US 10 year bond yield North 4.6% now, jumping a bit on this but also geopolitical risks. A lot pieces in motion. It thanks for breaking it down.

Anthony will be back later in the show with a look at the state of investor sentiment with the results of the latest TD Direct Investing Index.

Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.

Got shares of Tesla in the spotlight today on reports that the EV makers planning to lay off 10% of its global workforce.

We have seen a softening market for electric vehicles and also increased competition from Chinese EV makers and that has weighed on Tesla shares this year.

Right now you are done about 3% on the name.

These are unconfirmed media reports today that suggest Tesla is focusing on cost reductions and increasing productivity and making these job cuts.

Shares of Goldman Sachs are on the move today, the Wall Street banking giant topped expectations on the top and bottom lines for the most recent quarter.

The beats were led by sizable gains in Goldman's trading and investment banking divisions. That's after a rocky start on Friday in banking season south of the border but Goldman delivered today and being welcomed by the street, up almost 4%.

As Anthony was just telling us, sticky inflation and it wasn't appearing to hold back the American consumer. It was a stronger showing than anticipated.

Sporting goods were among the categories that there was a pullback in.

Quick check on the markets.

Oil and gold prices pulling back today, which has a slightly to the downside, down three ticks. South of the border, the resilient consumer, 17 points to the upside or one third of a percent.

Despite that strong US economy and market sitting near all-time highs, many investors have still large cash position.

Brad Simpson, chief all strategies that TD Wealth refers to these diversions as the vibecession. He joined me earlier to discuss.

>> I'm not taking credit for it. I think it started to enter into the vernacular about a year ago.

Let's call it somewhere in 2023. Really the idea of a vibecession is not so much about the fact of how an economy is doing but how an economy makes you feel.

A vibecession is forget the facts, how do you feel about it?

You gotta think of that is consistent often with our you think our new reality is increasingly how you feel about something and is more important than the facts are in something. The problem with that is an investment terms, financial markets ultimately move and equity markets move on having greater earnings down the road and ultimately how the economy is doing is a huge part of that, of course.

And so facts around the economy really do matter.

If you look at it in those terms, I think one of the things that are having a huge impact on investors is that the facts are that the economy in particular in the United States is pretty darn good.

You could almost go as far as to say it's probably been great and it's probably on its way to good. We published a couple of weeks ago, every once in a while you publish something that you really like and I really like this because it took this idea of vibecession and said, here is two problems with this. The first one is on the front cover, we had this telephone that said just the facts. The problem is that I think the phone quite frankly and the facts that we get from our phone, let's say social media, are really taking investors to a place that we know that there are social consequences but I think they're starting to be financial one.

>> This data is released all the time, the economy is growing like this, the labour market is resilient like this, so why do we feel so… >> Why do you feel so bad, right?

I think there are many reasons for that.

But if you look at the one that we tackled, we said let's look at this, it may be the elephant in the room, and that is the upcoming election in the United States.

You have the world's media centre and you have the world's superpower and I think we are all aware of the turmoil and political angst that we have there but ultimately I think that angst and that turmoil around it is starting to have an impact on investing. It would be looked at it is first and foremost, we took something called the Michigan consumer Index.

This is a survey that the University of Michigan has been doing all the way back to 1942 and consistently over and over and over again.

So when they look at the questions that they ask in the response that they are getting, they noticed, starting at the end of 2019, when they were doing the survey, the way the questions were being answered, the tone started to change and it got negative and more negative and more negative between 2000 and 2022.

>> So you can't even blame the pandemic.

>> No. Sitting at home and seeing the pandemic and then on the other hand the increasing use of where you are getting your news, not so much on television of the newspaper but more and more on social media.

And even the 60+, that skewed higher, that younger you get, the more it went up.

You look at it today and you get a Michigan consumer Index survey that comes out on average in the type of economy we are in now, pre-pandemic, if we were in a similar scenario getting those questions, the score would be 30 to 35 points higher than what was coming out as and I think a lot of that has to do with reading that machine but if you look at the way politics are running the United States, there is this famous quote from James Carr Feld, the campaign manager for Clinton in the 90s, the economy is stupid. Both parties know this. Republicans are constantly talking about how terrible the economy is.

