Market Strategy

[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. coming up on today show, MoneyTalk's Anthony Okolie is going to break down that weaker than expected Canadian Jobs Report. We are going to hear from TD Asset Management's Julien Nono-Womdim on whether the recent run and semiconductor stocks will continue. And Hussein Allidina will give us his view on what Saudi Arabia's production cuts mean for the energy market. plus, in today's WebBroker education segment, Caitlin Cormier will show us where you get an overview of the markets using the platform. Before he gets all that, let's get you an update on the markets. Last trading day of the week. Let's check in on the TSX Composite Index. right now we are down a modest 60 points, about 1/3 of a percent. A bit of a mixed showing out there. I want to take a look at Shopify. It's been a choppy week for this one. it did close the sale of its logistics business earlier in the week. The shares gained after that, they got pulled down with the broader market on other days and today at 8244, they bounced back up again to the tune of about 4%. One of the most heavily traded names at this hour on the exchange. Saputo is at with their latest earnings and even though they did grow revenue and profit, there warning of a challenging environment going forward in inflation and competition among the issues. That's not down out to the tune of a little more than 10%. Just south of the border, let's check in on the S&P 500. He got the US Federal Reserve's rate decision next week. We had our Bank of Canada this week. Right now you got the S&P 500 up a very modest four points, 1/10 of a percent. The tech heavy NASDAQ, right now a bit more strength but still modest. Up 1/3 of a percent. Tesla getting a bit today, seems like another one of the big Detroit automakers saying they are going to get on board with their charging technology. This would be GEM on the heels of for just a couple of weeks ago saying the same thing. If God has led to 47 and change per share, a little more than 5%. That's your market update. On another read on the Canadian labour market today. The economy broken eight month run of employment gains. MoneyTalk's Anthony Okolie joins us now to break down the numbers and what it could mean going forward for the central bank. >> Little things coming up next week. Cracks are starting to show in the labour market in May. According to the data, the economy shed 17,000 jobs. We saw the unemployment rate take up to 5.2%. This is the first sign of job market softness here in Canada and this ends a streak of eight straight months of employment gains. Keep in mind, the markets had been expecting about 21,000 jobs, job gains with the employment rate expected to rise to 5.1%. Before I get to the breakdown of the sectors, I want to highlight a few of the key things from the report. Full-time jobs drove the headline figures. We lost about 33,000 full-time jobs. We did gain 15,000 part-time jobs. But the key driver for the most job losses was really young people. Most of the job losses was consecrated in younger workers between 15 and 24 years old. Youth employment dropped 77,000 jobs. By contrast, employment for workers aged 25 and older increased 60,000 last month. There are likely some seasonal factors at play. May tends to be a peak month for youth employment as a lot of the younger workers, including students, enter the workforce. So looking at the rest of the report, we will now take a look at the sector. May was a pretty decent month for the goods sector where they added about 23,000 jobs, led by manufacturing followed by utilities. Losses were concentrated in business, building and support services as well as professional, scientific and technology services. Finally,wage growth was up 5. 1% year-over-year. Slowly below what we saw in April and in line with expectations. Greg? >> It's an interesting report. The labour market report is always interesting but it comes just two days after the Bank of Canada surprised the market with a rate hike. We heard from one of the governors yesterday, I believe he was saying, they are seeing resilience in consumer spending that they weren't expecting at this stage. They felt the need to hike again and try to bring inflation under control. I get the jobs report where it's not a big loss of jobs but it's weaker than expected. Any feelings or thinking about what this could do for the Bank of Canada? >> I think there's a bit of temptation to look at today's report and think that perhaps the Bank of Canada might be second-guessing their decision to restart the tightening cycle. But we spoke with TD Securities and they are pushing back on that notion for several reasons. One, they point to the fact that the six month moving average and in employment is still strong at 50,000 per month. Wage growth is moderating but is still elevating on a year-over-year basis. third, they believe that the split between youth and older workers looks like a one-time shock. TD Security still expect the Bank of Canada to hike another 25 Basis Points in July. >> Great breakdown, Anthony. Thanks for that. That's my pleasure. >> MoneyTalk's Anthony Okolie. Let's stick with the economy. We did see a rate hike earlier this week from the Bank of Canada. It was an unexpected one. We had a chance to speak with TD Securities chief Canada strategist Andrew Kelvin. We got his reaction to all of that and where he think the market might be headed. >> I think the best way to sort of his plane this is to go back to January when the pause