Market Insights

[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. coming up on today show, we are going to hear from TD Cowen analyst Mariel Mendoncawith his outlook for the bank stocks. TD Asset Management's Alex Gorewicz will discuss what's next for the Fed after they held on rates at this week's meeting. An MoneyTalk's Anthony Okolie will have a look at TD Economics latest quarterly forecast. plus in today's WebBroker education segment, Hiren Amin is going to take us through the technical analysis tools that are available here on the platform. But before we get to all that, let's get you an update on the markets. Last trading day of the week. the TSX Composite Index it down a little more than 1/10 of a percent. The Teck Resources story continues, all the talk about Glencore making a bid for the coal business. tech said they would take a look. They weren't interested in them taking over the whole thing. You're down about 3 1/3% on Teck Resources today. Noticing some movement towards Telus at the expense of some of the other telecoms in the space. Some green on the screen. At 2572, up about 1%. South of the border, investors had a lot to digest this week. And right now, you're pretty much just flat on the S&P 500, we will be generous and give that three points to the upside, just six ticks. NASDAQ has been on a pretty good run lately. Pullback today, 39 points, a little over 1/4 of a percent. And Nvidia, it's been a big week for that name and all the excitement around AI, the GP use, the processors that Nvidia has not seemed to be quite up to the task of all this generative AI in the talk around that. Making some modest gains today, it was quite a run though, you're up 1.75%. And that's your market update. As we said, it's been a big week. We got the latest read on US inflation, the Fed on pause or skipping or whatever we like to talk about or how we like to phrase it. Anthony Okolie joins us now. Can you give us a recap of everything we've had? >> Yeah. We had quite a run down, as you mention. To kick off the week, I think the thing that you first mention was the US inflation print. US CPI came in at 0.1% month over month, annual inflation at 4%, way below expectations. That 12 month increase was the smallest since March 2021. So investors are cheering some of its data. We also got some retail sales data as well. While it is still rising, it points to a slowdown in spending in the summer months. Weekly jobless claims, of course, had the highest level since October 2021. Industrial production fell as well. So we are getting all of this data and it is showing some signs of weakness in the economy. At the same time, people are shifting, the markets have been away from recession. That's kind of boosting the market. > It's interesting, of course, because that inflation report lands on Tuesday. That was the beginning of the Fed's two-day meeting. You gotta figure everyone walked in there with that inflation report fresh under their arms, and they came out the other side on Wednesday and say, we are not going to do anything today. But they change their projections and where they need to get to. It felt like a perhaps not a mixed message but first he sort of had to sort out, what are we talking about here, Jay Powell? >> Exactly. As you mention, the Fed decided to skip the June meeting up but signalled more rate hikes to come. I interviewed Andrew Hencic, senior economist at TD Bank after the announcement. Here's his take on the Fed's announcement. >> Well, as you mentioned, as expected, the Fed paused. There was no hike today. But it was really the hawkish tone of the messaging that came along with the pause that was a tad surprising. The median from the dot plot indicates possibly two more hikes this year. You know, from our view, it was a bit of a hawkish pause where the messaging was definitely signaling for the potential for more rate hikes to come. >> And signaling of more rate hikes to come, how much further do you think the Fed will go before they stop raising interest rates? >> Well, our view is now that we're going to get one more this year, so another 25 basis point hike. Really in this phase of the cycle, where they're looking at the incoming data as it comes along and having to make their decisions one step at a time, and so from our view there's likely to be one more hike before the end. >> And as you mentioned, the Fed is signaling at least two more hikes. How have the bond markets reacted to the news and what are the yield curves telling us about the US economy and about the potential for recession next year? >> Well, look, yields jumped when the statement came out. I mean, look, the yield curve is inverted. The longer term yields are below the near term ones. Markets are expecting the economy to slow down and for the Fed's policy rate to eventually have to have to come off these very high levels. So from that regard, we see the economy slowing into the back half of this year and into next year. Markets expect the economy to slow down and for the Fed to eventually have to start lowering its policy rate. >> OK. And looking ahead, what are the indicators that