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[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we are officially into the last quarter of the year. Bond yields are on the rise which is pressuring markets. Where do we go from here? Michael Craig, head of asset allocation a TD Asset Management will share his thoughts in just a few moments.
it's a big week on the jobs front with the US and Canada releasing results. Anthony Okolie will be here with a preview.
And in today's WebBroker education segment, Bryan Rogers is going to tell us about how to do extended hours investing using the WebBroker platform. So here's how you can get in touch with us. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
before get our guest of the day, let's get you an update on the markets. It was a bank holiday yesterday butthe markets did trade so we are well into the last quarter of the year now and we have some right on the screen. At 214 point deficit on the TSX Composite Index, we are down more than a full percent.
One of the most actively traded names on the TSX is Enbridge, a 4286 per share, it's down 2%.
It's been on a downward glide path for a few months. Denison Mines, it's been interesting to watch the uranium place.
It's been high-volume, there one of the most actively traded names on the TSX for the past weekend a bit of a bumpy ride.
Today it's back to the upside but a bit off the highs of the session.
ActiveX and $0.17, you've got Denison up a very modest half a percent.
South of the border, we are tracking the US 10 year bond yield that continues to move higher and it is exerting pressure on the equities. The S&P 500, that broader rate of the American market, down 65 points or 1/2%.
The tech heavy NASDAQ, how is it pacing the broader market? A little bit weaker, down 1.8%.
Could have chosen any of the big tech names, let's take a look at Amazon right now. At 124 bucks and change, that stock down 3 1/2%.
And that is your market update.
We are officially trading in the month of October, also means it's the last quarter of 2023. Markets so far have defied expectations and so has the economy.
Now we've got rising bond yields, markets under pressure.
Michael Craig, head of asset allocation, here to talk about all of it with us.
these are interesting days as we enter the last three months of the trading year.
>> Excruciating would probably be more apt but yes, it hasn't been a fun year for sure.
>> Let's talk about the dynamics here because it's been a much different picture. I think a lot of things have defied expectations, whether it was labour, consumer spending.
You got bond yields moving aggressively higher in the last several weeks. What is taking shape in the market right now and how we make sense of it?
>> Right, so it's been, the bond market really started rolling over since August.
Surprisingly.
Most market participants are kind of, quite taken aback by the move.
You got long rates at lower yields now feeling that. I would say that as we think where do we go from here, the easier part of inflation reduction has happened. We seen the declining goods prices, that has happened.
I think we are on the precipice of seeing a decline in rents.
But what I think, what we should think about going forward is that last bit of inflation reduction to those target rates is going to be challenging and bond market is basically saying it's going to need to push the economy towards a session to get there. There was a bit of a slow, soft landing there, circling the market which we never really believed in.
It really was trying to describe the very strong US equity performance in the first half of the year. I think that narrative now is past and really now I think it becomes how severe a recessionary going to need to see to create the demand destruction to get inflation back to target, right?
I think that's the bond market telling you it's going to really restrict financial conditions to create that demand destruction but the speed of it is quite remarkable.
> Quite remarkable.
What does it actually means the central banks? The bond market is sort of making its voice heard. We still like to hear from central banks before the end of the year with rate decisions. We've been trying to figure out the coin toss. Are they done? Will they go again? How long are they going to stay high for? What does this environment due to central banks thinking?
>> I think of the central banks, because inflation kind of got away from themand there is a credibility issue, they are going to have to really keep restrictive conditions in place until they have very, very tangible evidence that not only is inflation back to range but it's not going to rebound.
The lesson, which many people .2, 1970s was inflation came off, the job market started to track, and at the time there was more focus there was more focus on jobs inflation so there was easing very quickly.
and then it went back up.
I think they will wait on this to make sure thatinflation will not be accelerated the ease which really get you back to this higher for longer. I don't think we are… It's been a tricky one to call this year.
The market is not expecting much more.
We're not gonna get another hike in Canada, have a chance of a hike in the US.
That could change we get inflation going higher which I don't believe is going to happen. So the easier answer is I think we are probably done for hikes but the more challenging one is how long will it stay restrictive? And for that, that is the million-dollar question.
The way I see it is, you're going to see a precipitous fall in activity and timing that is a monks game but when you see that you will see a pretty rapid decline, that is probably a late 24 story with a lot of uncertainty.
>> Let's talk about that.