was first announced from the bank of Canada. At the time, the BOC was looking for GDP growth at about 1% for 2023. They were talking about a recession. Inflation was expected to get down to the mid-to use by the fourth quarter of this year. As of the most recent data we've seen, on the TD Security side, we are looking for growth to be 1.5, 1.6 this year which is a pretty big deviation from where the bank originally saw the economy when they announced their pause. We don't think inflation will get below 3% this year. in that sort of the world, it became very difficult to justify that on hold stands that the bank announced in January. If you go to April, the bank was very open that they had discussed lifting rates in April and that was with the uncertainty around the US banking issues, let's call them. Since then, always had our upside surprise in GDP, inflation and employment. In a world where you were going to hikebecause the economy is going to slow and then the economy doesn't slow, they had to hike and here we are today. >> Very specific concerns. We didn't getmedia availability with Tiff Macklem, the senior deputy governor. All they had was that piece of paper. But they did outline some concerns with GDP. there was growing concern and that perhaps inflation is going to get back to target unless they take further moves. what do you think shifted for them? I feel like the last time we heard from the speaker, they said one month doesn't make a trend. But there are concerns out there. >> One month doesn't a trend make but it's been four, five, six months with quite high interest rates where the economy did not slow. The employment rate has been 5% of all this year despite that very tight monetary policy. The Banks framework for this is needing to slow demand in the economy. There were reasonable concerns in January that given that there are legged impacts of rate hikes and given the very high degree of household leveragein Canada that the rate hikes that were in place into the third and fourth quarter of the year would start to have really significant negative impact on household spending. What we have seen over the first half of the year, we are getting pretty close to the midway point, it has been really tremendous resilience from the household. They were lifting rates to the point where they were trying to make household spending slowdown. They now see the benefit of hindsight that perhaps they did not lift rates enough to accomplish that goal. >> That takes us to what happens next. Will they go 25 again at the next meeting? >> I do think so. A single 25 basis point rate hike when restarting cycle would be historically pretty rare. I find examples board. In 2007, the Bank of Canada hiked just once in July but the world change pretty dramatically between July and September of that year. If the world changed dramatically again, the BOC can reverse course but the momentum in the economy is such that a single 25 basis point movement is not going to steer growth completely back to a below trend level and that's what they're trying to do. They are not trying to engineer hard landing. They don't hate Canadians. They are trying to slow growth in a gentler fashion. 25 basis points probably isn't going to do that. Unless they see something changes in the world are they see an indication that in fact they didn't need to make that move because growth slows religion medically or inflation decelerates more than inspected, then they can change tact but as it stands, 25 basis points probably just isn't going to be enough to really change the course of the economy. >> In the past when the housing market has been accelerating to the upside in terms of volume and price, different central bank governors have said, listen, we have to worry about the broader economy. We can't worry just about the housing market. They did make mention of the housing market today, saying, we have seen spending on interest sensitive goods increased. This is not supposed to happen when you raise rates aggressively. Housing market activity is picking up. They definitely have to get that on their radar. >> They do. As much as they don't want to be driven solely by what happens in the housing market, and often Canadians are very reductive when we think about the economy, we tend to look at house prices as the one indicator about whether the economy is doing well or not, the BOC needs to look at a broader picture. At the same time, it's an important part of the economy and they can't ignore it. And this comes back to the idea that in January, they were concerned that some of therate hikes already in place would have a slowing, dramatic slowing impact on the economy. In fact, as you know, the housing market has been doing just fine. This is a supply and demand issue to some extent. And it's not just housing. I think the same dynamics are present in the auto sector as well. On the housing side, we have this very strong population growth and Canada is very good at bringing people and growing modulation. We are less good building houses for the increased population. When demand increases faster than supply, prices go up. that's how it's supposed to work. On the auto sector side, we continue to see below trend automotive production. We will come to this country, they need three things. They need food and their belly, a roof over their head and a way to get around. We haven't been building the cars for the population in North America for the past two years. I think it follows that we should see continued strong spending on things like