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[music] >>Hello I'm Greg Bonnell and welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Coming up on today's show, MoneyTalk's Anthony Okolie will give us a preview of what to expect from next week's Canadian inflation report. TD Asset Management's Hussein Allidina will give us his you and whether the run we've been seeing and copper can continue.
And TD Cowan's Vince Valentini will discuss whether better days are ahead for Canada's beaten-down telecom stocks. Plus in today's WebBroker education segment, Bryan Rogers will show us how you can screen for dividend stocks using the platform. Now an update on the markets for the last trading day of the week. How do we stand?
Here in Bay Street the TDF skipped… A little shy half a percent will most actively traded names today, a lot of mining names. The price of gold today silver is higher today, gold is higher today.
Copper is higher today. Kinross Gold .
1 .2%. Also capstone copper on the move higher.
What we have on capstone right now?
Fearing a little better than Kinross at 10 bucks and 89 about 2 1/2%.
Now we are taking a look at a bit of a pause south of the border. Not a lot happening but of course we did see the S&P 500, the NASDAQ and Dow had new record highs this week, the Dow getting about 40 fell 40,000 for the first time in its history. Right now, coming down a little bit. Up one point in the S&P 500, pretty much just flat, the tech heavy NASDAQ let's check in as well, a second read, down a modest amount but 11 points, or about seven tics. In game stop, what a wild ride of is been for this stock of course at the start of the week with a big pop.
Today we will tell you more about what's happening with game stop down about 26 points, 20 bucks a share, pretty close back down where the stock was before the frenzy started off the beginning of this week. And that's your market update.
One of the big stories in the market this week was US inflation showing signs of easing. Well when they come out of the long we can on the other side we will have a Canadian consumer price report waiting for us to find out how price pressures are transpiring in this country. MoneyTalk's Anthony Okolie joins us now with a preview of what to expect.
>> I things will be one of the more closely watched reports since the Bank of Canada paused interest rates last year.
Let's face it, markets are obsessed with inflation and when rates are coming down.
And right now, markets are seen as a coin toss in terms of June and July rate cuts but we will get to the forecast from TD Securities. The headline inflation is slowing down a tick 0.1%, pointing to 2.8% year-over-year in April.
That is slightly above consensus estimates.
Energy prices will likely be the biggest factor driving inflation higher in April.
They also expect food prices to come in hotter as well. Recently there has been a pickup in imported food prices and that could translate to higher inflation in April as well. When we look at the core numbers we exclude the volatile food and energy, they see core inflation softening to 2.8% Lee year-over-year. That is in line with consensus estimates.
Prices they believe will be the main drive across core components led by the rising rental accommodation. Regarding the two of the three Bank of Canada preferred measures of inflation, that's the CPI trim and CPI medium, TD Securities sees the medium forecast up just to take, .2% growth over a month with both measures coming just under the 3% threshold.
>> There is been a feeling, as you simply watched inflation so carefully trying to figure out what the Bank of Canada will do about its policy rate.
We have that jobs reform a little harder than expected and now I feel like people are trying to see if it is June or July, what are they thinking here?
> TD Securities is leading towards June.
They think it will take up a much bigger drop in April inflation for the Bank of Canada to cut in June.
You know, between June and July there's about three more sorry to more inflation reports between that time. They think that the Bank of Canada to be more patient and see if inflation is courting towards the two cooling toward such a present trend.
They believe the risks of cutting too soon, and July, outweigh the risks of just waiting another month in July.
>> There was a month after all this time that we've been waiting for some big development. Anthony, have a nice long week and I will come back and be all over that next week.
>> Have a great weekend.
> Thanks for the breakdown.
Our thanks to Anthony Okolie for money talk now let's get you updated and some of the top world stories in the world of business and take a look at how the markets are trading.
Let's get back to game stop. Set to close out a volatile week with a sizable pullback.
Right now 27% to the downside. What's going on? The videogame retailer says it will sell up to 45 million shares as a reports or drop in its first quarter sales. Of course game stop shares sword to start the week as the meme stock frenzy was rekindled but stock is nearly back downward start of this week.
This social media platform at the centre of the pandemic era Mima stop crazes making gains today, read it says it has a partnership with OPEN AI to bring artificial intelligence features of the platform. In turn, OPEN AI will gain access to read it data to train its AI models (…) There some news today for gamers waiting for the release of the new Grand Theft Auto. Take two interactive software says the game will be released sometime in the fall of next year. That could be a bit of a disappointment of sorts for the market, the company previously said the game would come out sometime in 2025. Now they're saying probably in the fall of 2025. So a little later than a year.
Quick check of the markets with the TSX Composite Index. The mining stocks moving are high today silver gold or copper all making gains.
South of the border, after hitting new all time highs across the S&P 500, the NASDAQ on the Dow this week, a bit of applause up to points in a tick.
But for tics in the S&P 500.
Let's talk on the price of copper jumping of a 25% since the start of this year. But are the market fundamentals supporting this big move?
Hussein Allidina, Managing Director and commodities at TD Asset Management join me earlier to discuss.
>> So the red metal has been supported by kind of three main factors right? Last year we had a big mining in Panama. That was taken out of Commissioner not brought into Commission which I think for startling to kind of, update their supply and demand balances.
The recognition and realization the balances are maybe not as loose as prices were discounting. I think this year we've seen Chinese economic activity on the ground improving from low levels. But no longer getting worse. And on the margin getting better which is quite supportive for copper demand.
And I think the third piece is that sort of realization, recognition, that sort of the AI trade and the amount of power that's going to be needed to support those data centre's is material, we can debate with the power sources for the generation but you're gonna need copper to move that power.
You asked if the prices move in fundamentals today. We actually think it's moving too far, too quick. If we talk of a copper on a multiyear view, pop copper prices have to use… Given the fondles given the fundamentals we've seen, giving today's fundamentals, when I look at a multiyear view though, quite constructive, not to bore the viewers, we document this before.
We have not been investing in the supply side.
For the better part of the past 10 years we have an you and I can go and try to find a copper mine. We are not getting brought to the market on reduction for 10 years. So copper prices often with higher than the 10,000 that we are trading at right now.
I think probably we see a bit of a pullback, five, 7% over the course of the next couple weeks.
>> I was going to ask you if the fundamentals longer-term rate support price but here and now, if we got a little far ahead of ourselves we see a pullback?
>> Commodities broadly speaking or co-indicators. They should reflect the supply and demand today. Equities can discuss the future right? This is what we have a low correlation between commodities and equities.
Could we have a scenario where the constructivist on a multiyear view keeps copper prices higher than I think right now? Of course, we saw this happen in the energy market of 2005 2006 for anticipations of future deficits lead to higher prices today. That actually softens the fundamental balance today right? The puck copper prices higher than in theory it should be. We'll see less demand today and potentially more supply of the margin.
Do I think in my position for a bit of a pullback yes. Ultimately do I think copper is one of the better performing commodities on a multiyear view? Absolutely.
>> Let's talk about some of those factors particularly Panama.