you'll be watching closely as the Fed considers its next move? >> Look, all eyes are going to be on the labor market here. Payrolls growth has been very healthy. Labor demands still looks to be very strong. The Fed is going to be looking for some signs that things are cooling off there, that wage and wage pressures are coming off and ultimately going to lead to some easing inflationary pressures. So all eyes on the labor market. It's going to tell us what's likely to be coming down. >> OK. Let's talk about the US dollar. Where do you see the US dollar going over the next little while? >> Look, I mean, with expectations for rates kind of moving up after this meeting, the downside to the USD in the near term is a little bit smaller. It's true, other central banks are still hiking and may have a little bit further to go than the Fed. But this hawkish tone really kind of limits the downside to the USD. Looking forward, though, as the global economy rolls over, that will also add a little bit of strength to the dollar, as those flows to safety and demand for safe assets kind of increase. > That was Andrew Hencic, of TD economy speaking with Anthony Okolie. 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. God shares of Virgin Galactic in the spotlight today, the company is setting a date for its first initial space tourism flight, saying it has a window later this month between June 27 and the 30th. Virgin Galactic is targeting a second commercial flight in August, and says it wants to run monthly flights after that. The space tourism outfit says it has a backlog of some 800 passengers waiting to fly. The stock up today about 14%. Software maker Adobe says generative artificial intelligence will be a boon for its business. The company handed in an earnings before its most recent quarter and it rated sales and profit forecast. The company is a firefly generative AI engine is being integrated into a suite of Adobe products, such as Photoshop, illustrate or and Adobe express. The stock is up more than 2 1/2%. The Roomba vacuum cleaner is one step closer to joining Amazon's offerings of smart home devices. British regulators are giving the green light to Amazon $1.7 billion acquisition of iRobot Corp., the maker of Ruma. European and American regulars are still reviewing the deal. It's up 20%. On the TSX, you are down on modest tense of a person to and south of the border, after some sizable gains for the S&P 500, in Europe just a little shy of three points or six ticks. Of course, markets have been reacting to the earlierFed rate decision. I had a chance to discuss where rates go from here and what it means the bond market with Alex Horwitz, portfolio manager for active fixed income at TD Asset Management. Have a listen. >> It was-- this is probably the first time I'll give Powell credit for all the experience he has in terms of being able to communicate an otherwise a bit of a head-scratcher decision as far as investors and market pundits go. He was able to communicate the rationale in a pretty concise and convicted manner. But it doesn't change the fact that the data has been coming in strong enough that the Fed, which is communicating it probably will deliver another two rate hikes before the end of the year, could have done it yesterday. And they chose not to. >> Yeah, it's one of those things like, all right, we're going on a road trip, we got to cover a lot of ground, and so let's go. I say, well, not yet. There was a bit of confusion-- then just why not go for it? But I think he was sort of giving themselves a little bit of time, maybe a breather to say, we've done a lot in this short period of time. Let's see what the effects are. What do we got, about five, six weeks till the next meeting? Could things actually turn in the data that would actually cause them to rethink their stance? >> Look, anything is possible. And in fact, if we look at jobless claims in the last couple of weeks, we have seen not just higher than expected claims, but we're seeing now a trend where the average of the last several weeks is very clearly in an upward trend. How that continues or how that evolves from here on out, and certainly before the next meeting, might give the Fed indication of whether the job market is starting to exhibit better balance. And I think that, more than anything else, is ultimately the key for the Fed in determining whether they're going to deliver more rate hikes. And I don't think it's lost on any of us that that seemed to come up time and again from Powell in answers to questions about what they're looking for to determine whether to hike rates further. >> Of course, one point-- Chair Powell did get that question about, when are you going to start cutting? Because there's been a push and pull between what central banks have been telling us during this rate hiking cycle and what the markets have been telling us in terms of what they thought you would get in terms of reversal. And at one point, it wasn't even that long ago, maybe even the last time you were on, we were talking about the potential for cuts in the summer or the fall just based on market pricing. That has