Market Insights

[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 join us to break down those latest job reports out of both Canada and the US and will hear from TV td epics Kevin Hebner on whether artificial intelligence development will be held back by its massive energy needs. And TD Asset Management's Monica Yeung will give us her takeaways from Canadian Bank earnings season. Lesson today's WebBroker education segment, Bryan Rogers will join us with a look at the technical analysis tools available on the platform.

TSX Composite Index, last trading day of the week, in June, hundred and 54 point pull back, more than half a percent.

It's been a really choppy trading week when it comes to the metals space and for the miners as well, most notable movers today including any miner I could pick for you but Kinross, these have been sums pretty substantial moves on a daily basis based on the underlying metals.

Kinross now pulling back more at 6% in today's session alone. So Pluto, also a noble notable move, will tell you more about that later in the show. So Pluto of more than 7%.

Now south of the border, investors are trying to figure out the latest jobs and manufacturers and service data but it's all eventually going to be, we will go a little deeper for a moment but right now pretty much flat on the session the S&P 500. The tech heavy NASDAQ after hitting new highs this week of invidious searching descending flat as well down 1/10 of a percent at 16 points. Nvidia, after breaking into the $3 trillion mark and above, briefly knocking Apple out of the way, looking at the stats now. Nvidia for itself has pulled back to the tune of a couple of percent of the last couple of days. Nothing too dramatic, 1192 bucks a share down 1/2% on today's session.

And that's your market update.

It is jobs Friday, always an important data point for both economies but of course and we talk about interest rates that central banks might do, it can be a little more scrutinized. MoneyTalk's Anthony Okolie has been scrutinizing those numbers.

>> It's kind of a mixed picture for Canada.

Looking at the headline numbers, many jobs came in a nearly 27,000 net new jobs added in the month, a thousand above expectations. Now, most all of it was part time jobs and we actually lost 36,000 full-time jobs and may. We look at the unemployment rate, up 1/10 to 6.2%, up a tick from April.

Now this is because entrance, coming into the job market far exceeded the number of people who found jobs and an interesting stat here, the population growth continues to outpace new jobs. When you look at the employment growth, it's only up to percent. So a huge number of people there were still not finding work in a disproportionate share of those with that rise in unemployment rate is actually students entering the job market for the first time and of course we are coming to the Summer months were a lot more students will be finishing school and looking for jobs.

For a lot of the students it's taking them much longer to find work as well. Now, when we look at the breakdown of where the jobs were, we saw some new jobs in healthcare and social assistance. Also the finance insurance real estate rental and leasing sectors, big pull back though and construction as you can see the chart here.

Rates were the main factor. Higher cost of mortgage, the drives down demand. It also drives up costs for many developers as well.

Lastly, I think this is going to be the thing that the Bank of Canada might be worried about. We saw strong wage growth in the average hourly earnings actually up year-over-year running at about 5.2% and that kind of complicates the picture for the Bank of Canada because they predicted that the wage growth will continue to grow throughout the year gradually and now we are seeing a tick up in the wage growth.

>> Delivering a rate cut for us this week and if things continue to evolve the way they see it, you can expect more cuts but there is some stuff to keep their your ion for the July meeting.

What happens south of the border, a bit of a different story.

>> We saw it actually defied expectations in May.

They added and above net new jobs in May, the unemployment rate edged up, that's the first time the job rate, the job growth in the past two months was revised lower but over the past few months, when you look at the job gains, it's averaging about 249,000 jobs over the past three months.

That is a really hard to sustain pace. Now the labour market, as evidenced in the April jobs that we saw earlier, there are signs that we are seeing moving back towards normalization in the labour market.

We saw the gap between labour supply and demand has largely closed as a result of that because job momentum appears to be peeking with the unemployment rate at the feds year and year projection of 4%.

Now there is one caveat, similar to Canada, we did see an uptick in the average earnings.

Up 2/10 versus April and again that is something that the Fed will need to keep an eye on.