If we do get this hard landing, what the market looks like. Obviously we would expect an acceleration in the unemployment rate, on that side, the economic data starts to pull back and economic output.
With the markets look like through. Like that?
>> Markets are typically forward-looking indicators.
I think the markets are actually starting to price that outcome right now.
So by the time the real economy really feels that pain, the markets will probably be bottoming and that'll be the point where returns going forward I think will be higher. But this move right now, the stock market is funneling the message of the bond market, like, hey dude, it's hard to justify your valuations when money is trading at five or 6%. You really need a higher risk premium and the stark market that just not there.
So I think the stock market is starting to catch up with the bond market is at.
We are probably entering the peak pain of this whole, what has been a two-year malaise.
Stocks are flat, actually down on a two-year window now.
And I think this is likely the end of this kind of mini bear market of the last two years, the beginning of the end of that market.
I would expect a couple of quarters that may be challenging before you have a much more upside in stocks.
>> Is the attractiveness of the cash products part of the problem for equities right now? If you have an equity paying a yield of 4 1/2 or 5%, but then cash products doing the same, are they fighting each other?
>> I think the people flocked to cash because they see the current prices as high but often if you need the money in the next year, it makes little sense, but if you are moving long-term investments over and saying, I can't be bothered now, over long periods of time, these periods of kind of chaos don't look like much.
If you're a long-term investor, you should be looking… Over the next six months or so challenging.
So is it with cash, you always want cash.
It was want to have some cash on hand.
You might need it, he might have expenses.
But that should be a very small part of your portfolio.
Nevertheless, we are seeing the move to cash because people are making that kind of judgement now and saying, well, I'm trying to lock the sin, it's only gonna be there for so long.
> Before we finish this discussion, I did want to ask you, in times like these where you see bond yields will be aggressively higher and you seal this kind of activity, this term starts coming up in the press.
As is the work of bond vigilantes?
> I think we are trying to take another period of history and slap it on to this one.
In all fairness, Western democracies are spending too much money.
And in all fairness, we will need to make some decisions about investment and we are, we have now moved away from an area of free money. You have to make decisions, if those decisions are not thoughtful, there is a price to be paid. The UK is a primeexample of what that bond vigilante environment looks like.they had a crisis.
Soon the government will come out with an announcement on spending that will rapidly reduce the deficit.
you are going to see move in the bond market.
in previous periods we had so much excess lock. I think there's a little bit of that aptly right now. The US certainly is runningunsustainable fiscal policy. You see where this is going.
It's going into a dumpster fire if they don't hurt that over the next 10 years.
It's just there hasn't been the political courage yet because there hasn't been enough pain. I think there is a part of that storyto be told.
Right now, there's so much volatility in the market so people are holding back.
But this is a term that I don't think is going to disappear anytime soon because we are in a period of very restrictive money and governments are still running excessive deficits.
>> great insights with Michael Craig.
We'll get to your questions about the markets and asset allocation and just a moment's time.And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
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.
Senior Bank of Canada officials says that price hikes from businesses are contributing to a higher-than-expected inflation. In a speech today in Montréal, Deputy Gov.
Nicolas VincentSaid while corporate pricing behaviour showing signs of stabilizing, there is a risk frequent price hikes could become the norm, making it higher to get inflation back to 2%.
there is a changing of the guard at Lundin Mining. CEO Peter Rockandel will step down at the end of last year, and will be subsided by Jack Lundin, his family holds a 15% interest in the company. In a note to clients, TD Cowen says that while the transition was somewhat inevitable, it does come sooner than expected. Jack Lundin, who in the company as president last year, will assume the top job in January 1.
US retailer Macy's is looking outside the shopping mall for its next phase of growth, the department stores operator will open up to 30 smaller stores in strip malls over the next couple of years. Macy cut its full-year sales and earnings outlook earlier this year citing weak consumer demand. The TSX Composite Index is down. Says of the border, the S&P 500 right now, you're down 53 points, about 1 1/4 of a percent.
Michael Craig, head of asset allocation TD Asset Management is taking your questions so let's get to them. Here's an interesting one. The Fed is warning about hedge funds shorting treasuries futures.
Do you see that as a risk to the bond market?
>> Hedge funds have been buying the cash market to mind cash bonds and then selling futures gainsthey captured the basis difference between those two. Typically should be trading on top of each other but they are not.and they pour in a lot of leverage do that. They might be trying to squeeze a little bit of return but they use leverage to view it.