disappeared. Jerome Powell was pretty adamant. He talked in terms of years. He said this is a place we need to get to and a fight we need to sustain for years. So again, a pretty strong signal to the market-- do we take that at face value? Years is a long time. >> Well, yeah, but I actually find that a little bit misleading. And the one thing that I would have liked to have seen reporters ask him about or challenge him about was why the median dot for 2024is 100 basis points lower than the median dot for 2023. >> Yeah, because then that would mean you're not going to get there without cuts. >> Correct. Correct. And that, to me, is probably the most important question to ask, because that difference-- 100 basis points of rate cuts or even some rate cuts has consistently been communicated by the Fed between '23 and '24, even as far back as the end of last year's dot plot. But the most recent update continues to show that rate cut, despite the fact that they think, well, at some point this year, we still have more rate hikes to deliver. And then if you think about the magnitude, let's say 100 basis points as the difference between the two median dots, and that's supposed to be to the end of 2024, well, they're not going to deliver 100 basis points all in one meeting, let's say, in December of next year. So that will very likely start in a more gradual fashion as far as the Fed's concerned-- probably within the next 12 months. So here, you see why it's a head-scratcher for investors who say, well, over the next couple of months, you still have to deliver two more rate hikes. But then over the next 12 months, you start cutting? And if the Fed-- and Powell did acknowledge that they don't really have a lot of visibility out beyond a couple of months, which I understand. I appreciate how uncertain the environment is. But if that's the case, why are you already communicating rate cuts for next year? >> What does it mean for fixed income, maybe in the second half of this year? Startlingly so, but you look at the calendar, we're almost halfway through this year. >> Correct. So what does it mean? It means that despite the volatility that we've seen in interest rates this year, we've done a number of round trips where to start the year, interest rates came down 60 to 70 basis points, then they came back up through February, then they came back down through March and back again. We've literally done round trips in the matter of weeks of 60 to 70 basis points. That's not insignificant in a very short period of time. And I think that could persist. But what that also tells you is that what you're really doing is you're clipping your coupon, right? You're getting income. And although interest rates right now are higher than where they were at the start of the year because of all of these round trips, total returns on bonds are still positive-- which, again, is a sign that income is helping to offset some of these negative price impacts. >> At the heart of all this, Alex, of course, is inflation, right? There was a time where it was going to be transitory. It wasn't transitory. The central banks got aggressive. Here we are today in the situation that we're in. Are you seeing signs that, indeed, they're winning this battle? Headline seems pretty decisive. Watch your headline graph, and it goes up high from here, and it goes down low to here. But underneath that, there seems to be concern. >> Yeah. So Powell broke it down into, effectively, three categories. He talked about inflation that came from the goods sector. And there, he said that there's been a lot of moderation in, let's say, global supply chains and all kinds of supply related pressures that are helping to bring those prices down relatively quickly. And we're seeing that as well. Then he talked about housing. Housing is probably the one sector component that responds most clearly to monetary policy tightening or easing. However, the lags are quite substantial. So in other words, it could take anywhere between a year to 18 months to actually start seeing the effects of tightening. And we've seen some correction in US housing. Perhaps, we'll see more as the Fed continues to deliver rate hikes, albeit at a slower pace. But they know that it's having an impact-- their monetary policy tightening is having an impact in that sector, and they expect housing to continue to moderate. Then, he mentioned services. And on services-- ex housing-- on services, he did talk about how that was the most labor sensitive segment, effectively, of the inflation basket. And what he really did was to tie the fact that at this point, to bring inflation down in the US, you need to start seeing cracks in the labor market. And he didn't talk about cracks, obviously, but he did say that there needs to be a better balance or you need to see a moderation in wage growth. And what that really means is they're looking for an uptick in unemployment. And if you look at the projections that they put out alongside the decision, their updated projections, they've actually decreased the rise in unemployment rate that they're expecting for this year. Previously, they were