motor vehicles as a way of, even a supply chains were healed, there is still an overhanging demand for some the items that were impacted by supply chain disruptions. So I think there are these supply and demand factors still impacting things and is much as the Bank of Canada can't control these things, they have one job and that job is 2% inflation and they won tools they have to use it. >> Some of the things they can't control, near the end of the statement, they said they took this action today because it's a proven course to get inflation back down and come off the sidelines. They talk about going forward, they are going to evaluate things. They will evaluate excess demand, inflation expectation, wage growth. We have heard these things before. House prices as well was thrown in there. >> I think there is some messaging that they are trying to get their head around because a lot of the times, if I put my economist had on, I think of corporate pricing decisions as part and parcel of inflation. When demand is up, corporate pricing powering increases and inflation results. The bank of Canada received some produces them a while ago by focusing on wages and corporate profits and that wasalways a bit of a false dichotomy from the BOC's perspective. I don't think they recognized how that sounded to some segments of the population. I think this is simply the Bank of Canada acknowledging… >> You're making too much money. Don't worry about corporate spending. >> Exactly. The Bank of Canada was sensitive to the criticism and they're trying to be, this goes back to a broader effort that the BOC has to try and better explain what they do to Canadians and then when Canadians notice, they get the feedback that we don't like that you are focus on wages, why are we not talking about corporate profits? And the Bank of Canada is not changing the way they think about the economy but unpacking the assumptions incorporated in their model. >> That was Andrew Kelvin, chief Canada strategist with TD Securities. Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading. we have shares of General Motors and has when the spotlight today after GM said it will adopt the electrical vehicle makerscharging technology to charge a TV offering. This move comes weeks after rival automaker Ford struck a similar arrangement. In short, GM and Ford electric vehicles will be able to use Tesla chargers. You got Tesla up to the tune of about 5%. Brookfield Asset Management brokering a deal to expand his credit card processing presence in the Middle East. Brookfield is acquiring Network International Holdings for some $2.8 billion US. In a release, Brookfield says it sees a strategic benefit in combining network International with a payments business in the region and took control of last year. Got Brookfield pretty much flat on the day. A little bit green. Shares of Saputo are under pressure today. The Montréal-based dairy producer did grow its revenue and net earnings compared to the same period last year. But Saputo is also warning investors of continued inflationary pressures, competitive market, also says they are seeing softer demand in the United States. Though shares at 3116 are down a little more than 10%. A quick check in on the markets. We will start your Bay Street with the TSX Composite Index. Bit of a down day, nothing too dramatic. 70 points to the downside or about 1/3 of a percent. Meantime in the United States, the S&P 500 right now, it is in positive territory but it is modest, little more than three points, a little less than 1/10 of a percent. Semiconductor stocks have had a strong run in recent months amid all the buzz around the potential for artificial intelligence. Earlier I was joined by Julien Nono-Womdim, semiconductor analyst at TD Asset Management to discuss whether that trend can continue. >> Semiconductor stocks are up 37% on the year. That's incredible. I would say there are three dynamics at play. The first one is the cycle is approaching a bottom. Secondly, AI is like a dog that won't stop barking. And lastly, the quality of the businesses in semiconductors relative to 10, 15 years ago has improved significantly. Let's parse those. Cycle bottom. We are now 10 months as per the most recent data points into a semiconductor contraction, as per the semiconductor industry Association. Typically, these contractions lost anywhere between 8 to 12 months on the market is starting to underwrite a new cycle. But as you talked about, AI has made significant, some significant buzz in terms of the investments that are being made. You have companies like Microsoft, Meta, Google, that are investing significantly in AI and that is going to determine the winners and losers of tomorrow and that is all semiconductor intensive. lastly, like I said, the biggest surprise this quarter from a reporting standpoint is despite the weakness in semiconductor demand, margins, gross margins in particular, have held really well across the industry. I think that is a testament to the fact that semiconductors are not a commodity. They are a critical input into the economy. >> That's interesting that you have three pillars there because all everyone wants to talk about is AI. I will make the deadly sin of only want to talk about AI. Let's talk about ChatGPT. I feeling people who follows technology have known about AI for a while and then suddenly ChatGPT brings it to the mainstream. The average person says, I play with AI all the time now. >> Yes, yes, yes. Let's think about the 80s and 90s. We had the advent of the personal