If you recall in the spring when Silicon Valley Bank at one end off the rails,the front end of the bond market rally, that rally was the destruction of the P&L pools of a lot of trade desks across the US. You could see the stop out as people scramble because everyone was short at security.
Where you have these buildups of leverage, we come in on Friday, we have a very weak from payroll, -200,000, hypothetically.
The bond markets rallying. That basis can explode in because there's so much leverage honour, you would have a disorderly move in the market, typically see treasuries rallying at that. That's what they're getting at.
These tend to create problems in the markets. The Fed is warning about it, it is a risk to be monitored but that's essentially what is happening and how you, as an investor, what do you do about it, just be mindful of using futures on the market because you could be, you could have price moves that don't make a lot of sense because of deleveraging.
>> The Fed warns about it, isn't much they can do about it other than monitor it?
>> Not really, no.
What they would like to be prime numbers… Those hedge funds need counterparties to finances.
They probably say do my just pulling back there their credit lines a little bit so that's what the moral suasion is but it's hard to… We talked about these shadow markets but they are outside of the Fed's regular tri-control.
>> Interesting question to start the showoff.
Got another one here. We are always right around the corner, right? What should we expect from this earnings season?
>> Depending on the market you are looking at, I think is going to be a challenging one.
I think the market is still too optimistic on earnings and we are seeingactivity across the board that indicates it is quite challenging. On mega-cap tech in the US it's a bit of a wildcard. There's no reason to believe that trainers not continuing, whether it meets expectations is another story. But I would expect to see a slowing in earnings growth.
>> Some of the companies that are more levered I guess to the consumer, they will be looking at what they thinkthe consumer is going to do in the future.
Will they be key to all this?
> What will be interesting I suppose will be, there is a theory in the market about this extended period of growth being a function of excessive savings from pandemic related transfers. If you see, if weakness does play out in the consumers space it will be indicating that the savings are all but exhausted.
>> Let's get to another question here.
How do you see interest rates effecting the housing market on the long term and could you give us an example of how that could play out?
>> In the long term. In the long term, I don't… Look.
I'm trying to think about this.
What's the long term?
> What are we talking, six month, year, 10 years?
>> It's going to exacerbate housing shortages as builders struggled to finance and build. If we continue to population growth, that will make a more challenging backdrop to housing and I think as a society we need to think about restricting demand for housing. No one likes to hear that but the fact is we have a mismatch of supply and demand right now. So that's probably where you can see some problems where you just can't get financed to get materials to build and that is going to be a problem. In the near term, I would expect, certainly for secondary, tertiary properties, that market is going to be struggling because there's just no liquidity so that's just a bit more of an obvious tell. But unless the power of money is changed and gravity doesn't work anymore, there is going to be a material dampening in the coming years.
>> We have seen an aggressive rate hiking cycle over the past year and 1/2 but if you are on a fixed mortgage, he fixed and right before the pandemic or during the early years of the pandemic, you're not sweating it yet, but then renewal comes in whenever that renewal comes and what that interest-rate landscape is is a bit of a wildcard.
>> There are two problems.
On the fixed, you will have a rude awakening when your rate goes from 1 1/2% to six and change.
On the flipside, most of the mortgages that were printed in 21 were variable.
They had amortization extensions. Make of Canada says that you cannot have an amortization her longer than 35 years when you reset.
When those people come to reset, you're gonna see higher payments because of the amortization schedules being tighter.
it's a perfect storm right now for households.
I've heard stories about people selling assets to make mortgage payments and collapsing balance sheets. I don't think this is anywhere near… I think it's a material risk for the Canadian economy in terms of what housing looks like over the next 12 months.
>> The Bank of Canada right now has to worry about a prime mission, getting inflation down.
But if you start to see real strains in the housing market, does that start to affect their thinking?
As to the actions they have taken?
>> If inflation is still too high, they are going to keep their foot on the gas.
if they are terrified, they might make new mistakes.
but they are not gonna make the mistakes of the 70s were they eased too early and they see inflation research.
It's like a forest fire. The fire looks like it's out, you stop with the water cannons but it's still burning under the ground, they are terrified of that scenario happening where it reignites the forest because they have been completely put out those last members of inflation.