expecting the unemployment rate to rise to about 4.5% to the end of the year. Now, it's only about 4.1%. So in many ways, although they're communicating that they have to raise rates further, they actually think it's going to be an even softer landing than they thought before. >> That was Alex Gorewicz, portfolio manager for active fixed income at TD Asset Management. Now let's get to today's educational segment. Technical analysis is one method for sizing up a potential investment in WebBroker has tools which can help. Hiren Amin, Senior client education instructor with TD Direct Investing has more. >> Hello, and welcome to today's education segment. Today, we are going to continue our series on technical analysis indicators. One of the questions traders tend to ask a lot is how do we track volatility when it comes to investing? Using charts. One of the indicators we are going to observe today is known as Bollinger Bands. We will show you how to set up and how traders use it and interpret volatility with the but as well use it for trading purposes to determine entry and exit signals. So we are going to be looking at SPY our example today which is the broad market index that tracks the S&P 500 market, and we are going to set up the Bollinger band. We are going to access the charts right over here. And within the chart space,that's going to be found within the upper indicator section. So we click upper indicators, it's a very first one there, Bollinger Bands. Bollinger Bands lends its name from its namesake, John Bollinger created this study back in the 1980s and it is widely used even today to track various market assets such as stocks, foreign trading and future trading as well. It helps us really determine not only volatility but it also tells us about overbought and oversold signals. It helps us identify trends in the market, but it also tells us about potential entry and exit points or breakouts out of those bands when they do occur. So we are going to look at how you can interpret them. Here's the Bollinger Bands set up. what you will notice is that in terms of how the study is actually created or calculated, it is composed of three bands, as the name implies. You have the upper band which is at the top. You have the middle band, and the lower band. Now this metal band, in fact, is a simple moving average and it is actually based off of a moving average and specifically and by default it is usually going to be a 20 day moving average. Now you can actually come in here and click on the Bollinger Bands study to get some more information about what it is, but we are going to adjust it down to 20 days. The default comes up is 25 on WebBroker, but we are going to set up to 20 days here and update that. Now you will notice that I'm looking at the one year and one day chart which means it is going to capture 20 days worth of average prices there as the middle band. Now it is based off of a statistical measure as well, so the upper band and the lower band were calculated using two standard deviations above and below the moving average. Two standard deviation simply means that 95% of the time, the prices should be moving or travelling within these bands. So two ways traders can use thispurposes, one is a strategy known as when the prices are going to either break out of those bands, so if you see a price break above the upper band, this usually indicates an overbought condition and this is when the prices are rising too much and they may be due for a pullback. So traders would consider liquidating her coming out of their or shorting the stock potentially. If the prices touch the lower band, that indicates an oversold condition. So prices have fallen to rapidly and they may be due for a bounce so traders may consider going along positions or exiting out of short at this point. Now one of the studies or probability theory states that prices are going to be mean reverting, so they tend to go back to their average price. A lot of traders will look for that and you will see a lot of them, the prices to regulate or move in and out of that moving average. And finally, we will talk about Bollinger squeezes so this is another thing the traders also use. You will notice that through these bands there are periods of contraction were they narrow and and then they expand out. This really represents when volatility is kind of contracting and then when it expands and whenever there is a volatility expansion, you see getting wider and you're going to see potentially a breakout in the prices. Now, we don't know directionally whether it is up or down but we will see a big breakout in the prices and traders will be ready for that and trade with it. One thing you should never forget when you are trading is to remember the overall trend. Trade with the trend. That is a technical analysis 101, trend is your friend. That will avoid any sort of false signals when you are using the Bollinger Bands. There you have it. This is a quick rundown on how to use Bollinger Bands. For more learning our technical analysis content, please be sure to check out the Learning Center and the technical analysis videos