>> The market reaction, the US 10 year bond yields up about 13 basis points on the heels of that, the equity side though seems to calm down, initial reactions a bit of a pullback and now pretty much flat taking in stride. I guess now the discussion is the Fed in September.

> Exactly I think right now there is a question about whether if the Fed will hike and we spoke, hikes.

>> Apologies.

Getting used to the word cut now.

>> Yes.

>> TD Securities expects the Fed to hold next week as does the markets.

We will also get inflation numbers next week as well but TD Securities is still looking for two cuts this year and four cuts in 2025.

Bank of Canada, of course you mentioned, we did get that cut this week. TD Securities believes that the stronger wage growth is not enough to derail a July rate cut of 25 basis points.

They look for another basis points cut in the fourth quarter as well.

>> Interesting stuff.

Thanks Anthony.

>> My pleasure.

>> MoneyTalk Live's Anthony Okolie. Now look at the top stories happening here in a look at how the markets are trading.

Game stops has surprised the street with an early release of its quarterly earnings which were scheduled for later this month.

The stock down 24% and the investors seem overwhelmed by this. The videogame retailer at the centre of the Mimas stock craze saw 29% drop in net sales compared to the same period last year. A steeper pullback than was expected.

Game stop is also planning another share sale to raise some cash. The stock is been volatile recently to say the least with meme trade or "roaring Kitty" back of the social media scene.

It might have something planned for this afternoon somewhere to watch if you are a watcher of game stop.

Here at home, so Pluto is among the best-performing names today the TSX Composite Index. The dairy products and cheesemakers as a expects inflation pressures to continue easing into next year and for its US business to improve.

The news came as a Montréal-based support all reported a modest increase in sales for its most recent quarter.

Up about almost 8%.

Shares of Vail resorts in the spotlight today. As the ski resort operator reported disappointing results to the street on the back of what it calls "unfavourable conditions" across much of North America for the recent ski season. They also said will fall is about 20% lower across its resorts compared to the previous year. The street doesn't like the sound of all that.

169 bucks and change down almost 13%.

A quick check of the markets for the last trading day of the week and the last trading day of, I almost said the year. I just lost six months of my life. Hundred 50 point deficit now the TSX Composite Index down a little more than half a percent.

The mining stocks getting hit again as we see the metals pullback and south of the border, investors are trying to take it all in.

Expecting the markets for the Fed, you're pretty much flat. You have green on the screen.

Four points to the upside to the S&P 500 for seven tics.

Of course as we were just talking about Anthony, the Bank of Canada has cut its key interest rates by 25 basis points this week and in doing so became the first G-7 nation to begin easing borrowing costs after an aggressive hiking cycle.

All part of an aggressive hiking campaign.

There are signals of their more cuts ahead.

Andrew Kelvin, head of Canada global rate strategy would TD Securities join me earlier to discuss whether a July cut is on the table.

>> There was a lot of surprises with the decision as we did expect to cut as you know.

But they describe the cut, they really did indicate that it will probably be more gradual, easing cycle compared to will be some of the hiking cycle.

The rationale for the cuts is pretty straightforward. The data was just there.

Inflation momentum has really been flagging throughout 2020 2024 at the start of the year US core inflation so if you think about momentum and inflation where inflation is going, running of the sort of mental 03's.

Last two months it is been below 2%.

Headline inflation is been moving steadily lower so still pretty high.

But not as high as it had been. Within the banks 3% band and your sort of near-term momentum is pointing towards inflation turning on a more substantial sustainable way.

That's really key.

We've seen enough CPI prints that they can feel comfortable that this trend will be sustained.

The growth data in the first quarter was not as strong as they had expected. The Bank of Canada had been looking for 2.8% Q1 GDP print. He came to 1.7.

Well the details may suggest it's a strong 1.7. In fact it's looking for 2.8, the BSE. So inflation is softening, that's the data that they need to go to a restrictive stance but there was an argument I think to be made for waiting to make extra, extra sure to read >> And you said this persistence and wage growth could be the thing that they could have on their hung their hats on that.