So I don't think you're gonna get anything from the bank until you see those inflation numbers at target and they believe it's going to stay there for some time.
>> Interesting stuff as always.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Michael Craig, head of asset allocation at TD Asset Management just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get to today's educational segment.Bryan Rogers, Senior client education structure TD investing is here to talk us through trading hours and opportunities outside of those hours.
>> Yeah, this is a common question we hear a lot Greg.
I think most that are self-directed investors trade between the 9:30 AM Eastern time to 4:30 PM Eastern time. But then you're thinking, what about outside of that?
what if I missed at 4 o'clock deadline, am I out of luck?
The answer is no, at least in some cases.
This is going to be one of the things that you need to US dollars securities within TD Direct Investing.
So you can trade after hours.
You can go into that extended session.
Stocks trade pretty much 24 hours a day around the world but the most common time periods were trading happens, that's obviously the 930 to 4, but then typically up until around 7 PM which is when TD Direct Investing will allow you if you missed the 4 o'clock and you want to possibly see if you could set a price and get out of your trade if there was an announcement or some kind of bad news or earnings, maybe you want to sell after hours.
So I'll take just a moment to show everyone how to do that WebBroker and what's available if you did want to do something like that.
So we jumped over to the WebBroker platform.
You can see on here I have in order to get open already. I'm going to go back. Let me go back slightly and to show you, if you are going to buy and sell, remember it's the same procedure.
You can click on buy and sell.
TD Bank is the example here.
If I click on the buy button here, it opens up the order ticket and now you have the option to do a market limit, said in order.
I pulled up to the on purpose because I just want to show you, right here on this good till section, that's what I was mentioning, you can only do this with US dollar stocks.
If you ever go into a Canadian stock that just trading on the Canadian exchange, you can see on here it's not coming up as an option, just as I do a day order, I cannot do a day plus extended order.
But if I look at a different stock, let's sample of something like Apple that we know is on the US exchange, I want to click the US flag and if I go buy or sell, now that I'm on the order ticket, if I want to sell the stock, if I put in 100 shares and I click on, it has to be a limit order, meaning you do have to specify a price you'll notice it will be available even then, but what we are looking at is on this good till section, I see there is day, meaning it's of the day, or specify, that would be specify until the end of the month or something like that, or I do good till cancelled, but then this last one down at the very bottom, all these three of the top are those regular hours, 930 to 4 o'clock, but day plus extended hours means it can go up until 7 o'clock.
If I missed the 4 o'clock deadline, I still sell afterwards and I would have to specify a price, I would have to put in a specific limit order, if I specify my price and he gets hit I could sell that stock after hours.
>> Alright.
So this is placing a trade after the market.
I am not an early bird but what if you are an early bird and you want to get in before the market opens in the morning, what's the process there?
>> I like to sleep into, but if you do get up really earlyand maybe you want to try, sometimes there might be a situation before 9:30 AM that maybe there is news, sometimes companies will have a earnings before the market bell anything, I want to buy the stock before the market opens or maybe there was some type of news or event.
Then you could possibly get in before the opening bell at 930.
Stocks trade all the time.
You will see that there are indications, WebBroker is not a real-time streaming platform.
You can refresh it but if you refreshing it all the time, even before 930 and, you can see on the bid ask, it will be a little bit different than what the last trader closing price was, and that's what's indicating what's happening in the premarket.
In TD Direct Investing, you can look at that from 8 AM until the 9:30 AM. If we jump back into WebBroker, it still the same process.
If we are in this order to get that I'm in right now, it's just a matter of timing it.
Harvard enter a trade like this, let's say just before 8 o'clock or even slightly after 8 o'clock, if it was 8 AM Eastern time or 805 or whatever time it might be, if I still do the same thing and click on sell or buy, then I go Dave was extended, it automatically will traverse that whole time being, if I entered it at 8 o'clock, it will stay open from 8 AM to 7 PM. If it's a limit order when I specify the price, it will stay open across the Dave was extended market.
if you're looking for a little bit more information on this good till area, you can actually, this is something that's in WebBroker all over the place.
You can click on the?.
I know it's kind of small.