As industry tries to work through their it's very hard to find a new copper mine.
Further into the future and all those factors you talked about, AI, EV's… Will be have the copper?
>> Based on the supply we have today, produced over the course of the next five, 10 years, if I look at that relative to demand projections, no we are not can have enough copper. And that means of the copper process to move materially hire to do two things, to bring about increased production, now have to deal with the lags associated with bringing copper to market.
Prices will have to average hire to discourage demand on the market. Will it discourage EV demand? Will it discourage AI demand? That can be debated.
Probably more of a substitution of copper into aluminum.
Maybe an hour generate generation or the transmission of that generation. Maybe air conditioning units in China etc. Based on the supply and demand today, there's not enough copper to meet the demand projections that we are seeing. Now, as prices move higher we will find more minds. Those minds will not come online in 25, 26, 27. They take 8 to 10 years to bring on to the market. And during that time, you're going to have to discourage demand. The only way to do that is by price.
>> The EV story, obviously we see in this move in copper, pretty substantial in this year. Against the backdrop of EV's who were a part of that story. But the EV demand is been going in the other direction. We talk about hiring rates and stuff, how does that play to a we've been seeing?
>> EV demand growth has been moving in the other direction.
The number of EV's, i.e. the amounts of copper I need is still materially hire what you see in a nice vehicle. So definite definitely the second derivative is slowed and likely remains pretty tempered for 24, maybe even into 25. But I am using incrementally more copper.
We can argue that I'm using less than I thought I was getting use six or 12 months ago, that's true. Again, that is a bearish factor for copper but today everyone focused on the number of research reports I get from the south side on power generation AAI, I get multiple reports a day. So everyone is focused on that sliver of the market. Today it's a relatively small component of demand. It will get materially larger.
It's not there yet. This is why think the market is to be moved a little bit too fast, too high, too fast.
> Obviously higher price for copper and future would incentivize people to start mining for copper. It sounds like it will be a bumpy road.
>> Even in the last cycle when we were trying to find copper reserve, copper, unlike oil, we don't have an OPEC that is keeping copper production off-line in anticipation of better price. You are producing everything that you can today.
And you know, the reason the First Quantum Panama situation was such a surprise to the market is that was supposed to be concentrated. That was supposed to be copper that came to the market to help with the supply and demand balance.
If I rewind 12 months when folks still thought copper Panama was coming online, most folks at 24 supply and demand relatively equal. Now you've lost this production in you've had some production issues in other regions as well. That is taken a sort of balanced market with tight imageries to a deficit market. A deficit market tight imageries is a recipe for higher prices.
>> It's hard to know what's gonna happen in the Panama situation. Trying to keep on top of the story in terms of you know, will there be a changing of sentiment? Can you actually get things going again and get on the right side of the officials there?
Would that be a wildcard in the months ahead?
It doesn't look like this will be a quick resolution.
>> I ultimately think the production will come to the market. The economics for the producer are probably not gonna be as good as they thought they were going to be when they first started investing.
This is another thing that we have kind of forgotten over the course of the last 10 or 15 years because commodity prices have been depressed but in environments where commodity prices are higher, you see more resource nationalism. You see more strikes.
The labour that's working in these mind, everyone's on my phone today. They know what the copper prices. When it's north of four or 450 they will be inclined to ask for more right? So that will be an issue that again, we have not to really think about over the course of the last five, 10, 12 years. As commodity prices move higher, anticipate the countries where that production is situated will want to keep more of it.
>> That was Hussein Allidina Managing Director of commodities and TD Asset Management. Now let's get to our educational segment of the day.
If you're looking for dividend stocks, WebBroker is tools which can help. Joining us now to discuss, Bryan Rogers, Senior Client Education Instructor with TD Direct Investing.
Bryan good to see you.
Let's talk about finding dividend stocks on the platform.
>>Great to see you also Greg. Dividends are becoming more popular in terms of people trying to achieve that passive income in their account.
One of the things that can be hard though is finding those dividend paying stocks.
So we do them away in WebBroker, where you can kind of maybe narrow down a little bit and then do some more research after that, after you found what you may be looking for in terms of the dividend yield and maybe a growth rate and things like that.
So there's a great feature in WebBroker. A tool you can use to screen that. If we jump over the WebBroker platform, you can see, I have Enbridge up in the moment but just as a reminder for everyone over the dividend yield is, you can't pull up any stocks, you will get this overview tab for almost every stock. You can see charts, news etc. As you scroll down, you will notice that you can see there is the dividend yield rate here. That's the category initially the actual dividend yield currently.
Remember that yield is calculated by taking the annual dividend rate, $3.66… And dividing it by the current share price. So this $50.08 share price with Enbridge.
So if you're looking for a specific rate of return, let's say 5%, 6% or seven, whatever it may be, you can actually go on the research tab and utilize the screen I will right here. So as we click on "screeners" you will notice there is a Discover section, a number of premade screens you can look at.
But we are looking at building our own so we will click on "screening".
You will see it does give you some pre-populated categories. What I normally do is clear these out.
I say "Clairol" and you can go to this "bulk edit" section where I can look at more criteria for what I want to find.
There we go.
A section right here for dividends. So if I want to find a certain dividend yield, I can send it by I can set up my stock price first.
Then I go for more criteria if I want to add, make sure the stock price that I want to be in, maybe something from a $20 range to a $50 range. You can send whatever you like there.
I'll just do something like that, 20 or $50. Not 5000 dental out there we go!
Set your range and a can set criteria make it as simple or as complex as you like. I can go to "dividend yield" now I cannot and adjust the dividend yield and I want to have. I want to go 4%, 5%, 6% up to maybe even above that.
You notice here 474 stocks I can look at.
I'm looking at US and Canada, you can change to Canada, if you want to make that a little bit more narrow the focus in terms of the economy are looking at, if you're looking at the US, you can do that as well. So now 91 and I can continue to go further if I go more criteria has there been some dividend growth on these particular stocks?
I can say "dividend growth rate" of the last five years. As I scroll up your vacancy there is my criteria right here.
I want to see the dividend growth. Maybe 4%, narrowing down the number of returns if you go a little too aggressive. So maybe you're going to say it is going by 2%. Now I have eight total criteria, a total stocks returned from this criteria.
Then I just scroll down and see all these I can research these even further. So you can just do your own research after that, Greg.
For the stock you are interested in from a dividend perspective.
>> Bryan, clearly there's a lot of functionality there you can start, as you say, narrowing down your criteria.
Life gets busy. You might think "I'm really honing in on what I'm interested in!" Then you get distracted.
You've seen these things right?
>> Yes you can.
It's a great point. I've done a lot of times to don't worry.
In WebBroker as well you can just, if you do click on something and he gets messed up, you can just go backwards by clicking the back button and usually that will work but if you want to save this for future, definitely there is a way to save the actual screen itself and then you can also edit later on if you want to change your criteria and put what you want to put in there and change as well. As you can see we have them on the tear already and we can see, we have our eight matches, our performance, we can make our changes but then we can go up here and click on "save" and the cool thing is you can actually name it however you like. So if we call this, you can see I've even done once in the past, a 500 million market With 5%.