computer. As we moved into the 2000s in 2010, you had the mobile phone and the smart phone. And then over the last several years, we have been wondering, what comes next? You heard about IOT. Last year, the metaphors was all the rage. And finally, this picture of the future which was very blurry is starting to become clearer and what drove that clarity is generative AI broadly speaking but ChatGPT. We are getting a glimpse into what the future might look like from a productivity gains standpoint and all of these really drive continued growth in semiconductor intensity across the economy and therefore positive for companies across the space and obviously the likes of Nvidia and AMD. > I think of ChatGPT and how it is public facing. Any member of the public can get an account like I did a while ago to start playing with it. Is that the tip of the iceberg when we are talking about AI and why people are excited about the space? >> That is precisely what I'm saying. It is the tip of the iceberg. I think the excitement is because it's tangible. You and I can play with ChatGPT and see the applications, but really, the investments that have come on the back of generative AI from the likes of Microsoft or Google, etc., on the one hand, they are going to be a revenue generating opportunity. And on the other hand, they are going to be threats for some businesses. And so this investment, as I said, is going to really determine the winners and losers of tomorrow. I mean, I believe you have an iPhone. >> I do. >> In the smart phone era, Apple captured the vast majority of that ecosystem. If we step back to the early 2000, everybody had a Nokia. So this evolution of technology is partly driven by ChatGPT and generative AI but ultimately if we take a step back, it is a glimpse into some of the applications that will be available to us. >> When it comes to semiconductors and chipmakers, there is more than one name out there building these chips. Yet, Nvidia seems to be the poster child, I guess, of all this AI height. What is going on with Nvidia in particular, why does it seem to reap the rewards in this stage? >> Let's take a step back. Last year, the stock was down 60% peak to trough. Yes, the stock is up over 160% this year. There are three dynamics at play, I would say. Number one is their gaming business, which provides games for PC players, graphics cards for PC players, etc. Appears to have bottomed. Number two. Data centre is starting to represent a bigger proportion of that company's business. Pre-pandemic, they were south of 50% and it looks like we are going to end the year north of 70%. But I think the most important dynamic that's going on is that you may have heard of the CPU, the central processing unit. Historically, the CPU was the brains behind computers. And what's going on today is that computers and more specifically data centres are going through a brain transplant. The CPU is being replaced by the GPU because CPUs are better at processing AI type of application. >> These are graphics processing units? I thought they were relating to gaming but now there seems to be in AI use. >> They are very good at what is called doing parallel processing, i. e. performing small calculations simultaneously as opposed to serial processing. And AI is essentially that, performing a bunch of different calculations simultaneously. And Nvidia is the overwhelming leader in GPU hardware and software so they are capturing for now a vast majority of that ecosystem and consequently the stock is reacting in kind. But like I said, there are three dynamics, not just the AI element. >> Now, the AI element gets all the headlines but what if, you said there were multiple elements at play, in the end, these chips, whether it's Nvidia, Intel, AMD, go into devices? What if there is an economic slowdown? What if there's a recession where we don't buy as many devices, what does that mean for semis? >> That's a good question. I think historically semiconductor demand, you can split it up into a pie that is half consumer, PCs and smartphones, and then the other half is a hodgepodge of data centre and industrial, automotive. And you are right that the consumer has seen a pretty significant slowdown partly driven by inflation, but also driven by the binge that was occurring during the pandemicin terms of people just ordering devices. I think it's pretty clear today that that slice of the pie that is dedicated to data centre communication infrastructure, that is going to grow because companies, as I said earlier, Microsoft and Google, are making strategic long-term investments that are driving the value of these businesses five, 10, 15, 20 years out. So that is one element. The other element is that on the automotive and infrastructure piece of the pie, we are talking about electrification. We are talking about reading the economy. All of those are driving incremental semiconductor content and on the consumer side, for now, it appears we have reached a bottom. Whether we recover from here remains to be seen but the other half of the overall demand pie can drive growth into the quarters ahead and I think that is what the markets are pricing in. >> That was Julien Nono-Womdim, semi conductor analyst at TD Asset Management. Now to get our educational segment of the day. If you're looking to get an overview of what's happening in the markets on a day-to-day basis, WebBroker has tools which can help. Joining us that with more is Caitlin Cormier, client education instructor with TD Direct Investing. Caitlin, great to see you, as