But right above the top right-hand side here, this will give us, if I open this up, it will take me to a page and that will give me information on everything to do with the order ticket. If you scroll down probably about half way, you can probably do control F if you want to be really quick, but if you scroll down halfway, you'll say that it's as good till, that's the good till section it gives you more information about what day plus extended, it tells you all the details in case you forgot what I was referring to, the 8 AM to 920 basically for the early session and 4 PM till 7 PM for the extended. So there's a little bit more detail. Like Greg said, if you get up earlier you just missed the boat at 4 o'clock and you want to try to sell your stock, you still have that option with a plus extended.
>> Great stuff as always, Bryan. Thanks for that.
>> Thanks, Greg.
>> Bryan Rogers, Senior client education instructor with 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. October is also investor education month. Here is a preview of what they have planned.
All right, we are back with Michael Craig, talking asset allocation a lot of question coming in the past couple of minutes. We are starting to get a few of them. Someone wants to know, if stocks are we can bond yields are rising, like today situation,where should investors look for the short term?
>> Short term means a lot of different things to different people. I will say maybe a year or so out.
As assets get cheaper, you start putting together your bio list.
I think there are some really interesting companies that are getting into by zones.
I think on a longer term view, you need to have exposure to AI. I think it's a place is going to make a lot of sense. Energy, again, if you get a bit of weakness there, that's a market that is going to be a perpetual, chronic under supply so probably a good and interesting place to make money longer term. And on the yield front, treasuries will continue to sell off until they break things.
When they break things, historically, they've gone the other way and yields have fallen.
I would keep my eyes on the government market in terms of if we go and if, when we roll into a recession, that's probably where we will see the move happening in terms of the other way.
>> Is the case to you when investors are doing their homework on what moves they might want to make in the market, they need to be patient and prepared for a bit of volatility?
You can't time the market, so they are not going to choose the exact right moment.
>> I've been doing this a long time and trading actively, I've done this in a previous role, it is really exhausting and it's a full-time job. You have to be staring at your screen from market open to market close and have very disciplined stop at levels and stuff like that.
Most people can't do it. I'd say 99% of people can't do it. I know about five people through my career I've met who are consistently successful at trading.
The rest of us mere mortals, you have to have… You have to use the benefit of time.
It's on your side.
If you believe in something, let it play out, have patience.
That's what investing is all about, kind of understanding what represents good value and then having the patience to let your thesis player.
>> Another question came in on the heels of that question, and I follow him. We have of you are asking, when you do see as market turn in a different direction to the path we have been on, which stock sectors should rebound first?
>> I would expect to see interest rates move. Depending on the depth of a recession, your early cyclical's move, homebuilders get a bid, US financials might be interesting. And then I would probably want to barbel that two types of tactics that are going to be keeping it productivity gains and back and see you back tofrom forms of AI.
>> Does this take us back to a longer-term investment thesis? What are you trying to do, you gotta figure out what your goals are.
>> Exactly. You might have in the near-term, interim, long-term goals, if you need cash next year, your investment should reflect that.
that medium-term bucket, let's say, you're looking to pass on, endowments or to your children, if you have that, it's a completely different type of asset mix that you need to think about in the shorter term.
this is something I think sometimes investors miss, not all investments need to be kind of in the same area.
You have to think about the time horizon you're going to be holding them for.
>> We will get back to your questions for Michael Craig in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
and a reminder, of course, you can get in touch with us here at MoneyTalk Live at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us. You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send. We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
We are into the month of October now and along with a few things, is going to bring more interest rate decisions from our central bank, the Bank of Canada, also from the Fed. So we bought some jobs report coming in at the end of this week that are going to be pretty key in that analysis. Anthony Okolie joins us now with a look at what to expect from the latest payroll data.
>> I will start here in Canada. The labour market in Canada seems to be tracking towards better supply demand balance, according to TD Economics. The survey of employment payrolls and hours for the month of July came in last week, showed the labour demand continued to ease here in Canada.
Job vacancies also fell substantially.
They hit lows not seen since May 2021.
The number of unfilled positions fell below 30% and vacancies in the accommodation and food services as well as trade actually counted for just over one third of the decline as the chart shows.
TD Economics notes that the wage growth is still a concern. Obviously, average weekly earnings picked up pace in July. We saw average weekly hours falling in the same period. We will get more clarity on wage growth this Friday but TD Economics is that the data could provide a solid case for the Bank of Canada to hold on rates.
Also this week, we got the US jobs opening report for August, it came in this morning. TD Securities was expecting a rebound in the number and it actually came in much higher-than-expected.