>> They did address that actually in either the statement of the press conference, essentially noting that there are certain signs of moderation and wage growth as well.

So I think it's a reasonable argument, the unemployment rate in Canada has increased quite sharply in the last few years.

So there is slack in the labour market.

Wage growth is much more turned to margin compression from businesses than it is to passing into inflation in the sort of environment. When you have an unemployment rate, 6% or above, it does follow that you should not see the same wage pressures going forward so I think it all makes sense.

The data is there for them.

There was a road to be perhaps extra cautious would have minimal cost of the economy but at the end of the day, I think they just looked at the economy and supported interest rate cuts so they cut.

I think it's pretty straightforward.

>> I think they're pretty straightforward and saying the path you would expect more cuts at future meetings because there are always risks right? You mention the wage growth, you listed geopolitics and also home prices.

I think a lot of people have their eye on that one.

>> I was a little bit surprised to see that so explicitly mentioned that's when you have to dig into an NPR.

It shows that they are sensitive to what we've seen in the shelter price of inflation.

I think the reality of this is that with there being a big housing demand, just something that piercing together, Rogers and the press conference, given there is a sort of overhang of demand, we are looking at shelter price inflation that will be above headline inflation probably quite a long time.

If they can get to be sufficiently below two, then you can run with 2% inflation target was shelter inflation being a more persistent. But it's such a big part of the basket.

It's a big part of the basket and they can move rapidly in this country.

It's about 1/4 of CPI that can move in leaps and bounds, he clearly represents a threat to inflation target, one way or the other like in the current contents we are talking about is rising house prices. The same could be true over tightened and this could put them into disinflation pretty quickly as well but that's obviously not what happened.

Those risks over a long enough horizon become symmetric.

>> Him and ask you a question that Gov.

Maclin Willis was asked and I didn't know he he was able to deliver his anger.

We have this decision today but what about July.

Let's say for the moment. That's the way he answer the question.

What would you think is the next?

>> He answered that on the second time he was asked about July.

So I guess if you thought about the first time he was asking about the July question, I think he will cut in July.

Historically, it's very rare for the BOC to go from dormant monetary policy to a new phase of a policy cycle and not move back to back in meetings.

It's happened before and is not totally unprecedented.

The two most recent times I would point you would be in the financial crisis, the Bank of Canada hiked rates in July 2007 and the world changed between July and September 2007. So clearly they didn't follow through.

If you look at Gov. policies insurance cuts when you went from 1% to 75 basis points in the back they all crashed in the middle of the last decade, he framed those as insurance cuts.

I think it's hard to use that as insurance framing today. And in fact he did not frame them as insurance cuts so we now know that they don't see them that way which would have been an odd position for the Bank to take regardless.

So I don't really see that as a Pres.

either. So I do look forward to for them to cut rates in July. I would say from the banks perspective, cutting in June and July and waiting to see where you are and taking a pause in September is entirely consistent with the message that the pace of easing will be gradual. I will also add that they did emphasize that this is going to be data dependent.

We have two more CPI prints ahead of the July meeting. Of those come out stronger, the Bank of Canada will start having second thoughts about this path they've started on. But I would just say, I think it would be unusual for the Bank to not cut rates in July and I think it would create a communication challenge for them to not cut rates in July because if they don't cut in July and they are not willing to provide explicit guidance, >> What are you worried about?

>> Exactly.

Why would we believe you when you say you expect for the rate cuts? Do you mean once every six months? I just think if they were to take a pause immediately after this cut, it would create more challenges and it would produce benefits.

If we get a July 1 Pause in September, how do you see that key benchmark rate by the end of this year?

>> We think we can get two more cuts in the fourth quarter.

We do think that by that point we will have several fairly weak growth quarters behind us.