Let's call this 5% with a 2% growth… I'll just make it really short.
Then I can do a description etc. You want to do all that but you can also share it as well. You can put your email address to send you updates if it's changed like the criteria or results of change based on the criteria.
Then click on "save screen". I really like to show this because you might wonder "where did it go after I saved?" The star, think of it as a favourite. So you click on the star here. There is my 5% with two growth. Other ones I created that I can access any time.
So anytime you want to jump back in and see the results or edit it, you have that available just right underneath the screening tool.
> Great stuff as always Bryan. Thanks and have a great long weekend.
> You too. Thanks Greg.
>> Our thanks to Bryan Rogers, Senior Client Education Instructor TD Direct Investing. For more educational resources, you can check out the Learning Center in WebBroker or use the QR code to navigate the TD directing investing's YouTube page where you can find more of those informative videos.
The Canadian telecom sector is been under pressure recently, but according to Vince Valentini, managing director for equity research at TD Cowan, there may be some potential green shoots he joined me earlier to discuss.
>> It's been almost a perfect storm. When I was here last time I realized that was things basically got a lot worse within a couple of weeks after that. So that was mid February.
First of all we've seen bond yields go even higher. As I talked about last time I was here, we need bond yields to start coming down to bring back some macro interest in the space.
At heart these are not growth names.
Their study clack cash flow names of good dividends. So when people don't of alternatives and risk-free bonds, they tend to look at these names and they get a better bid and better valuations. So bond yields her up at about 15% basis points.
That does not create a good starting point. Probably more importantly than that is the competition in the industry has gotten even worse.
I would say we've had basically higher for longer in terms of rates, lower for longer in terms of pricing for telecom services, especially when it comes to wireless. In the month of March, so just after I was here last time, things basically went off the rails. We saw price wars across the industry. Across most of the country, especially in the province of Québec.
Effectively Rogers Bell and Telus all saying we are not going to let Québec war in their new freedom mobile business and run a mock and take market share.
Québec had priced And very low.
Typically what we see Black Friday pricing get really aggressive.
That will last through the end of the year with boxing week. The first couple of weeks with January we will see pricing back higher. Giving an opportunity to dip back down during emotional periods.
We have now been sitting here since November and Québec freedom has not change the prices. They still have the lock Friday pricing of the market for May. So the heart of it grey as to why these things been so weak will think Rogers Bell and Telus want to sustain lower pricing in their wireless business in order to fend off this increased competition from Québecor but certainly has been justification because the flow is been pretty bad.
>> Going forward now let's break those things down. We are anticipating released the market is anticipating increases in some rate cuts to the Fed later this year.
Let's start with the interest rate environment. If we do end up in a situation whereby the end of the year the Fed feels like it will start cutting its trendsetting rate, will we start to see some relief in these names?
>> I think you would for sure.
If you just go back to November and December when biennials were coming down, these stocks at that time people were still nervous about pricing in the industry. In the midst of Black Friday pricing going on for all the carriers.
It's almost like the Marketing ignored the bad news on the industry fundamentals because bond yields were coming down and most of the stock had pretty good run over that sort of last six weeks to end last year.
So I think the same thing will happen again.
The bad news gets overwhelmed by the macro good news on bond yields. Look let's face it, you're looking at 7% dividend yield on Telus, 8 1/2% on BCE, even with a little bit a hair on these names, in terms of competition, people will find that pretty attractive in an environment with interest rates and bond yields coming down.
>> Full disclosure at the company is covered please see a link at the website at the end of this program.
That now let's talk about competitive environment. You said obviously the big players are going to say you can price whatever you want to will head back and let you take market share. Could we see an easing of that competitive space this year?
>> I sure hoped so but I'll be honest it doesn't seem like it's going to happen right away.
We have just come through earnings season and we have conference calls with all of the major operators, Telus and Québec are for both the last report on Thursday of last week.
Quebecornumbers were not perfect either.… Because of the low pricing they have, so people were asking "are you going to let up and raise your pricing a little bit?
And their signal was basically no. We are here to gain market share. We are the disrupter and the messaging they are giving is a bit scary for some people. I suspect at some point, it will lead.
We always see the pendulum swing back to the middle at some point in this industry.
I've gone through periods in my 25 years covering where we have seen the new slow as bad as this and people fearful that the price will last forever.
Rarely will it.
At some point people will, cooler heads will prevail. I should point out that we did see the three incumbents, Rogers Bell and Telus have all moved their price down in April.
They've all gone down from what used to be $34 for 50 gigs of data is now $39 for 20 gigs of data and that's where they tend to have more aggressive pricing.
So it has been a bit of a green shoot from them but Quebecor and freedom have not follow that path higher which is will be hoped but it's not happening yet.
I think we probably have to figure out how to value the stocks and you know, what upside there can be even if, pricing, I don't think it gets a lot worse but if to assume it doesn't get better.
>> We hear from some of these names of the regulatory environment is not favourable for further operations.
That's let's break that down in terms of how you see it and you think will be any relief coming from the CRTC?
>> When I think regulatory grade, I would think broader picture to start with his government efforts on the population growth in the housing growth side.
There could be some impact there is if this government or any future government wants to put further restrictions on foreign students or permanent immigration.
That is been a very nice tailwind for the wireless industry.
We saw at record levels of subscriber growth in 2022 and 2023.
So if there is a more substantial reduction in population I would consider that the biggest regulatory or government risk that we face.
In terms of the specific regulator in the CRTC or industry Canada, really nothing I nor should there be. The competition in the market is taking care of all the problems they wanted.
Every time the CPI stats come out, a big outlier versus increases in the price of most goods for consumers. A big outliers it wireless down 1520% year-over-year.
Internet price is not down as much is that but still down low single digits. So if I'm the CRTC you are a politician I'm probably saying "okay, I'm not gonna congratulate the telecom industry, it may not win many votes but do I really want to make this a focal point?
There's a lot of other fish they need to fry and I need telecom, there saying "things we've done in the last decade to create more competition seemed to be working on their own and we don't need to step on anything else. So I'm not worried at all great, about incremental's here for decisions and to just keep our out in population growth and what the government may be doing there.
>> You put all this together in the telecom space. Some investors may feel frustrated and wonder what's going on.
Longer term, which they be thinking?
>> I think you want to focus on the names that have the ability to generate good cash flow.
Even if we are in a "lower for longer" scenario in terms of pricing.
There are couple of names that can deliver that.
Then sustain good dividend growth. So that's what I encourage people to do, keep their eye on the sort of fundamentals of cost-reduction and Reduction which are sometimes overlooked facets of this industry.
Subscriber growth and relative revenue growth whether it's Jen AI, whether it's new network technologies, whether it's self installation… And the stroke role across the board there are substantial cost reductions going on which means a lot of companies can still generate mid, single-digit, even high single-digit cash flow growth even if their revenue growth is almost 0.