The number came in at nine 600000 Job Openings in August versus the 8.9 million in July and also above economic forecast.
This is down from the peak of just over 12 million in the spring of 2022.
Due to the leg and the jobs report, doesn't take into account autoworkers strike. That is not captured in the data.
But a key focus of the report is on the portion of the report which is a leading indicator of the wage growth dynamics and the rate of people quitting jobs in the US was unchanged at 2.2%. That again is still the lowest we have seen since January 2021.
It also matches the months before the pandemic. Layoffs have also been flat, the data suggesting employers are reluctant to part ways with workers in a tight labour market.
Attention will focus on this Friday's US payrolls data and TD Securities is forecasting an above forecast estimate of 210,000 jobs. That is well above the 165,000 and consensus estimates. They see unemployment coming down slightly to 3.7%.
Keeping in mind that the last three report showed that on a plane became below 200,000. So big focus on jobs this week.
We will wait for the Canadian and US jobs report on Friday.
>> Jobs will be the big one.
But there are increasing signs that the aggressive rate hiking cycle has had an effect on the economy. What does that mean for economic growth or maybe lack of growth next year for Canada and the US?
>> TD Economics recently put out their economic forecast and they believe that after an economic slowdown in 2024 and a subsequent rebound in 2025 and 2026, they see longer-term Canadian GDP growth stabilizing around 1.7% annually.
And with inflationary pressures easing over the medium term, TD Economics sees the Bank of Canada cutting policy rates back to the neutral of 2 1/4% by 2025.
Turning to the US, US economic growth is expected to grow, come in about 2.3% this year but will slow to 1.3% in 2024 according to their economic forecast and then gradually rise back to growth of around 1.8% in 2025. TD Economics also expects rates to remain in the 5.25 to 5.5% range for the next few quarters.
>> Interesting stuff as always. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, let's get you updated on the markets.
We are having a look at TD's advanced dashboard,a platform designed for active traders available through the TD Direct Investing platform. We are looking at the heat map function here, screening by price and volume. You can see when it comes to the financials and energy space, there is some pressure to the downside although it is interesting, the uranium plays, obviously we have to look at the oil and gas plays, with interesting is if you dig into the mining space,it's a mixed bag there. You have the likes of First Quantum down 1 1/3%. You've seen some strength, it's modest. Kinross Gold and Barrick Gold as well. South of the border, we will screen through the S&P 100, to give us a tidier picture of the market, see what's happening down there. Again, it's interesting. we are seeing you at the name Intel. Not really beneficiary of the AI excitement. Up 1/2% today. A chipmaking brother and not doing quite as well.
you got a name like Amazon down to the tune of a little more than 3%. You can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
we are back now with Michael Craig from TD Asset Management, we are talking asset allocation, let's get your questions. We have a lot coming in.
let's see what we've got. What's your outlook for the oil and energy sector?
Could West Texas intermediate, American benchmark crude, near 100 bucks per barrel?
>> It could.
I don't think it's in either producers or consumers interest that it does only because when oil starts to move rapidly to those higher numbers, it starts to create demand destruction and producers don't want to see it go up to 100 and then down to 70. It's a possibility but I don't think it's going to live in the hundreds for long before you see a retracement back to a lower price.
>> Would be, obviously, is not an American's interest but let's think of the Biden administration.
We haven't heard much about the White House in Saudi Arabia.
Biden did make it clear that he wasn't enjoying the higher price of crude.
They do have a strategic reserve.
>> Yeah. It's at its lowest levels in many years.
You could be cynical and say it's election engineering in terms of trying to get votes in the last round of midterm elections but the longer term picture for oil is quite bright. We are not producing enough and demand continues to grow. Our petroleum usage continues to be on the rise. So this is where, it's a weird set up where energy producers are being basically told by shareholders, don't increase production.
But the price continues to rise so it is a sweet spot to be in right now as a producer.
>> Is that the biggest risk right now is it more of a risk of a very hard landing which could impact the crude market?
>> Near term, that would certainly be an issue but I say hard landing, it's not consensus at all. Many people are still in the camp that we are going to see no landing and just keep driving on.
If we see that hard landing scenario, oil will go lower as it has traditionally done, but there is a realm of possibilities about what might play out.
>> Let's take another question from the audience.
We've got plenty coming in four Michael Craig.