But Democrats are trying get reelected and on one hand need to run on their track record but they also need to assume that there are empathetic so most of the time they're talking about how bad the economy is. I think between the two of them we have this negativity contest going on.

That kind of seems to all information sources and would kind of make this point, look, think of yourself, look at every dinner party you go to, any social event you go to, you get into Trump within the first five minutes almost anywhere then you are talking most of the time about the US election. I think a lot of that ultimately then is that in there are other sources of course but I think that when you look at the facts around it and to your point, unemployment, 3.9%, 3.8%. Look at GDP growth, 3.2%.

Look at equity markets, at your opening here today, markets are a little bit soft today. The S&P 500 is at 5200. It's put on 12… >> And not much patience either, one day pull back, it's like, what's going on?

>> Between October and today, the S&P 500 has put on $12 trillion in market cap.

Stop and think about that for a little bit. That's wealth creation.

The negativity that we have around this is the bad news of it is if you let that set how you are going to allocate, you are going to sit in massive amounts of cash.

>> Is that we are seeing and what investors are doing right now?

>> Yeah.

When you look at what investors are doing, they got 1 foot in and one photo.

Yeah, they are participating in some of this movement but when you look at money market funds in the United States, money market funds in Canada, you look at brokerage accounts, look at investment accounts, bank accounts, the high percentage of cash that people have held onto over this entire period ased on that, it tells you something. The second part of that is the negativity highlights that one of the things that happens is with where we are getting this emotional news and I put news in quotes, is because this isn't fact-based, just because you think it's so doesn't mean it is so.

How do you counteract that? One of the neat things about my job is I can oversee for giant investment platforms, all movements of capital, what people are doing and thinking of. Right before I came here today, I was in a meeting with one of the guys I work with and we were having a discussion where we were looking at what is the one determinant over the last five years that was the greatest predictor of return for clients across our financial planning, advisory, enterprise, we said, what is the law of gravity? What is the thing?

Asset allocation.

I've said it a million times here, right?

You look at that over a month, not so much. Three months… And then all of a sudden, one year, starts to correlate, three years, after five years, it's all in.

>> Is that the key here, to start thinking long term again?

We were talking about that earlier, one day down in the markets, you like oh man, but is that the point here, getting people to think life is long?

>> I think it's two things. It's having a longer-term time horizon but I think people hear that now, it's almost like their ears are closed because it's like your parents telling you to eat vegetables.

You know what I mean?

After a while, it kind of wears off a little bit.

Try eating Hamburg is in French fries for a decade and you're like, wait a minute, now I understand what they were saying. I think there are two points to that.

It's that one, we do need to start broadening our time horizons again.

I think about when I used to be able to do an investment presentation 20 years ago, you could walk through data and facts and ideas that would be a couple months old and would still be relevant in the way of looking at things, I almost have to do when I do anything today is have a team running behind me updating me on the fly, by the minute.

The second part of the lesson is it doesn't have to be just a long-term time horizon. I think it also has to be able to sit back, and I know we talked about this here before in the past, but I just can't tell you how important it is to sit down and take a look at your money that you are investing inputted in some buckets and bucket a is that instead of running at 20% in cash, you have the bucket that says what is the amount of money I'm going to need over the next year if something really terrible happened? Whatever that is, loss of life, loss of my job, something very critical and terrible. I need to have another bucket that says in the next three years, where is capital and going to need? I need to have another bucket that says five years from now, that bucket there, how my when allocate that based on letting that money grow over the next five years and not worry about any of this? And then I have to have a bucket out here that says what is that long-term growth where I'm not worried about getting access to that money or what it looks like.

I can tell you consistently over and over again if you do that and look at it in these terms, take that phone, put it away somewhere, take that person on Instagram, but before they did this they dumped a can of paint over their head and all of a sudden they are talking about what the market is doing next. If you ignore those folks and follow and do something along those lines, it's going to make all the difference.