Not negative. We are not talking about recession here. Again, population growth is too strong to talk about recession and sort of mild activity slowdowns.

But we can of growth combined with inflation that will, we think, has been proven to be sustainable at 2% that we can get a few more rate cuts from the BOC of the fourth quarter.

The we think it will end the year at 4%.

>> That was Andrew Kelvin, head of Canada and global rate strategy with TD Securities.

Now let's get your educational segment of the day.

>> Technical analysis is one method that can be used to size up a potential investment.

Joining us now to show us how you can find these tools on WebBroker is Bryan Rogers, Senior Client Education Instructor with TD Direct Investing. Bryan always great to see you.

Let's talk technical analysis and what we can do on the platform.

>> Thanks Greg and for those that are looking for new ways to research stocks, there something you may not be familiar with. Thinking hey… I've done fundamental analysis and of looked up the company.

Some of the data that's available and what about technical analysis? Looking at charts. But you may not be very comfortable or know where to start her look. I'm going to show everyone in WebBroker where you can find.

To me it's kind of a hidden gem in a way where it's information it's there and there is also information on how to get started with technical analysis as well.

So we jump into WebBroker really quickly.

You can see what you're gonna look for his are going to be able to research tabs, a few different places you can look but at the start, research, you can go to technicals and that's in general going to give you (…) You see it's automatically going to this tab.

The ones that are most abused by clients in WebBroker, using the tabs so you can get some… You can click on these and get the most popular (… :) When you go into the stock itself in terms of, you know, what's there, the red colour and some green Barash, indicating right now, and it will tell you whether it is short-term, long-term, this one is more of an intermediate term, you can see other ones all along the top.

Going even further, this is the part I was talking about that you made an understand or have a clue what any of this means but you can start to learn on what these studies are underneath and read a little bit more.

>> Alright Bryan. We are having a little trouble with your audio. You're going in and out. I know there are additional resources on WebBroker for people who want to dig in. Thanks Bryan.

Alright. Thank you.

>> Bryan Rogers, Senior Client Education Instructor a TD Direct Investing.

A reminder that June is education month with TD Direct Investing with classes focusing on training from beginner to advanced strategies.

A few ways to register, you can go to td.

com or scan this QR code on your screen to bring you to the same location.

There's been a lot of excitement around the potential for artificial intelligence from applications in the workplace to changes in our daily lives.

But according to a guess this week, Kevin Hebner, global investment strategist with TD Epoch, that will demand a lot of energy he join me earlier to discuss.

>> From 2007 until 2022 and now we are seeing an increase in electricity demand, quite significant and there is three drivers for that. One is AI. Particularly number of data centre is required, your seeing for example Microsoft set up a new data centre every three days.

They are bigger, they need cooling a second driver has been EV's electric vehicles. Electrification everything.

The third driver is home and occur particularly electronic facilities and semiconductors you mentioned before related to that.

Increased demand for electricity, this is all three parts of this trend that are real. And quite a departure from what we saw in the previous 15 years.

>> Alright.

We have some competing interest there as well. Electric vehicles, onshoring manufacturing and AI will be power-hungry.

Is there a threat here to the AI development? Could we actually slow down the pace of AI based on energy demands?

>> I think that is a risk.

When you think of AI, as for pillars, one is the models behind AI, there's a lot of elements going there.

The second is data.

There are concerns about data particularly the quality of tech data but we are moving into images, video sound and so forth.

So data continues.

Compute, you mentioned Nvidia.

That's a critical part of development of AI and we've known about those three for quite a while.

The new in this year is really electricity.

Data centre is our, very hungry caterpillars, a lot of their electricity and this is a surprise, really I think the whole energy infrastructure change over the last six months.

I think that's something we were not prepared for.

Obviously over the past decade we become very aware of climate issues and you know, there's been a huge efforts by governments and corporations to title would try to address those climate issues.

Artificial intelligence so hunger for energy and resources, is climate change actually being thought of as not a positive?