Thoughts on AI right now as hype cycle dies down?
you touch on it a few times but obviously there was an explosion of interest in the spring which drove names like Nvidia higher.
I feel it right now it's not enough for company to say, hey, we are doing AI stuff.
Companies were just throwing it out in past quarters.
>> There are a few things.
One, there are different ways of playing AI. It's companies that are re-jeering their business models around it that are going to be able to drive down unit labour costs and make more money and have more margin. That's one way of thinking about it. What companies are best set up to incorporate AI into their business practices.
There are some who have a lock on a particular type of processor. And then companies that are delivering it, like the Microsoft of the world that are able to deliver the goods to work words.
You gotta pick your price.
If you bought Amazon at the highs of the 2000s, you lost 95% of your money before it became a multitrillion dollar stock so you do need to be mindful of valuations. I would say that historically speaking, market sense of massively overhyped new kinds of transformative technology in the near term and when they forget about it to the price rips higher and then collapses and markets forget about it as it continues on over the next 20 years.
So I think AI will follow a similar trajectory.
Maybe Nvidia will stay high for the next five years.
But if I am thinking of investing for the next 10 or 15 years, this is where I want to be, okay, where is the right price that I want to pay and believing in that cycle and if you're correct, it will return handsomer terms. That's the way I would think about it. But if you are trading around the next 90 days, that's a whole other question.
You need to be able to differentiate the two in the space.
>> Were almost no time for questions. I will squeeze one more in now. This is a big one in terms of we talked at the start of the show about thoughts of the beginning of the year. The idea was that China would be off to the races after the lifting of the COVID restrictions. How worried should we be about a slowing Chinese economy?
>> A few things on that.
It was right for couple of months and then rapidly fizzled out.
You have to understand how much damage to the average person was incurred to COVID lockdowns and heavy-handed governments and assault on industry.
so in China, there's a few things. One, I don't think we will see a precipitous collapse anytime soon. But China over the 2020s might look something like Japan of the 1990s were there has been overinvestmentin infrastructure. It takes a long time to absorb that introduction to the economy. And there isn't really any sources of investment opportunities there and you got excessive production versus demand.
Essentially, China needs to transfer wealth from government, local governments for the household sector. They don't have enough domestic consumption to maintain local growth rates. So long story show, it's probably dead money. Stocks are trading at about 1/3 of their valuation.
It's already someone pricing. In terms of additional stress to the world, it's probably a deflationary source of impulse due to weak growth and it's kind of going to go nowhere until you see policy just to the current realities they are facing.
>> Always an insightful conversation. I look forward to the next one.
>> My pleasure.
>> Our thanks to Michael Craig, head of asset allocation at TD Asset Management.
As always at home, do your own research before making any investment decision.
Stay tuned for tomorrow's show. We will have a discussion about economics, all things related, with Rannella Billy-Ochieng', Senior economist at TD.
You can get a head start with your questions for the show, just email moneytalklive@td.com. That's all the time we have the show today.
thanks for watching. We will see you tomorrow.
[music]
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we are officially into the last quarter of the year. Bond yields are on the rise which is pressuring markets. Where do we go from here? Michael Craig, head of asset allocation a TD Asset Management will share his thoughts in just a few moments.
it's a big week on the jobs front with the US and Canada releasing results. Anthony Okolie will be here with a preview.
And in today's WebBroker education segment, Bryan Rogers is going to tell us about how to do extended hours investing using the WebBroker platform. So here's how you can get in touch with us. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
before get our guest of the day, let's get you an update on the markets. It was a bank holiday yesterday butthe markets did trade so we are well into the last quarter of the year now and we have some right on the screen. At 214 point deficit on the TSX Composite Index, we are down more than a full percent.
One of the most actively traded names on the TSX is Enbridge, a 4286 per share, it's down 2%.
It's been on a downward glide path for a few months. Denison Mines, it's been interesting to watch the uranium place.
It's been high-volume, there one of the most actively traded names on the TSX for the past weekend a bit of a bumpy ride.
Today it's back to the upside but a bit off the highs of the session.
ActiveX and $0.17, you've got Denison up a very modest half a percent.
South of the border, we are tracking the US 10 year bond yield that continues to move higher and it is exerting pressure on the equities. The S&P 500, that broader rate of the American market, down 65 points or 1/2%.
The tech heavy NASDAQ, how is it pacing the broader market? A little bit weaker, down 1.8%.