So I would leave it there for now without getting into specific names but there are certainly some names that are better set up for that than others.
>> That was Vince Valentini, managing director for equity research at TD Callan.
They cover BC, Rogers, Quebecor and Telus.
From a bigger list follow the link at the end of this video.
Let's get you an update on the markets.
We are having a look at TD's advanced dashboard, platform designed for active traders available through TD Direct Investing. Here's the heat map function, a few of the market movers. Let's start with the to 660, I price and volume.
Price of gold higher today, higher copper higher today, silver higher today.
Rallying in terms of the commodity if you look at the basic material space we find a lot of the companies who mind these metals, you have First Quantum up more than 5%, tech about 2 1/2%.
A lot agreeing on the screen.
In the energy space, we have some movement in some of the traditional oil and gas names, it's really Cameco standing through first day.
A uranium play, more than 6%.
Now, south of the border you have the S&P 500, the Dow and the NASDAQ all hitting all-time highs this week.
The Dow broke 40,000 for the first time ever.
S&P 500 sort of flat with the NASDAQ pulling back. I'll refresh the numbers on my screen. The S&P 500 down four points.
Nothing too dramatic beneath the surface going and taking a look at the S&P 100, you have AMD, the chipmaker, putting some points on the screen today and test lop about 2 1/2% as well. But Nvidia pulling back. So talk about a mixed picture. Even if you just look at the chipmakers.
AMD up a percent and Nvidia down a percent… The latest US inflation report suggest price pressures may be easing after providing… The latest US inflation report suggest price pressures may be easing after providing stubbornly high so far this year. But that does not change the market you?
TD Asset Management Alex Gorewicz join me (…) >> Year on your numbers 3.4 and 3.6% respectively for headline and core, these numbers were basically in line with expectations. Month over month, headline was a slight mist. So obviously the market, all markets like that, bond markets, equity markets… And probably the week reason why is a psychological development.
This is the first time that you're probably sitting opposite someone in many months talking about US inflation, meeting or missing expectations.
>> Using the word "easing". Right? I think that's extremely important.
Now the devil is in the details as a mixed stunt. When you look at let's say super core inflation which is core services, excluding any shelter related components, if we look at the last three months, including the latest print, the last six months, if we average those numbers in an annualized them we are still looking at figures over 6%.
That doesn't actually give the fan a lot of confidence. However, similar to some of the other numbers I mentioned, the good part about it is not that it comes in line with expectations. The good part is at the rate of change is slowing.
We saw stickiness along all the sort of inflation measures in the last several months. And now, we are starting to see that momentum way in which is probably the positive outcome of today's print.
>> As you said bond markets equity markets, liking this news of the same time. I imagine it's the first of what the Fed will need to see through several reports to tell them that indeed they are on the right track.
>> Correct. You have to look at the details in your to realize that the numbers are still not compatible with the Fed, you know, returning to the 2% target in the medium 2% inflation target in the medium term. So we have to take this with a grain of salt.
It's maybe a step of the right direction but by no means giving the Fed the green light to, let's say, lower its policy rate in its next meeting.
>> Somewhat overshadowing, being overshadowed by the CPI headline, the fact that US retail sales today, I don't go too deep into it other than to see they were flat. This seems to be another indication that perhaps the US consumer is starting to say "wow, life is expensive. Maybe I need to slow down".
>> That is an excellent point because I think when we look at today's, you know, fall in interest rates across the yield curve, it seems to have been more of a reaction to those soft retail sales.
Again, psychologically, the fact that inflation was nada beat that did come not confirm her than expected actually helped to pave the way for that. But today's retail sales, similar to some of the mixed data we saw yesterday and PPI, similar to let's say, a couple of weeks ago you're starting to see a string of data in the US that is missing expectations.
As we know, when we think about, you know, market reactions, it really is about what's been priced in. What's expected by investors versus what's delivered on the last several weeks of delivered weaker than expected data in the US from a total, you know, macro point of view. I think that, more than anything else is what is going to enable the bond market to say "well maybe, now we've priced are too many great cuts for this year." Maybe it's time we start pricing some back in." >> All right this can create a situation re-of the market expectations pushing back against what the Fed is telling us. It's been a push and pull for a while right?
Sometimes it feels if the market is saying no, and then take it easy and be patient.
He's been talking about patients for a while, Powell, has there been a disconnect?
The patient about the interest rates we think they will go sooner rather than later?
>> Now that narrative seems to be we think they will cut sooner rather than later.
But you know, just a couple weeks ago, there was a growing chorus of investors suggesting that the Fed needs to hike again.
And you know, in hindsight, I think Powell and the Fed did the right thing by saying "let's stay the course. Let's cut off that tail risk, we will say, for more rate hikes and just prolong our current policy stance. We will delay when we start rate cuts but the next move is more likely a cut.
And again, the string of data we seen in the last couple of weeks in a number of different indicators suggesting that the Fed is right to sort of try to transition more towards easing.
>> When we finally do get the easing, how robust will they be?
How aggressive will they be on the other side?
When we finally do start cutting, will be take it slow?
>> The key here and it's hard to say at this time, the key will be labour market data.
What the Fed did by saying effectively, we just need to hold the current stance longer and then all of the data that came after suggesting that rates don't need to move higher, with that all dead is to say well actually, the Fed's position and that Fed's current policy stance could be restrictive enough but the key will be labour day done, not days that was initial claims last week that surprise to the upside whether was the non-farmed data from a couple weeks ago that suggested that perhaps the Fed's policy stance is restricted restrictive enough. So you've actually seen the response and markets being skewed towards asymmetric outcome which, maybe rates don't move higher. You have the move lower than all classes really like them.
>> Let's talk about the waiting.
We've been waiting longer as investors and we thought we would be for the Federal Reserve to deliver a rate cut.
What is the sentiment like among fixed income investors as they wait the site?
>> They don't like waiting.
The hard part here is that everything I've just mentioned, that is actually whips the market around quite a bit.
There you are really super data dependent which in some ways is boring but in other ways very volatile from economic data released.
I think for a long time, bond investors were conditioned to choose to expect capital returns whether it's positive or negative but yields were generally so low for the last 10 or 15 years up until a couple of years ago.
And because of that, he didn't you know, have the experience of having to wait for their income return other yield return to compound over time.
And so bond investors are still very much cut in that psyche where okay, I want my returns now. Okay will the Fed needs to cut interest rates.
We are data dependent on the data has been volatile.
But when you take a step back, what you realizes your yields are actually hoping to offset a lot of that volatility but it takes time to compound those yields. It takes time to, you know, realize those yields and I think that waiting and being patient part is something that needs to return to bond investors.
>> That was Alex Gorewicz, VP and Dir. for Active Fixed Income portfolio management at TD Asset Management.
Stay tuned after the long weekend, the reaction of the latest inflation report here. Robert Both will join us, Senior Client Education Instructor, he is a Guy who talks rates in the economy.
He is a senior macro strategist at TD Securities.
You can get a head start by emailing moneytalklive@td.com.