>> That was Brad Simpson, chief wealth strategist at TD Wealth.

Now, let's get our educational segment of the day.

In today's education segment, we will answer a recent pure question that was sent in. The question is, Caitlin Cormier standing by, do all tax forms listed in the tax stocks and web broker get sent to the CRA?

Caitlin Cormier, Senior client education instructor with TD Direct Investing joins us now with the answer.

>> This is a great question because I think that especially now in times of technology we leaned back on the idea that CRA has everything on the backside or everything gets updated but the thing to keep in mind is that as an investor, you are responsible for knowing what types of receipts you should be getting for your investments depending on the type of investment you have, whether it's dividends or capital gains or whatever interest type of investment that you have, you have to know what receipts you should be receiving and make sure that you have received them and send them through the CRA. It can be a little bit tricky going through this whole process so it's really about kind of understanding the investments you have, what type of return to get and what kind of tax slips should be issued.

Let's hop into web broker and see where we can get some information around those tax slips.

The first thing I'm just going to go into accounts and then under gain and loss, this is an area of the platform or you can find out what types of returns you have had in your accounts. When we are talking about some of those less common types of receipts, they would be under the nonregistered type of accounts.

If you have activity in nonregistered plans, you will be receiving those types of receipts for dividends and interest and those sorts of things and you can choose your date range. For example, if I wanted everything for 2023, I could get a listing here showing me all the different types of interest. If I had different types of interest, it would show a different types of gains and losses so I would have a type of idea of the type of receipts I was looking for.

After have done that, I can go into e-services and look for receipts but if I want to make sure I have what I need, I come here to accounts, come over to the tax information Centre, and once I get here this is a resource for self-directed investors to understand what we need and what we can expect. Filing taxes right here is going to show us the different key dates that connect us back to our tax documents. This is important because not only does it show the expected distribution date, it also tells you what it is, what type of receipt it is, when you can expect it.

For example, if you have an RESP, education savings plan, the T4A is what you can expect.

If you are having securities that you dispose of during the year, you will have a T5008. This is a great place to go through, understand what types of documents are available and again, not every single document may make it into the CRA portal so it's really important that you understand what types of receipts are going to be receiving and then the also making sure that you have them and that they are sent into CRA.

>> Great place for people to get started with the tax deadline coming up at the end of the month. How about other resources for investors on the platform when it comes to taxes?

>> Absolutely. When we talk about filing taxes, that's one thing but there are other things like for example we might want to be tax planning, so I'm trying it backwards here on my browser in my browser does not want to go back with me so I'm gonna exit out and click back here.

We can plan for next year's taxes. On top of getting ready for this year, we also need to worry about next year.

What we can do is look at different planning resources within the platform.

So if I keep getting into the wrong screen here, bear with me, oh my goodness.

Back to web broker, okay. In web broker, there is a search bar. If I type in here simple as taxes, I can actually get a ton of information on taxation, not just filing your taxes but other information to know. So how options are taxed, different ways to lower options before year end, capital gains, Canadian portfolio strategy, there are so many different types of videos and webinars available here for you to look through and see what's important.

Of course, there are also articles here that you can read through and then the last piece as well as we are on social media so we are on YouTube so it's TD_direct investing and there's a QR code that we will put up on the screen so viewers can scan that with their phone and follow us on YouTube because we are always providing content on things that are happening, whether it's tax content or up-and-coming types of investments or events in the markets, we have lots of information and education there as well so definitely some great resources to help you support your education see can make the correct decision.

>> Great stuff as always.

We will aim to get the QR code up later.

Caitlin, before let you go, congratulations, you now have seen your in your title. Congrats. Well deserved.

>> Thanks so much, Greg.

>> Our thanks to Caitlin Cormier, Senior client education instructor at TD Direct Investing.

And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.

Well, beyond the world of stocks and bonds, there is an asset class known as alternatives.

They can give investors exposure to everything from infrastructure to mortgages and private debt. Colin Lynch, Managing Director and had alternative investments at TD Asset Management joined us to discuss the potential opportunities in the space.