>> I think in the short term, I think what's happening with AI and data centre's is going to be a bit of a negative.

We have, for the last 15 years or so and reducing CO2 emissions and most in most of the developed world and I will continue but maybe slightly decreased pace with increased demands from AI and so forth.

And immediately, if we need more electricity, the easiest way to generate it is through natural gas and that doesn't require much thought.

The second way would be solar and wind but there is intermittency problems which are big issues for data centre's until we get battery technology to store electricity from 2 to 4 hours to two or three days.

That's going to continue to be an issue.

People talk a lot about nuclear but that's not going to be part of the solution probably for the next decade. Beyond the next decade I think is very promising.

But it's a technology that we've ignored for quite a long time.

So that means at least in the short term, the easiest thing to do is natural gas and unfortunately that does mean somewhat increased CO2 emissions and the dangers that poses for climate change.

I guess the one thing I would say about this though is the big hyper scalars, the big tech companies, Google, Microsoft, Facebook and so on, they are very serious about their environmental commitments.

They want to be net zero.

This is part of the evaluation and renumeration of all topics.

They are doing what they can do and we've seen big deals from Amazon, from Microsoft, clean energy driving the data centre report.

It's something that the tech sector is very serious about but that will take some time to come through.

Interesting to see how that evolves and we still of a transport right?

The infrastructure we know North America is old and some challenges to updating it.

What's the challenge there?

One we just updated?

>> This reflects the hollowing out of capabilities to make stuff in North America since we've seen in 1990. This is across the manufacturing spectrum.

But for example, with electricity, so, we need the data centre's, the cooling systems, the transformers, we need to build up the grid.

There is a lot of components to that.

There is only one company in the United States that makes that specialized… As we ignore the manufacturing capabilities for so much and made ourselves reliant on overseas economies, in many cases, that means China, I think there's a realization whether it's semiconductors or energy, electricity or the infrastructure for electricity that we do need to home sure that and develop it.

This is something which has caught a lot of people by surprise so I do think it's going to take, and ultimately, this is where the world, we think of AI meeting the role of (…) Building and energy infrastructure can take a long time, certainly 5 to 10 years.

>> We are to showing an audience of the graph that you showed us in terms of the average age of infrastructure and it has definitely gone up dramatically the past little while. I don't think were talking about risks dear Kevin.

Risks to the AI trends, energy being at the centre of it.

How can some of this play out?

>> One risk is that we don't have the energy to feed the data centre's and that what slows down the progress of AI. And this is bad in the sense that AI holds a lot of promise for sectors like education, healthcare and beyond.

And that is definitely a good for society.

That is a risk.

Maybe not even a risk but a likelihood, an alternative risk is we are in the midst of this AI boom, Boom, the three big hyper scalars promise to invest hundred $50 billion this year.

This is a crazy amount of money and there is a chance that we are replaying the 1990s at the amount of investments are unsustainable and there will be a pullback.

So that says that if we do increase electricity we are generating today, to quickly we could overshoot.

I think five, 10 years from now there definitely will be a demand but I think there are a two-sided risk here. The balance probability is typically biased and that we won't have the capabilities and this will smooth gel the progress of AI.

>> We put all this together Kevin what the implications for investors?

I think it's pretty clear that the first round of all this from an investment point of view has been about the semis.

What we think going forward?

>> Beyond that when you look at the sectors within the S&P 500, the number of performing sectors this year is actually utilities.

We have Tackett, commercial services and that includes a number of the big hyper scalars names but number three's utilities.

So this sector does look interesting, more so than it has in the last couple of years.

Secondly, a lot of these energy infrastructure names in fact if you look at the top 10 performers within the S&P here today, four of those 10 our energy infrastructure names.

You know, Nvidia, everybody likes to mention but even beyond Nvidia, a number of companies are not household names that look very interesting given this name and I think the third interesting idea for investors is we are going to need a lot of real investment in energy infrastructure and broadly infrastructure.