Thank you for watching and we will see you after the long weekend!
[music]
Coming up on today's show, MoneyTalk's Anthony Okolie will give us a preview of what to expect from next week's Canadian inflation report. TD Asset Management's Hussein Allidina will give us his you and whether the run we've been seeing and copper can continue.
And TD Cowan's Vince Valentini will discuss whether better days are ahead for Canada's beaten-down telecom stocks. Plus in today's WebBroker education segment, Bryan Rogers will show us how you can screen for dividend stocks using the platform. Now an update on the markets for the last trading day of the week. How do we stand?
Here in Bay Street the TDF skipped… A little shy half a percent will most actively traded names today, a lot of mining names. The price of gold today silver is higher today, gold is higher today.
Copper is higher today. Kinross Gold .
1 .2%. Also capstone copper on the move higher.
What we have on capstone right now?
Fearing a little better than Kinross at 10 bucks and 89 about 2 1/2%.
Now we are taking a look at a bit of a pause south of the border. Not a lot happening but of course we did see the S&P 500, the NASDAQ and Dow had new record highs this week, the Dow getting about 40 fell 40,000 for the first time in its history. Right now, coming down a little bit. Up one point in the S&P 500, pretty much just flat, the tech heavy NASDAQ let's check in as well, a second read, down a modest amount but 11 points, or about seven tics. In game stop, what a wild ride of is been for this stock of course at the start of the week with a big pop.
Today we will tell you more about what's happening with game stop down about 26 points, 20 bucks a share, pretty close back down where the stock was before the frenzy started off the beginning of this week. And that's your market update.
One of the big stories in the market this week was US inflation showing signs of easing. Well when they come out of the long we can on the other side we will have a Canadian consumer price report waiting for us to find out how price pressures are transpiring in this country. MoneyTalk's Anthony Okolie joins us now with a preview of what to expect.
>> I things will be one of the more closely watched reports since the Bank of Canada paused interest rates last year.
Let's face it, markets are obsessed with inflation and when rates are coming down.
And right now, markets are seen as a coin toss in terms of June and July rate cuts but we will get to the forecast from TD Securities. The headline inflation is slowing down a tick 0.1%, pointing to 2.8% year-over-year in April.
That is slightly above consensus estimates.
Energy prices will likely be the biggest factor driving inflation higher in April.
They also expect food prices to come in hotter as well. Recently there has been a pickup in imported food prices and that could translate to higher inflation in April as well. When we look at the core numbers we exclude the volatile food and energy, they see core inflation softening to 2.8% Lee year-over-year. That is in line with consensus estimates.
Prices they believe will be the main drive across core components led by the rising rental accommodation. Regarding the two of the three Bank of Canada preferred measures of inflation, that's the CPI trim and CPI medium, TD Securities sees the medium forecast up just to take, .2% growth over a month with both measures coming just under the 3% threshold.
>> There is been a feeling, as you simply watched inflation so carefully trying to figure out what the Bank of Canada will do about its policy rate.
We have that jobs reform a little harder than expected and now I feel like people are trying to see if it is June or July, what are they thinking here?
> TD Securities is leading towards June.
They think it will take up a much bigger drop in April inflation for the Bank of Canada to cut in June.
You know, between June and July there's about three more sorry to more inflation reports between that time. They think that the Bank of Canada to be more patient and see if inflation is courting towards the two cooling toward such a present trend.
They believe the risks of cutting too soon, and July, outweigh the risks of just waiting another month in July.
>> There was a month after all this time that we've been waiting for some big development. Anthony, have a nice long week and I will come back and be all over that next week.
>> Have a great weekend.
> Thanks for the breakdown.
Our thanks to Anthony Okolie for money talk now let's get you updated and some of the top world stories in the world of business and take a look at how the markets are trading.
Let's get back to game stop. Set to close out a volatile week with a sizable pullback.
Right now 27% to the downside. What's going on? The videogame retailer says it will sell up to 45 million shares as a reports or drop in its first quarter sales. Of course game stop shares sword to start the week as the meme stock frenzy was rekindled but stock is nearly back downward start of this week.
This social media platform at the centre of the pandemic era Mima stop crazes making gains today, read it says it has a partnership with OPEN AI to bring artificial intelligence features of the platform. In turn, OPEN AI will gain access to read it data to train its AI models (…) There some news today for gamers waiting for the release of the new Grand Theft Auto. Take two interactive software says the game will be released sometime in the fall of next year. That could be a bit of a disappointment of sorts for the market, the company previously said the game would come out sometime in 2025. Now they're saying probably in the fall of 2025. So a little later than a year.
Quick check of the markets with the TSX Composite Index. The mining stocks moving are high today silver gold or copper all making gains.
South of the border, after hitting new all time highs across the S&P 500, the NASDAQ on the Dow this week, a bit of applause up to points in a tick.
But for tics in the S&P 500.
Let's talk on the price of copper jumping of a 25% since the start of this year. But are the market fundamentals supporting this big move?
Hussein Allidina, Managing Director and commodities at TD Asset Management join me earlier to discuss.
>> So the red metal has been supported by kind of three main factors right? Last year we had a big mining in Panama. That was taken out of Commissioner not brought into Commission which I think for startling to kind of, update their supply and demand balances.
The recognition and realization the balances are maybe not as loose as prices were discounting. I think this year we've seen Chinese economic activity on the ground improving from low levels. But no longer getting worse. And on the margin getting better which is quite supportive for copper demand.
And I think the third piece is that sort of realization, recognition, that sort of the AI trade and the amount of power that's going to be needed to support those data centre's is material, we can debate with the power sources for the generation but you're gonna need copper to move that power.
You asked if the prices move in fundamentals today. We actually think it's moving too far, too quick. If we talk of a copper on a multiyear view, pop copper prices have to use… Given the fondles given the fundamentals we've seen, giving today's fundamentals, when I look at a multiyear view though, quite constructive, not to bore the viewers, we document this before.
We have not been investing in the supply side.
For the better part of the past 10 years we have an you and I can go and try to find a copper mine. We are not getting brought to the market on reduction for 10 years. So copper prices often with higher than the 10,000 that we are trading at right now.
I think probably we see a bit of a pullback, five, 7% over the course of the next couple weeks.
>> I was going to ask you if the fundamentals longer-term rate support price but here and now, if we got a little far ahead of ourselves we see a pullback?
>> Commodities broadly speaking or co-indicators. They should reflect the supply and demand today. Equities can discuss the future right? This is what we have a low correlation between commodities and equities.
Could we have a scenario where the constructivist on a multiyear view keeps copper prices higher than I think right now? Of course, we saw this happen in the energy market of 2005 2006 for anticipations of future deficits lead to higher prices today. That actually softens the fundamental balance today right? The puck copper prices higher than in theory it should be. We'll see less demand today and potentially more supply of the margin.
Do I think in my position for a bit of a pullback yes. Ultimately do I think copper is one of the better performing commodities on a multiyear view? Absolutely.
>> Let's talk about some of those factors particularly Panama.