always. Let's talk about WebBroker and where we go to get caught up on what's happening in the markets. >> Absolutely. If we aren't just looking for an overview and want to have an idea of what the slaver of the day is, what the market is doing, we have a great place within WebBroker to do that. Let's just top-rated and take a peek. We are going to click on the research button. Over towards the left under markets, we are going to click on overview. Again, this is not on a specific security, on a specific anything. It is just in general the overall market. Of course, you can see the quick video of me on the right hand side. I will scroll by that a little quickly. But this is where you can watch MoneyTalk Live. But we also have a lot of other things that you can see on the left-hand side, we have a lot of news articles. We have the indices kind of within Canada and also outside of Canada. We have a bunch of videos that are available, both from MoneyTalk and MorningStar on a lot of different topics currently happening within the market, making meaning of some of the things that are going on. Down here on the left-hand side, we've got information about different commodities, so how their pricing is compared to their lifetime. On the right, we got some Globe and Mail articles available to be read. We've got sectors and industries, lots of information about what's happening, whether there is more advances or declines in those different indices. Business news, company movers. So what different companies are actually moving the most. So we've got the highest percentage gainers here. If I click losers, we can see the ones that are losing the most today. Again, I choose different exchanges here. If I want to know what's happening on the NASDAQ, for example, I switch that up. On the right, we have the analyst notebook which can give you some ideas that may be some different securities to look at if you are kind of looking for some inspiration. we've got technical analysis here, so showing some different bullish and bearish signals that might be happening with companies. You can see them listed here. In the last pieces the company events, so we can see earnings announcements, ratings, splits or dividends that are upcoming. Noticing here that this is for today. If, for example, we were looking for a dividend, and ex dividend date, we could choose, for example, next business day and find out what companies would have and ex dividend date the next day in order to purchase those stocks before they go ex dividend. One less thing I want to point out, throughout the page, you will see these little flakes and you can see there is an American flag kind of radio here. They are all around the page and that simply is, as you can see, switches the content over from Canadian content to US content. Hereunder trading ideas, there is usually less under the Canadian side so we choose typically the US. Again,under sectors and industries, same sort of idea. So we can switch back and forth. and actually one last thing that I did scroll over is right across the top, you will see that we, in fact, have some indices showing us what's going on in the market. You can actually customize that. Students going to click this edit button over on the right. Then you will see a little list pop up and you can actually change what different information you see along the top. So if there is a particular exchange that you want to or particular indexing would like to have information on that is currently listed, you can actually go writing here and customize that make it show whatever changes you would like to see. So a little bit of customization and a lot of information available within this page. >> Is so say someone has been taking this journey with you. They got on this page, they customize the bar at the top. I like what I'm seeing here, this make sense to me in terms of seeing what's going on the market. is it possible to set this is the main page? >>absolutely. If we take a look at my screen now, we can see that this is kind of the traditional homepage that everyone will have when they are logging into WebBroker for the first time. It's the standard, chose their balances and some other stuff. But they maybe didn't want their balances to be the first thing that shows up when they log into WebBroker or perhaps they really like that page. Like you said, they have it customized and want to get a feel for what's going on in the market. Let's take a look at how you can actually customize your experience and have that is your homepage. Instead of this page here, we would go right in the top right-hand corner where our name is. We are going to scroll down to customize site. There are couple of other things we can customize but it's actually the first option here that we want to choose. So we click homepage, sorry, sorry page, and under here we can either choose start page or we can scroll down and click markets overview. So if you selected that and we are good, we just need to click the save button and then when we click the TD symbol to go back home, we should be able to get to our research page. So moving forward once that is saved, we will be able to get to the overview page 1 we log into WebBroker. So that is definitely an option if that is how you would like to start your trading day if you want to get into what's going on in the market and the customization, that's how easy it is. >> That is my opening page when I get into WebBroker. Thanks for that. >> No problem. Thanks so much. > Caitlin Cormier, client education instructor