So these are real assets, and there's a lot of interest in us the government will be able to fund this because governments both in Canada and the United States and other places, they are pretty cash-strapped so ultimately will be investors funding this but I think that's an opportunity often for, say, 8% returns, pretty stable and an ice pick up on what you're getting from government bonds.

>> That was Kevin Hebner, global investment strategist with TD Epoch.

>> You can see a pretty tough day for some of the mining stocks, a very choppy week.

We've seen pretty volatile trade in the underlying metals. Gold is pulling back at most 3% today, Silver is down almost 6% today on today's session. Copper, you get the picture of a repeat of what we saw earlier in the week.

It's been very volatile.

The mining stocks, Barrick Gold more than 5% down today, Kinross done more than 6%, not a lot of optimism there. Looking for some upside.

Energy space, we have crewed all prices holding steady today, this week was about the OPEC+ meeting of last weekend. They held the production cuts that are currently in place but they started talking about ramping up production in the fall.

That definitely hit the price of crude oil, right now not a lot happening there.

If you're looking for a bit of green on the screen, we told you about some Pluto earlier in the show, that's SAP dental the corner.

Continue to abate through this year and into next year. Now south of the border, of course jobs Friday, usually more bearing on the American markets and ours, the jobs report of the states was stronger-than-expected. Investors trying to store through it all we actually saw the 10 year bond yield jump higher about 13 basis points right now. The equity side, initial reaction was negative.

In terms of price movement.

In the markets of sort of just calm down a little bit. Still gonna be a winning week for the S&P 500 right now, the headline is about 1/4 of a percent. When you dig at the some of the names behind that today, and a fair amount agreed on the screen.

Whether it's in the technology basket with an Apple or an AMD, up a little cyber percent or even Amazon, Tesla or Nike.

Nike up about 2% as well. So some positive momentum across the market. Perhaps we will end in positive territory for this session, south of the border.

>> Let's talk at the Canadian banks. There was some divergence among their earnings, one thing they all have in common is rising credit provisions. Monica Yeung, VP director and Portfolio Manager at TD Asset Management join me earlier to discuss the quarter and where things may go from here.

>> It's been a challenging two years for community banks. We have things like rising losses, compression and expensed headwinds of the context I would say, it was a pretty good quarter.

We are starting to turn a corner.

I don't think we are out of the woods yet.

But we can see the light at the tunnel. So the things I'm watching this quarter, number one, most banks be earnings, on average by 4% and they are what we would typically call high quality. So things like better-than-expected Wealth Management results, we also got really good expense controls and also rebounded market activity and that was just the icing on the cake. So that's the first thing I'm watching. Number two was also the first quarter of earnings growth in nearly 2 years. So you would have to go all the way back to Q2 of 2022 to see growth for the community banks this quarter we saw them up about 2 1/2% on EPS. So that is a really positive inflection for a turning point I think.

I think the most important thing with earnings if you start to unpack some of the fundamentals, severely positive trends like to see, something we follow called "pretax, pre-provision earnings" it's a mouthful. But basically a proxy for earnings before credit losses and that was actually up double digits.

Why is that loan growth of 4% on top of that? We've got stabilizing debt interest margins, also a rebound in the income like Capital Markets and then the kicker on top of all of that was really expense control so if you recall last year, the banks announced restructuring program are now seeing the benefit of those now flowing through into earnings. Overall, I'd say pretty decent quarter, most banks are earnings growth finally after two years and then some good positive trends we are seeing under the hut. Products let's talk about those provisions because obviously central banks in closing ours aggressively hiking interest rates and try to tame inflation. We did thing about we did hear about strained consumers and households.

Have we seen the worst? We arty have a Bank of Canada starting to embark on what people think is gonna be the cutting cycle.

>> It's kind of the elephant in the room is in it?

Really the only sore point that I would point out this quarter but also for the past few quarters now, ever since Bank of Canada has been hiking rates, we have since seen low moss provisions increase quite steadily to give you some context if you look at this quarter's loan losses compared to a year ago they are up over 50%.