As industry tries to work through their it's very hard to find a new copper mine.
Further into the future and all those factors you talked about, AI, EV's… Will be have the copper?
>> Based on the supply we have today, produced over the course of the next five, 10 years, if I look at that relative to demand projections, no we are not can have enough copper. And that means of the copper process to move materially hire to do two things, to bring about increased production, now have to deal with the lags associated with bringing copper to market.
Prices will have to average hire to discourage demand on the market. Will it discourage EV demand? Will it discourage AI demand? That can be debated.
Probably more of a substitution of copper into aluminum.
Maybe an hour generate generation or the transmission of that generation. Maybe air conditioning units in China etc. Based on the supply and demand today, there's not enough copper to meet the demand projections that we are seeing. Now, as prices move higher we will find more minds. Those minds will not come online in 25, 26, 27. They take 8 to 10 years to bring on to the market. And during that time, you're going to have to discourage demand. The only way to do that is by price.
>> The EV story, obviously we see in this move in copper, pretty substantial in this year. Against the backdrop of EV's who were a part of that story. But the EV demand is been going in the other direction. We talk about hiring rates and stuff, how does that play to a we've been seeing?
>> EV demand growth has been moving in the other direction.
The number of EV's, i.e. the amounts of copper I need is still materially hire what you see in a nice vehicle. So definite definitely the second derivative is slowed and likely remains pretty tempered for 24, maybe even into 25. But I am using incrementally more copper.
We can argue that I'm using less than I thought I was getting use six or 12 months ago, that's true. Again, that is a bearish factor for copper but today everyone focused on the number of research reports I get from the south side on power generation AAI, I get multiple reports a day. So everyone is focused on that sliver of the market. Today it's a relatively small component of demand. It will get materially larger.
It's not there yet. This is why think the market is to be moved a little bit too fast, too high, too fast.
> Obviously higher price for copper and future would incentivize people to start mining for copper. It sounds like it will be a bumpy road.
>> Even in the last cycle when we were trying to find copper reserve, copper, unlike oil, we don't have an OPEC that is keeping copper production off-line in anticipation of better price. You are producing everything that you can today.
And you know, the reason the First Quantum Panama situation was such a surprise to the market is that was supposed to be concentrated. That was supposed to be copper that came to the market to help with the supply and demand balance.
If I rewind 12 months when folks still thought copper Panama was coming online, most folks at 24 supply and demand relatively equal. Now you've lost this production in you've had some production issues in other regions as well. That is taken a sort of balanced market with tight imageries to a deficit market. A deficit market tight imageries is a recipe for higher prices.
>> It's hard to know what's gonna happen in the Panama situation. Trying to keep on top of the story in terms of you know, will there be a changing of sentiment? Can you actually get things going again and get on the right side of the officials there?
Would that be a wildcard in the months ahead?
It doesn't look like this will be a quick resolution.
>> I ultimately think the production will come to the market. The economics for the producer are probably not gonna be as good as they thought they were going to be when they first started investing.
This is another thing that we have kind of forgotten over the course of the last 10 or 15 years because commodity prices have been depressed but in environments where commodity prices are higher, you see more resource nationalism. You see more strikes.
The labour that's working in these mind, everyone's on my phone today. They know what the copper prices. When it's north of four or 450 they will be inclined to ask for more right? So that will be an issue that again, we have not to really think about over the course of the last five, 10, 12 years. As commodity prices move higher, anticipate the countries where that production is situated will want to keep more of it.
>> That was Hussein Allidina Managing Director of commodities and TD Asset Management. Now let's get to our educational segment of the day.
If you're looking for dividend stocks, WebBroker is tools which can help. Joining us now to discuss, Bryan Rogers, Senior Client Education Instructor with TD Direct Investing.
Bryan good to see you.
Let's talk about finding dividend stocks on the platform.
>>Great to see you also Greg. Dividends are becoming more popular in terms of people trying to achieve that passive income in their account.
One of the things that can be hard though is finding those dividend paying stocks.
So we do them away in WebBroker, where you can kind of maybe narrow down a little bit and then do some more research after that, after you found what you may be looking for in terms of the dividend yield and maybe a growth rate and things like that.
So there's a great feature in WebBroker. A tool you can use to screen that. If we jump over the WebBroker platform, you can see, I have Enbridge up in the moment but just as a reminder for everyone over the dividend yield is, you can't pull up any stocks, you will get this overview tab for almost every stock. You can see charts, news etc. As you scroll down, you will notice that you can see there is the dividend yield rate here. That's the category initially the actual dividend yield currently.
Remember that yield is calculated by taking the annual dividend rate, $3.66… And dividing it by the current share price. So this $50.08 share price with Enbridge.
So if you're looking for a specific rate of return, let's say 5%, 6% or seven, whatever it may be, you can actually go on the research tab and utilize the screen I will right here. So as we click on "screeners" you will notice there is a Discover section, a number of premade screens you can look at.
But we are looking at building our own so we will click on "screening".
You will see it does give you some pre-populated categories. What I normally do is clear these out.
I say "Clairol" and you can go to this "bulk edit" section where I can look at more criteria for what I want to find.
There we go.
A section right here for dividends. So if I want to find a certain dividend yield, I can send it by I can set up my stock price first.
Then I go for more criteria if I want to add, make sure the stock price that I want to be in, maybe something from a $20 range to a $50 range. You can send whatever you like there.
I'll just do something like that, 20 or $50. Not 5000 dental out there we go!
Set your range and a can set criteria make it as simple or as complex as you like. I can go to "dividend yield" now I cannot and adjust the dividend yield and I want to have. I want to go 4%, 5%, 6% up to maybe even above that.
You notice here 474 stocks I can look at.
I'm looking at US and Canada, you can change to Canada, if you want to make that a little bit more narrow the focus in terms of the economy are looking at, if you're looking at the US, you can do that as well. So now 91 and I can continue to go further if I go more criteria has there been some dividend growth on these particular stocks?
I can say "dividend growth rate" of the last five years. As I scroll up your vacancy there is my criteria right here.
I want to see the dividend growth. Maybe 4%, narrowing down the number of returns if you go a little too aggressive. So maybe you're going to say it is going by 2%. Now I have eight total criteria, a total stocks returned from this criteria.
Then I just scroll down and see all these I can research these even further. So you can just do your own research after that, Greg.
For the stock you are interested in from a dividend perspective.
>> Bryan, clearly there's a lot of functionality there you can start, as you say, narrowing down your criteria.
Life gets busy. You might think "I'm really honing in on what I'm interested in!" Then you get distracted.
You've seen these things right?
>> Yes you can.
It's a great point. I've done a lot of times to don't worry.
In WebBroker as well you can just, if you do click on something and he gets messed up, you can just go backwards by clicking the back button and usually that will work but if you want to save this for future, definitely there is a way to save the actual screen itself and then you can also edit later on if you want to change your criteria and put what you want to put in there and change as well. As you can see we have them on the tear already and we can see, we have our eight matches, our performance, we can make our changes but then we can go up here and click on "save" and the cool thing is you can actually name it however you like. So if we call this, you can see I've even done once in the past, a 500 million market With 5%.