at TD Direct Investing. And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars. Now earlier this week, we had news of a production cut. He gave the price of oil a boost. But the trade has been choppy amid all of these global growth concerns. I had a chance to discuss the longer-term dynamics in the market with Hussein Allidina, he's head of commodities at TD Asset Management. Have a listen. >> That's a good question. And I think that the macro is concerning. The macro is overwhelming, in my opinion, the relatively constructive Microdata we have seen. We talked about how demand is expected to weaken as we get this sort of well anticipated recession, but the datais showing firm it demand, whether it's gasoline demand in the US. A couple of days ago we had demand out of India that was at a record high. We have had robust Chinese import data for both March, April and May. so I think it's kind of these crosscurrents between an expected challenge in growth, which we believe is forthcoming. We have had four, 500basis points of rate hikes that should've had a negative impact on economic activity. The contrast is that it hasn't yet. if I look at the newly released gasoline demand data or newly released oil demand data for the US, gasoline demand is averaging about the five-year average. Even if I remove the weakness in 2020. So you got the sort of I think conflicting currents. I think Saudi's decision to sort of unilaterally reduced production by a million barrels a day in the month of July only may be is meant to clean up the front of the market and/or scare the shorts, but I think the market has been a very challenging one to trade in for the first half of the year, very different than last year or the year prior when you heard about commodity trade houses posting record profits, hedge funds making record numbers. This year has been challenging partially partially becausethe China reopening has been disappointing and partially because Russian demand is not change. We expect to see draws in the second half of the year. The macro so concerning. >> Let's talk about that macro. what we are talking about basically is the fear of recession. We have been living with that fear for quite some time. we can dial back until late last year and were saying it was coming. Where is it and with that kind of uncertainty, what does that actually mean for crude? >> I think this is very important. If we don't get a sufficient slowdown, we have talked about this, if we don't get a sufficient slowdown in demand growth, most balances into the second half of the year .2 continued well above normal draws in the crude S and D. Again, the recession is kind of anticipated, expected, but we haven't seen it yet. Demand is still exceeding supply. We had draws yesterday in the DB data. The week before, we had a record draw, the biggest in six years. And these draws are occurring notwithstanding the fact that you have continued as PR releases. We talked about the SPR before. Yesterday's 400, 500,000 barrel drama in commercial inventories would have been material larger if we didn't reclassify 1.8 million barrels out of the FBI into the partial. That ends in June, at the end of June. Those mandated sales by Congress and at the end of June and I think the July data will be sort of more transparent or honest and should show, again, if these balances are true, it should show pretty material draws July, August, September and into the end of the year. >> We see some prognosticators pushing outthe recession into next year or maybe we escape it altogether, get a soft landing. If that is the scenario,what are we setting ourselves up for, what kind of prices could we see? >> I think that the crude market is coiled here. I think if I look at the level of inventory and spare capacity and given the fact the demand is still exceeding supply, if we don't get this sort of well telegraphed her anticipated slowdown, I would not be surprised to see oil at 90, $100 a barrel by the end of the year. I think the fear though is that the slowdown is going to be so material that the challenges on the supply side get muted. We talked before, if I don't have demand, the supply constraints don't matter. Again, this is the sort of battle over the course of the very near term that probably becomes far more obvious as we move into the summer. But again, I think the market itsgrappling with this idea that the second half is going to be really tight and a lot of that tightness is predicated on Chinese demand growth. It has disappointed relative to expectations of the first quarter, the first half of the year and I think that is in people's psyche and challenging their ability to get long. If you look at positioning in the market, there is very little speculative length to the market relative to history. So I think that if we do get clarity on how bad growth will be, you will see those participants returned to the market. I think one thing, Greg, that's very important to understand as well as her member for commodities, it's the level of supply relative to the level of demand. Demand growth will slow, but if demand doesn't fall in absolute terms so that it is below supply, I still have draws. So the second derivative is important but the absolute level of demand so long as it stays above supply, that means inventory draws and we have seen years of inventory draws so we don't have a ton of cover and why I think prices could go higher if the demand slowdown is nonmaterial. >> Those are some of the medium, longer-term dynamics of the market. In the short