>> Well, it's an exciting new mandate and I'm excited to lead the broad team to invest in these different asset classes.

As you mentioned, they can go beyond real estate and we do have Canadian realist a and international real estate but we also have commercial mortgages, we have private debt which provides a debt to whether it's private companies, also participates in real estate lending, infrastructure debt as well, and we also have global interest ring that's a fascinating asset class which includes everything from renewable energy through to transportation to things like social infrastructure as well.

The views are asset classes that fit into the core themes that our society worldwide is embracing today. For instance, the energy transition being one. Two, the housing shortage being another.

Three, the availability of capital being limited more from the government sector and needing to rely on other participants beyond the government to help create society sustaining solutions. And so the alternative space is an incredible space because not only are you able to help provide some of these solutions for all of society but investors increasingly realize that the alternative space plays a very interesting role, a diversification role, an attractive return generating role for a portfolio.

>> Let's talk about those potential opportunities and break it down. He mentioned infrastructure which is interesting because in North America we have aging infrastructure. There are goals we want to meet in terms of climate and there are governments that are strapped for cash. Let's talk about the opportunity there.

>> Absolutely, it's a very significant opportunity.

Let's start with the energy transition.

We certainly have many forms of energy, traditional energy, but we also have… I was going to say newer forms but actually, if you think about it, they are not that new.

>> The son has been around for a while, we are just figuring out how to harness its power.

>> Precisely, and that we are now doing at scale. Infrastructure investors have been able to participate in some of the financial returns associated in participating at scale in a couple of different ways.

Number one, Brownfield, i.e. existing assets that are generating power, but two, Greenfield, the development of new assets and some of those returns on the Greenfield side tend to be quite attractive.

And so solar is just one element of the renewable energy equation that includes windfarms as well, that includes biofuels.

Then, there is also the capture and storage of that energy, so think battery pack sand investors in the space have the opportunity to help governments, for instance, when they have issues around the sustainability of their power grids. For instance, if there is a significant weather event like we saw in Western Canada earlier this year, some of those battery packs are able to provide power to those grids in their times of need.

And then beyond energy, there is transportation. So think ports and think facilities at airports, think highways.

There are also the facilities that you frequent when you are travelling on highways, service plazas. All of that and more is part of infrastructure and those are call it the basic needs elements associated with living our day-to-day lives, but without those basic needs satisfied, we really can't live much of our day-to-day lives.

And so really infrastructure represents the ability to invest in providing high quality, whether it's power, whether it's transportation, whether it's social infrastructure to help provide the basic needs of our day-to-day lives.

>> Now, the average person can understand infrastructure because it's part of their daily lives, talk us about the private debt space opportunities.

>> We know about the fixed income market, for instance, which provides debt to companies and that debt is publicly traded. Similarly, private companies, companies that are not publicly traded, also need debt. The debt market provides debt to some of these companies.

There might be small business owners, for instance, that don't have publicly traded companies, they might own their small business and they go out to get debt from different providers. Broadly put, that's part of the private debt universe but where we invest is typically a bit broader in terms of companies that are operating at some significant scale that might be doing nine figures of revenue, or 10 figures of revenue, and we have the opportunity to provide debt to those companies. But it goes beyond those private debt companies. If you go back to infrastructure on the equity side, see you have investors that are investing in for instance renewable energy, some of those investors using debt as well so instead of putting all the cash down, they might seek to use some debt and that helps them amplify their cash, instead of investing in one portfolio project here, they might be able to invest in three or four, and that allows them to have diversification in higher returns but from a debt side, that allows a different investor to participate in some of that renewable energy without having some of the higher risk debts associated with the equity side, while achieving greater returns as well. There are multiple ways to kind of get exposure to some of those big themes.

You can get exposure through direct ownership on the equity side, infrastructure, or you can get exposure on the debt side, perhaps a little bit lower in the risk spectrum, perhaps a little lower in the return but that might work for a different type of investor as well according to what they are looking to accomplish.