there. >> That was Hiren Amin, senior client education instructor with TD Direct Investing. Of course, the banks have been in focus, as they always are, when they rule out at the end of earnings season. Earlier we had a chance to speak with TD accountant Mario Mendonca, who sat down with Kim Parlee, to get his thoughts. >> Four of the big six Mr. earnings this quarter. This is unusual for the Canadian banks. Our estimates were a little lower than consensus going into the quarter, so we weren't terribly surprised by the miss. Some of the big themes that emerged that investors are all talking about, expenses were very elevated across several of our banks. I really think that's something they can get under control. It's not something you can fix quickly unless you take a meaningful restructuring charge, which I don't think our banks will do. I think by 2024, the year over year comparisons on expenses will be a little more flattering for our Canadian banks. But it was definitely notable that expenses were quite elevated. Another theme that I think was somewhat predictable was that balance sheet growth would slow. We're definitely seeing mortgage growth slow, personal loans, commercial loans, wholesale loans. Across all domestic loan categories loan growth has slowed, and that makes sense also. Quantitative easing brought in a period of significant balance sheet expansion. With money supply now contracting under quantitative tightening, it makes perfect sense that bank balance sheets would slow. I think our banks also want to be cautious on balance sheet growth. It's probably appropriate to conserve capital, especially if OSFI raises the domestic stability buffer later on this month. So loan growth was clearly modest. That was an important theme. The other one that was, I think, very predictable was that margin expansion would abate. The banks have enjoyed significant margin expansion or most of them have for some time now. We saw margins contract for the first time in, say, since Q2 '21, around that period. We saw margins contract and it made sense there too. Banks were holding more liquidity in response to the US banking crisis. There's been a significant shift to high cost deposits from low cost deposits. Deposit betas, which are just the change in deposit rates relative to the change in interest rates, deposit betas are rising, so margins have stopped expanding as well. I think that's a very fluid situation. We could see margins start to stabilize and expand by as early as Q4 '23, but those are the big, broad themes that I think affected bank earnings this quarter and resulted in, in some cases, some meaningful misses relative to where the street was. >> Well, let's get into some of those earnings announcements, although I have to say, it's quite interesting you think you could see some meaningful margin expansion in Q4 '23, and I want to come back to that as well. Let's talk about BMO. You talked a bit about that you saw a slowdown in capital markets activity, but you still see some interesting positives with BMO. >> Well there's no doubt that BMO led the street in 2021, 2022. I think most of '22 they delivered very strong pre-tax, pre-provision earnings growth. In fact, in some quarters it was industry leading. And as I observed back then, so much of it was being driven by their very strong capital markets results, specifically their inroads with financial sponsors. That market has really slowed. It's dried up, so not surprisingly BMO's reporting weaker pre-tax, pre-provision profit growth. In fact, if you take out the benefits of the Bank of the West deal, which closed in Q2 '23, if you take out those benefits, the bank's pre-tax, pre-provision profits are actually down 6% year over year as opposed to being up call it 5%, including Bank of the West. So capital markets clearly played a role there, but also, Bank of the West is a smaller bank than what BMO envisioned when the deal was announced. There's been meaningful deposit runoff. That also has affected the contribution from Bank of the West and BMO's overall pre-tax, pre-provision profit growth. >> What about Bank of Nova Scotia? You highlight that their capital ratio is something to watch and that it doesn't give them as many options as others. >> Yeah, from a capital perspective, all of our banks have to be careful on capital. That's fairly clear. There are changes to the capital rules. As I said, the domestic stability buffer may be raised, although I think that's unlikely. All of our banks want to be cautious on capital. I think in Scotia's case, and probably the case with CIBC, they're going to be a little bit more cautious on loan formation because of a little bit of pressure on capital, but Scotia's also got a special sort of special situation, if you will. In their domestic business, their loans exceed their deposits, what we call the funding gap, by about $111 billion. That is a funding gap that I think the new CO, Scott Thompson, wants to address over time. Now, that could mean that Scotia competes more for deposits. That certainly would make sense that they try to grow the deposit base. But it also means that they