term, we are worried about the economy, so many asset classes obviously are hinging on the next moves from the central bank. We have always been central bank waters but now I feel like we are more keen than ever. We have the Fed coming up next week. Is that the next big catalyst to see what comes out of that meeting and their mouths in terms of people trying to figure out a range of asset classes including commodities? >> Yeah, so the macro, the fixed income market is a driver in the markets and if we do continue to see if Fed rate hikes or central bank rate hikes as we have seen in Canada and Australia, that does challenge risk sentiment for sure and it challenges growth expectations. I'm not as smart on the fixed income market as Scott or Alex on our team. Listen to what they had to say. But one thing, anecdotally, I was just speaking about this with my team before I came down, this four, five, 550 basis point rate hike increase hasn't really impacted, it has impacted me you are a bunch of folks that I talk to you because my mortgage hasn't reset, because my car payment hasn't reset. So I think you have to appreciate is that the monetary policy transmission mechanism takes time. I think that's what folks are grappling with. Growth will slow. How much does it slowand how much further monetary policy tightening there is over the course of the next little while, I think, is going to drive risk sentiment. That risk sentiment, the macro eating the micro continues until the micro can stand on its own. If we continue to see 10 million barrel draws in crude, if we continue to see an improvement in the crude structure, that is kind of what I think root can trade on its own absent the macro dynamic. >> That was Hussein Allidina, had commodities at TD Asset Management. Now for an update on the markets, we are going to take a look at TD's Advanced Dashboard. This is a platform designed for active traders available through TD Direct Investing. Okay, we're going to take a look at the heat map function here. It is going to give a view of the market movers. We are screening by the TSX 60. We are looking at price and volume. Obviously today there are two standards. Let's start with the big green part of the screen, that would be Shopify, up to the tune of about 3% today. It's been a bit of a choppy week. One day they saw some pressure on some of the tech stocks on both sides of the border. Today you're up to the tune of about 3% on this one. If you go to the corner, you are seeing SAP, that is Saputo, we were telling earlier the show about their latest quarterly earnings report, they grew revenue and the bottom line but they are warning ahead of a challenging environment where inflation pressures are persisting, some competition and softness and the man said that the Borders that is weighing on the name. You can see in other areas of the market it's a bit of a mixed day. If you go into energy space, you got some of the pipelines, whether it's PPL or Enbridge, I think there's some modest pressure. And then you got some of the names like Cenovus, the oil and gas names, that's up… [video buffering] On the name. You can see other areas in the market, it's been a mixed day. You go over to the side of the energy space, you bought some of the pipeline, whether it's PPL or Enbridge, under some modest pressure. And then he got some of the names like Cenovus, the oil and gas names, Cenovus… >> In June 2 5 1/2. And like the Bank of Canada, TD Securities believes the market is underpricing the probability of a rate hike in June. now, I'm going to do is say that if the Fed decides to skip the June meeting,they expected to be accompanied by a hawkish communication signalling a likely hike for July. Before that report, we also get a US inflation print in May. That will be a key report that they will be following closely. TD Securities looks for some short pullbacks in gas prices and modest easing and rents and they do still expect a strong CEPI forecast of 0.4% month over month gain for the headline number, 0.1% gain, but milder there. >> That inflation report will be very interesting considering that was only a week ago, this time we were talking about that much hotter than expected US jobs report, which was a bit of a coin toss as you said. A lot of things at play. If the labour market is this resilient after all of these very aggressive policy moves, what does the Fed do with that? >> Exactly. Not just a strong jobs report but other strong reports as well. This report will be something they will be watching closely to see if they are starting to see some cooling in inflation so we will have to wait to see what that decision is. But again, it's likely going to come down to the wire. As you will have full coverage for us on Wednesday afternoon. >> That's right. We will have full coverage of the market impact as soon as that decision is made on Wednesday afternoon. We will be following closely. >> Great set. Things that. > My pleasure. >> MoneyTalk's Anthony Okolie. Of course, we are going to be talking more about rate hikes. More on the way. That's going to be Monday's program. Maria Solovieva, economist at TD, we taking your questions about the economy and interest rates. A reminder they don't have to wait until the show starts get your questions and for Maria. You can email moneytalklive@td. com ahead of time. That's all the time we have for the show today. On behalf of Anthony and I on the desk and everyone behind the scenes who brings you the show every day, thanks for watching. We will see you next week. [music]