So private debt is interesting because it can play in multiple different places, whether it's the real estate side, infrastructure side, private equity companies providing debt and therefore able to build a pretty diversified portfolio of exposures and therefore limit the risk side while looking for opportunity on the debt side as well.

>> Let's talk about mortgage investing.

What's going on here?

>> Mortgage investing has really experienced quite the Renaissance.

Renaissance might not be the precisely accurate term because it's been a space that has grown materially, commercial mortgages, and commercial mortgages funds in Canada in particular have grown dramatically in the last decade but in particular over the last five years. Why is that? Well, number one, the yields have been quite incredible and part of that has been brought to you by the higher interest rate environment, part of that is also because we have a lot of developments in this country so whether it's building new rental housing or whether it's building new condominiums, the developers tend to use mortgage financing.

Some of that is variable-rate, limited term financing, that interest rate tends to be higher because it tends to track variable rates. Mortgage funds have benefited from some of that higher rate environment and that has been very attractive in terms of presentation of income and income yield for investors. As that space has evolved, it has not meant that the mortgage funds have not participated in other spaces such as providing mortgages for retail centres and when we say retail, of course, there are many types of retail.

There is not just the inclu shopping centres but also essential retail, like grocery stores, pharmacies, etc., mortgage funds participate in providing loans to some of those centres as well. And then, you have industrial warehouses and we have seen the growth of e-commerce and is significant acceleration of that space over the last 4 to 5 years and mortgage funds have participated in lending to some developers, in addition to providing what we call her funds which is more on the fixed-rate side to some of the stabilized income producing warehouse properties. And then, of course, the office space which not a lot of mortgage lenders are stepping into that space these days but historically mortgage lenders have participated in that space as well. When you step back from all of that, the default rates again had been pretty contained. The yields have been pretty high and now mortgage funds are generally looking to really capture and crystallize and lock in some of that high income yields brought to you by the variable rates because the Bank of Canada has been increasing interest rates but as we plateau in terms of where the rates are, the opportunity now presents itself to lock in to some of those higher rates because in three or four or five years, if rates are lower, that will look quite attractive versus high rates from an historical point of view.

>> That was Colin Lynch, managing director and head of alternative investments at TD Asset Management.

Now, for an update on the markets.

We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.

This is the heat map function, gives us a view of the market movers. We will start with TSX 60 and screen by price and volume. The price of gold in the price of oil moderating today. They saw big gains last week on geopolitical unrest. Right now if you look at the material space, you have a name like Barrick down about 4%.

Across energy space, CNQ, Cenovus, Suncor all down modestly. If they screen on the screen, it's BCE, up about 1% today. The stock is down considerably so far year to date and a bit of a bump today.

South of the border, the resilient American consumer, sticky inflation, resilient labour market, he put it all together and what do you get?

It's a bit of a mixed bag get there. The S&P 500 on the top line right now is just sitting at breakeven, giving up some gains from earlier in the session. Tesla cutting 10% of its global workforce on concerns about electric vehicle demand down almost 4%. Some financials including Goldman Sachs in positive territory. Goldman reported this morning and it has beaten on the top and bottom line. Bit of a shaky start on Friday to the U.S. Bank earnings season, Goldman seems to be a favour today but across the grid, a lot of mixed results, topline S&P 500 pulling back 1/10 of a percent, giving back some strength from earlier in the session.

You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.

Every month, TD Direct Investing releases its gauge of investor sentiment. Our Anthony Okolie has a look at how the TD Direct Investing Index looked in March.

>> The TD Direct Investing Index for the month of March has been released and self-directed investors continued their bullish sentiment. Here are the details.

First, let's start with the overall… No problem.

[audio cut] >> That was actually an unedited tape from Anthony. We will get you the proper edit on a later show this week. Stay tuned. It will be on tomorrow perhaps. You will also hear from James Orlando, Senior economist from TD Economics on what he's expecting from tomorrow's Canadian federal budget.

That's all the time we have for the show today.

Thanks for watching and we will see you tomorrow.

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