could slow the pace of loan formation or loan growth, particularly in brokered mortgages, where margins are pretty thin. So I think Scotia is one of those banks where, if you believe as I do that overall balance sheet growth, the slowdown and balance sheet growth will be a meaningful theme that investors are talking about in 2024, I think Scotia could be one of those banks that were especially sensitive to in so far as declining balance sheet growth is concerned. >> You make a comment in your report too that you say that Scotia's struggle to redefine the bank will not happen in a vacuum. Tell me a bit more about that. >> Well, if in fact Scotia is-- if their goal is to shrink that deposit gap by growing their deposits, well, in the period while they're trying to grow their deposits, the other banks aren't going to cede market share. Their peers will also be competing to maintain their market share of deposits. So that's one thing. The other thing to consider is that in a period when Scotia is trying to redefine itself, their peers may be benefiting from the acquisitions, like Bank of Montreal's acquisition of Bank of the West or Royal's acquisition of HSBC. What I'm getting at there is their peers may in fact be delivering balance sheet growth, if only because of the acquisitions, in the context of Scotia perhaps shrinking their balance sheet as they refocus their efforts. So that's what I meant by saying it won't happen in a vacuum. >> Yeah, no, OK. What about CIBC? I mean you mentioned them earlier, but you also highlight some exposure to US real estate as something that CIBC has that perhaps the others don't in the same way. >> Well, I think everybody has US commercial real estate exposure. You can see that across the groups. I'd say National would be light in that respect, but everybody else has a lot of commercial real estate, and so does CIBC. What I was observing there is that CIBC's growth in US commercial real estate was especially strong I think it was 2021, 2022. That means something to me, because often the loans you put in-- the most recent loans you put in could-- that your originate could be the ones that caused you the most heartburn down the road. So I was really observing there that CIBC may have some US commercial real estate exposure that will lead to charges. In fact, this quarter they did take some charges in the US commercial real estate. I think they were manageable or modest, but they did take some charges. I did do a stress test in my last research report where I assumed some fairly high cumulative loss rates in commercial real estate in Canada and the US, particularly in the office space. What I conclude from that is that every bank could see a bit of a hit to their capital. But I also believe that that hit to the capital would be manageable, especially because the banks are always producing capital every quarter anyway. So US commercial real estate or commercial real estate generally could lead to some charges and some pressure on capital, but I think our banks have the capacity to absorb it. >> I want to make sure I get in National Royal. So National, what are you seeing there? >> National's performed extremely well over the last few years. They've really defied gravity in my view. What I'm getting at there is their very strong Cambodian business has been growing the top or growing loans at 30% to 40% a year. It's become a very big part of this bank. What I did notice this quarter, and I've kind of started to see this over the last few quarters, that the margins on that business are compressing. 60, 70 basis points sequential decline in their overall net interest margin in Cambodia. That's because deposit costs are getting higher and I believe perhaps even competition is kicking in. What I find especially interesting about National and their Cambodian business is while they're growing their loans at that pace, we're not seeing any meaningful increase in credit losses. So either Cambodia is just the best place to be a bank, where you can grow your loans at 40% without credit losses, or that's something we'll see down the road. And I'm taking the view that, at some point, National is going to have to slow the pace of growth in Cambodia. >> Last one is Royal, and you also alluded to earlier that expense growth was something that you were watching with the banks, and you highlighted it again with Royal specifically. >> Yeah, bar none, no bank is growing expenses faster than Royal. And near the end of the call, the conference call, CEO Dave MacKay did acknowledge that the bank over hired, particularly in the tech space, on the presumption that there would be significant attrition of employees as the big tech companies in the US competed for employees. , The big tech companies in fact started letting people go and that's led to much lower attrition for Royal for their employees than they expected, and as a result, their expense base is really elevated. My view is really that our banks never budget out expenses without also taking into account what the revenue picture is like, and I think what happened is the revenue picture slowed down perhaps more abruptly