Soak two key trends I would point out, number one the areas we are seeing loan losses, low loss increasing is really in the community the Canadian consumer.

Things like credit card, unsecured personal lines, a little bit and then pockets of US commercials.

So in particular, US commercial real estate, we know there's been some stress in US office for example. So that's the first thing I'll call out. Second thing is the composition of loan losses. So when we started the cycle cut two years ago, banks were putting on what we call stage I provisions. These are basically forward-looking estimates of losses because of a deteriorating macroeconomic environment.

We are seeing now is a shifting of what it's called stage II and three. Loans that have gone bad, they've gone nonpayment, maybe they are and work out and losses kind of going through that cycle of expectation into actualization.

So I think what interpretation of that is loan losses are accelerating but I think for me, the way I would reframe it is really loans are kind of being realized.

This is the cycle that we expect. You save for a rainy day in the rainy days here.

So all that tells me as we are later in the cycle. Have we peaked? Your question?

I think we are peeking but not quite there yet. I think we are getting closer to the end.

What we've heard from Bank management teams is it's likely an expectation of peeking back end of this year, early 2025.

But a lot to see. Rate cuts are definitely positive.

>> You mention off the top it's a decent quarter. You saw a lot of things a looked positive for the banks. When you talk with the market reaction, on a daily basis, one day is not everything but there were definitely some different reactions among different people. What is I tell you overall about how the market reacts over this quarter?

> We have to go back all the way over a decade into the crisis to see moves in either direction of what we saw. So that really tells me that the fundamentals are quite different depending on which Bank you look at. To give you some examples, if you look at loan growth this quarter, 4% but on one side of the spectrum you had National Bank up 8% on the other side Scotiabank actually shrinking.

Even credit loss provisions, BML had a big negative credit surprise and some more PR loans and their US business, CIBC on the other hand is saying they've seen the peak already. They expect total provisions.

So all that really tells me, I think I've to point to an analogy, is there that there is that saying "rising tides lift (…". When operating leverage, in a case where the tide is coming out, that's kind of the situation right now, you really start to see some true colours.

Things like what banks are actually getting marketshare? Which banks have provision enough? Which ones actually have the expense controls they say they do?

So I would just say the take away for me is, this is not really an environment where you close your eyes and by all six banks and some people waited kind of fund.

You really have to pick and choose your spots. You have to understand what's going on with that individual Bank level.

>> A reminder that people need to do their homework when their thinking of these kinds of investments.

The Bank stocks have been lagging for about three years now. What's your outlook from here?

>> Valuation banks are trading at a PE of 10 have times and a yield of 5%.

In the context of history, that's at the lower end of what we see banks trade at, 10 to 12 times.

But I do think that we need some clarity on a few things.

Number one, we need to see a loan losses peeking.

So confidence, again, that we are on the other side of this credit cycle, certainly the Bank of Canada cutting rates… That's a positive and we will follow closely as those successive rate cuts come in. The other thing that I think would be really helpful for this group of stocks, if we could get it moving is a return to normalized earnings growth. So I like to think of banks as a lever plan the economies. In the context of fairly anemic growth rate in Canada this year, you can expect flattish earnings growth under the Canadian banks are 2024. But if we see loan losses start to taper off, get that operating leverage in expense control come in, decent loan growth, we could see banks revert back to five or 10% earnings growth trajectory and that would be really positive.

>> That was Monica Yeung, VP director and Portfolio Manager at TD Asset Management.

As always be sure to do your own research before making any investment decisions.

And stay tuned for next week's show, Justin Flowerday managing director of public equities at TD Asset Management will be our guests.

You can email Justin ahead of time by emailing moneytalklive@td.com.

That's all the time we have for today and thank you to Anthony and everybody behind-the-scenes who brings us the show.

Thanks for watching and we will see you Monday.

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