Let's call this 5% with a 2% growth… I'll just make it really short.
Then I can do a description etc. You want to do all that but you can also share it as well. You can put your email address to send you updates if it's changed like the criteria or results of change based on the criteria.
Then click on "save screen". I really like to show this because you might wonder "where did it go after I saved?" The star, think of it as a favourite. So you click on the star here. There is my 5% with two growth. Other ones I created that I can access any time.
So anytime you want to jump back in and see the results or edit it, you have that available just right underneath the screening tool.
> Great stuff as always Bryan. Thanks and have a great long weekend.
> You too. Thanks Greg.
>> Our thanks to Bryan Rogers, Senior Client Education Instructor TD Direct Investing. For more educational resources, you can check out the Learning Center in WebBroker or use the QR code to navigate the TD directing investing's YouTube page where you can find more of those informative videos.
The Canadian telecom sector is been under pressure recently, but according to Vince Valentini, managing director for equity research at TD Cowan, there may be some potential green shoots he joined me earlier to discuss.
>> It's been almost a perfect storm. When I was here last time I realized that was things basically got a lot worse within a couple of weeks after that. So that was mid February.
First of all we've seen bond yields go even higher. As I talked about last time I was here, we need bond yields to start coming down to bring back some macro interest in the space.
At heart these are not growth names.
Their study clack cash flow names of good dividends. So when people don't of alternatives and risk-free bonds, they tend to look at these names and they get a better bid and better valuations. So bond yields her up at about 15% basis points.
That does not create a good starting point. Probably more importantly than that is the competition in the industry has gotten even worse.
I would say we've had basically higher for longer in terms of rates, lower for longer in terms of pricing for telecom services, especially when it comes to wireless. In the month of March, so just after I was here last time, things basically went off the rails. We saw price wars across the industry. Across most of the country, especially in the province of Québec.
Effectively Rogers Bell and Telus all saying we are not going to let Québec war in their new freedom mobile business and run a mock and take market share.
Québec had priced And very low.
Typically what we see Black Friday pricing get really aggressive.
That will last through the end of the year with boxing week. The first couple of weeks with January we will see pricing back higher. Giving an opportunity to dip back down during emotional periods.
We have now been sitting here since November and Québec freedom has not change the prices. They still have the lock Friday pricing of the market for May. So the heart of it grey as to why these things been so weak will think Rogers Bell and Telus want to sustain lower pricing in their wireless business in order to fend off this increased competition from Québecor but certainly has been justification because the flow is been pretty bad.
>> Going forward now let's break those things down. We are anticipating released the market is anticipating increases in some rate cuts to the Fed later this year.
Let's start with the interest rate environment. If we do end up in a situation whereby the end of the year the Fed feels like it will start cutting its trendsetting rate, will we start to see some relief in these names?
>> I think you would for sure.
If you just go back to November and December when biennials were coming down, these stocks at that time people were still nervous about pricing in the industry. In the midst of Black Friday pricing going on for all the carriers.
It's almost like the Marketing ignored the bad news on the industry fundamentals because bond yields were coming down and most of the stock had pretty good run over that sort of last six weeks to end last year.
So I think the same thing will happen again.
The bad news gets overwhelmed by the macro good news on bond yields. Look let's face it, you're looking at 7% dividend yield on Telus, 8 1/2% on BCE, even with a little bit a hair on these names, in terms of competition, people will find that pretty attractive in an environment with interest rates and bond yields coming down.
>> Full disclosure at the company is covered please see a link at the website at the end of this program.
That now let's talk about competitive environment. You said obviously the big players are going to say you can price whatever you want to will head back and let you take market share. Could we see an easing of that competitive space this year?
>> I sure hoped so but I'll be honest it doesn't seem like it's going to happen right away.
We have just come through earnings season and we have conference calls with all of the major operators, Telus and Québec are for both the last report on Thursday of last week.
Quebecornumbers were not perfect either.… Because of the low pricing they have, so people were asking "are you going to let up and raise your pricing a little bit?
And their signal was basically no. We are here to gain market share. We are the disrupter and the messaging they are giving is a bit scary for some people. I suspect at some point, it will lead.
We always see the pendulum swing back to the middle at some point in this industry.
I've gone through periods in my 25 years covering where we have seen the new slow as bad as this and people fearful that the price will last forever.
Rarely will it.
At some point people will, cooler heads will prevail. I should point out that we did see the three incumbents, Rogers Bell and Telus have all moved their price down in April.
They've all gone down from what used to be $34 for 50 gigs of data is now $39 for 20 gigs of data and that's where they tend to have more aggressive pricing.
So it has been a bit of a green shoot from them but Quebecor and freedom have not follow that path higher which is will be hoped but it's not happening yet.
I think we probably have to figure out how to value the stocks and you know, what upside there can be even if, pricing, I don't think it gets a lot worse but if to assume it doesn't get better.
>> We hear from some of these names of the regulatory environment is not favourable for further operations.
That's let's break that down in terms of how you see it and you think will be any relief coming from the CRTC?
>> When I think regulatory grade, I would think broader picture to start with his government efforts on the population growth in the housing growth side.
There could be some impact there is if this government or any future government wants to put further restrictions on foreign students or permanent immigration.
That is been a very nice tailwind for the wireless industry.
We saw at record levels of subscriber growth in 2022 and 2023.
So if there is a more substantial reduction in population I would consider that the biggest regulatory or government risk that we face.
In terms of the specific regulator in the CRTC or industry Canada, really nothing I nor should there be. The competition in the market is taking care of all the problems they wanted.
Every time the CPI stats come out, a big outlier versus increases in the price of most goods for consumers. A big outliers it wireless down 1520% year-over-year.
Internet price is not down as much is that but still down low single digits. So if I'm the CRTC you are a politician I'm probably saying "okay, I'm not gonna congratulate the telecom industry, it may not win many votes but do I really want to make this a focal point?
There's a lot of other fish they need to fry and I need telecom, there saying "things we've done in the last decade to create more competition seemed to be working on their own and we don't need to step on anything else. So I'm not worried at all great, about incremental's here for decisions and to just keep our out in population growth and what the government may be doing there.
>> You put all this together in the telecom space. Some investors may feel frustrated and wonder what's going on.
Longer term, which they be thinking?
>> I think you want to focus on the names that have the ability to generate good cash flow.
Even if we are in a "lower for longer" scenario in terms of pricing.
There are couple of names that can deliver that.
Then sustain good dividend growth. So that's what I encourage people to do, keep their eye on the sort of fundamentals of cost-reduction and Reduction which are sometimes overlooked facets of this industry.
Subscriber growth and relative revenue growth whether it's Jen AI, whether it's new network technologies, whether it's self installation… And the stroke role across the board there are substantial cost reductions going on which means a lot of companies can still generate mid, single-digit, even high single-digit cash flow growth even if their revenue growth is almost 0.
So I would leave it there for now without getting into specific names but there are certainly some names that are better set up for that than others.