for our banks than they anticipated, and that's what led to this very high expense growth relative to the revenue growth, which is what we refer to as operating leverage. And I think that's what really, ultimately resulted in Royal's operating leverage looking so weak. They may have underestimated the abrupt decline in margins. >> That was Mario Mendonca, managing Dir. with TD Cowen. A reminder, always do your own research before making investment decisions. Now for 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. We are taking a look at the heat map function as we have for the past couple of days. We are screening by the TSX 60, the 60 biggest companies on the TSX composite index. a bit of weakness intact but this isn't the only way to use the heat map function. We can look at the performance on a one week basis. Now you can see five days of training including today's action. You get to get up bit of a bigger picture. There is some strength in the financials in the past week. Shopify in the upper corners the stand out, up 10 1/2% on the week at a fairly good volume. if you take a more real estate on the screen, that's an indication of volume, the number of shares trading hand. You also have FM, First Quantum. There are reports this week that First Quantum sort of backed away from the polite discussion. It Derek was taking a look at the name and apparently they decline them. First Quantum up 9% on the week. Interesting, and bridges a definite laggard in the energy space. You can see them down on the lower part of the screen, 2% down so far on the week. And Saputo is taking up a small amount of real estate down there in the corner to pull back this week. The earnings came out last week and it wasn't so much the quarter as the forecast going forward still weighing on the name. Of course, you can find out more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard. The Canadian economy grew faster than expected in the first three months of this year, registering the strongest growth among G-7 nations. Anthony will you joining us now to look at a TD Economics report and thereQuarterly forecast. What are they saying? >> They said the Canadian economy knocked it out of the park and the first two months of the year. The economy grew 3.1% and got the attention of the Bank of Canada, particularly after we saw the hot inflation housing markets print in April. Now it TD Economics forecast for economic growth being upgraded, they expect the BOC will hike interest rates again in July, bringing the rate to 5%. TD Economics calls thisthe trial and error. of fine-tuning their policy.TD Economics says that the consumer spending should loosening quickly through the end of this year. While the job market showed signs of cooling and me, they don't see a broader trend of job weakness taking hold so far in the job market. overall, TD sees the timing of a contraction in the economy being pushed back to 2024. Meanwhile, on the investment side, nonresidential investment has had surprising resilience in the face of higher interest rates. but residential investment, on the other hand, has been in a steep decline for four consecutive quarters in response to higher borrowing rates. As the chart shows, single-family unit construction here in Canada was a drag on residential investment in April, according to statistics Canada. Now, on the inflation front, TD Security sees headline inflation cooling to 3% in the near term, largely reflecting last year's high energy cost rolling off. And with core inflation proving unexpectedly sticky in April, TD Economics has pushed back the timing for rate cuts until the second quarter of 2024. And finally, with the Bank of Canada now keeping pace with the Fed in terms of increasing interest rates, TD Economics see some near-term upside for the Canadian dollar versus the US dollar. >> Those numbers give us an idea of what TD Economics is expecting next year for us here in Canada. A little more on that front, perhaps how even stack up globally next year? >> Yeah. Looking ahead to 2024, TD Economics expects the Canadian economy to contract, along with most global economies. TD Economics sees the Canadian economy contracting to 0.5% growth, that is slightly worse than the US but well below world GDP growth where they are forecasting the world GDP to grow at 2.6%. So there is a pullback but Canada seems to be pulling back more versus the world. >> Interesting stuff. MoneyTalk Anthony Okolie. Want to stay tuned for Monday's show. Haining Zha is going to be on the program, portfolio manager with TD Asset Management. He is going to take your questions about China's economy. There's a lot happening there. There is some rumbles about with the Chinese government might do next to try to reinvigorate the economy, the take off of their reopening after the COVID lockdowns hasn't really been rolling out as expected. Of course, you can get a head start on your questions. Just email moneytalklive@td.com. On behalf of Anthony and me here on the desk and everyone behind the scenes who brings you the show on a daily basis, thanks for watching and we will see you next week. [music]