>> That was Vince Valentini, managing director for equity research at TD Callan.
They cover BC, Rogers, Quebecor and Telus.
From a bigger list follow the link at the end of this video.
Let's get you an update on the markets.
We are having a look at TD's advanced dashboard, platform designed for active traders available through TD Direct Investing. Here's the heat map function, a few of the market movers. Let's start with the to 660, I price and volume.
Price of gold higher today, higher copper higher today, silver higher today.
Rallying in terms of the commodity if you look at the basic material space we find a lot of the companies who mind these metals, you have First Quantum up more than 5%, tech about 2 1/2%.
A lot agreeing on the screen.
In the energy space, we have some movement in some of the traditional oil and gas names, it's really Cameco standing through first day.
A uranium play, more than 6%.
Now, south of the border you have the S&P 500, the Dow and the NASDAQ all hitting all-time highs this week.
The Dow broke 40,000 for the first time ever.
S&P 500 sort of flat with the NASDAQ pulling back. I'll refresh the numbers on my screen. The S&P 500 down four points.
Nothing too dramatic beneath the surface going and taking a look at the S&P 100, you have AMD, the chipmaker, putting some points on the screen today and test lop about 2 1/2% as well. But Nvidia pulling back. So talk about a mixed picture. Even if you just look at the chipmakers.
AMD up a percent and Nvidia down a percent… The latest US inflation report suggest price pressures may be easing after providing… The latest US inflation report suggest price pressures may be easing after providing stubbornly high so far this year. But that does not change the market you?
TD Asset Management Alex Gorewicz join me (…) >> Year on your numbers 3.4 and 3.6% respectively for headline and core, these numbers were basically in line with expectations. Month over month, headline was a slight mist. So obviously the market, all markets like that, bond markets, equity markets… And probably the week reason why is a psychological development.
This is the first time that you're probably sitting opposite someone in many months talking about US inflation, meeting or missing expectations.
>> Using the word "easing". Right? I think that's extremely important.
Now the devil is in the details as a mixed stunt. When you look at let's say super core inflation which is core services, excluding any shelter related components, if we look at the last three months, including the latest print, the last six months, if we average those numbers in an annualized them we are still looking at figures over 6%.
That doesn't actually give the fan a lot of confidence. However, similar to some of the other numbers I mentioned, the good part about it is not that it comes in line with expectations. The good part is at the rate of change is slowing.
We saw stickiness along all the sort of inflation measures in the last several months. And now, we are starting to see that momentum way in which is probably the positive outcome of today's print.
>> As you said bond markets equity markets, liking this news of the same time. I imagine it's the first of what the Fed will need to see through several reports to tell them that indeed they are on the right track.
>> Correct. You have to look at the details in your to realize that the numbers are still not compatible with the Fed, you know, returning to the 2% target in the medium 2% inflation target in the medium term. So we have to take this with a grain of salt.
It's maybe a step of the right direction but by no means giving the Fed the green light to, let's say, lower its policy rate in its next meeting.
>> Somewhat overshadowing, being overshadowed by the CPI headline, the fact that US retail sales today, I don't go too deep into it other than to see they were flat. This seems to be another indication that perhaps the US consumer is starting to say "wow, life is expensive. Maybe I need to slow down".
>> That is an excellent point because I think when we look at today's, you know, fall in interest rates across the yield curve, it seems to have been more of a reaction to those soft retail sales.
Again, psychologically, the fact that inflation was nada beat that did come not confirm her than expected actually helped to pave the way for that. But today's retail sales, similar to some of the mixed data we saw yesterday and PPI, similar to let's say, a couple of weeks ago you're starting to see a string of data in the US that is missing expectations.
As we know, when we think about, you know, market reactions, it really is about what's been priced in. What's expected by investors versus what's delivered on the last several weeks of delivered weaker than expected data in the US from a total, you know, macro point of view. I think that, more than anything else is what is going to enable the bond market to say "well maybe, now we've priced are too many great cuts for this year." Maybe it's time we start pricing some back in." >> All right this can create a situation re-of the market expectations pushing back against what the Fed is telling us. It's been a push and pull for a while right?
Sometimes it feels if the market is saying no, and then take it easy and be patient.
He's been talking about patients for a while, Powell, has there been a disconnect?
The patient about the interest rates we think they will go sooner rather than later?
>> Now that narrative seems to be we think they will cut sooner rather than later.
But you know, just a couple weeks ago, there was a growing chorus of investors suggesting that the Fed needs to hike again.
And you know, in hindsight, I think Powell and the Fed did the right thing by saying "let's stay the course. Let's cut off that tail risk, we will say, for more rate hikes and just prolong our current policy stance. We will delay when we start rate cuts but the next move is more likely a cut.
And again, the string of data we seen in the last couple of weeks in a number of different indicators suggesting that the Fed is right to sort of try to transition more towards easing.
>> When we finally do get the easing, how robust will they be?
How aggressive will they be on the other side?
When we finally do start cutting, will be take it slow?
>> The key here and it's hard to say at this time, the key will be labour market data.
What the Fed did by saying effectively, we just need to hold the current stance longer and then all of the data that came after suggesting that rates don't need to move higher, with that all dead is to say well actually, the Fed's position and that Fed's current policy stance could be restrictive enough but the key will be labour day done, not days that was initial claims last week that surprise to the upside whether was the non-farmed data from a couple weeks ago that suggested that perhaps the Fed's policy stance is restricted restrictive enough. So you've actually seen the response and markets being skewed towards asymmetric outcome which, maybe rates don't move higher. You have the move lower than all classes really like them.
>> Let's talk about the waiting.
We've been waiting longer as investors and we thought we would be for the Federal Reserve to deliver a rate cut.
What is the sentiment like among fixed income investors as they wait the site?
>> They don't like waiting.
The hard part here is that everything I've just mentioned, that is actually whips the market around quite a bit.
There you are really super data dependent which in some ways is boring but in other ways very volatile from economic data released.
I think for a long time, bond investors were conditioned to choose to expect capital returns whether it's positive or negative but yields were generally so low for the last 10 or 15 years up until a couple of years ago.
And because of that, he didn't you know, have the experience of having to wait for their income return other yield return to compound over time.
And so bond investors are still very much cut in that psyche where okay, I want my returns now. Okay will the Fed needs to cut interest rates.
We are data dependent on the data has been volatile.
But when you take a step back, what you realizes your yields are actually hoping to offset a lot of that volatility but it takes time to compound those yields. It takes time to, you know, realize those yields and I think that waiting and being patient part is something that needs to return to bond investors.
>> That was Alex Gorewicz, VP and Dir. for Active Fixed Income portfolio management at TD Asset Management.
Stay tuned after the long weekend, the reaction of the latest inflation report here. Robert Both will join us, Senior Client Education Instructor, he is a Guy who talks rates in the economy.
He is a senior macro strategist at TD Securities.
You can get a head start by emailing moneytalklive@td.com.
Thank you for watching and we will see you after the long weekend!
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