Could have chosen any of the big tech names, let's take a look at Amazon right now. At 124 bucks and change, that stock down 3 1/2%.
And that is your market update.
We are officially trading in the month of October, also means it's the last quarter of 2023. Markets so far have defied expectations and so has the economy.
Now we've got rising bond yields, markets under pressure.
Michael Craig, head of asset allocation, here to talk about all of it with us.
these are interesting days as we enter the last three months of the trading year.
>> Excruciating would probably be more apt but yes, it hasn't been a fun year for sure.
>> Let's talk about the dynamics here because it's been a much different picture. I think a lot of things have defied expectations, whether it was labour, consumer spending.
You got bond yields moving aggressively higher in the last several weeks. What is taking shape in the market right now and how we make sense of it?
>> Right, so it's been, the bond market really started rolling over since August.
Surprisingly.
Most market participants are kind of, quite taken aback by the move.
You got long rates at lower yields now feeling that. I would say that as we think where do we go from here, the easier part of inflation reduction has happened. We seen the declining goods prices, that has happened.
I think we are on the precipice of seeing a decline in rents.
But what I think, what we should think about going forward is that last bit of inflation reduction to those target rates is going to be challenging and bond market is basically saying it's going to need to push the economy towards a session to get there. There was a bit of a slow, soft landing there, circling the market which we never really believed in.
It really was trying to describe the very strong US equity performance in the first half of the year. I think that narrative now is past and really now I think it becomes how severe a recessionary going to need to see to create the demand destruction to get inflation back to target, right?
I think that's the bond market telling you it's going to really restrict financial conditions to create that demand destruction but the speed of it is quite remarkable.
> Quite remarkable.
What does it actually means the central banks? The bond market is sort of making its voice heard. We still like to hear from central banks before the end of the year with rate decisions. We've been trying to figure out the coin toss. Are they done? Will they go again? How long are they going to stay high for? What does this environment due to central banks thinking?
>> I think of the central banks, because inflation kind of got away from themand there is a credibility issue, they are going to have to really keep restrictive conditions in place until they have very, very tangible evidence that not only is inflation back to range but it's not going to rebound.
The lesson, which many people .2, 1970s was inflation came off, the job market started to track, and at the time there was more focus there was more focus on jobs inflation so there was easing very quickly.
and then it went back up.
I think they will wait on this to make sure thatinflation will not be accelerated the ease which really get you back to this higher for longer. I don't think we are… It's been a tricky one to call this year.
The market is not expecting much more.
We're not gonna get another hike in Canada, have a chance of a hike in the US.
That could change we get inflation going higher which I don't believe is going to happen. So the easier answer is I think we are probably done for hikes but the more challenging one is how long will it stay restrictive? And for that, that is the million-dollar question.
The way I see it is, you're going to see a precipitous fall in activity and timing that is a monks game but when you see that you will see a pretty rapid decline, that is probably a late 24 story with a lot of uncertainty.
>> Let's talk about that.
If we do get this hard landing, what the market looks like. Obviously we would expect an acceleration in the unemployment rate, on that side, the economic data starts to pull back and economic output.
With the markets look like through. Like that?
>> Markets are typically forward-looking indicators.
I think the markets are actually starting to price that outcome right now.
So by the time the real economy really feels that pain, the markets will probably be bottoming and that'll be the point where returns going forward I think will be higher. But this move right now, the stock market is funneling the message of the bond market, like, hey dude, it's hard to justify your valuations when money is trading at five or 6%. You really need a higher risk premium and the stark market that just not there.
So I think the stock market is starting to catch up with the bond market is at.
We are probably entering the peak pain of this whole, what has been a two-year malaise.
Stocks are flat, actually down on a two-year window now.
And I think this is likely the end of this kind of mini bear market of the last two years, the beginning of the end of that market.
I would expect a couple of quarters that may be challenging before you have a much more upside in stocks.
>> Is the attractiveness of the cash products part of the problem for equities right now? If you have an equity paying a yield of 4 1/2 or 5%, but then cash products doing the same, are they fighting each other?
>> I think the people flocked to cash because they see the current prices as high but often if you need the money in the next year, it makes little sense, but if you are moving long-term investments over and saying, I can't be bothered now, over long periods of time, these periods of kind of chaos don't look like much.
If you're a long-term investor, you should be looking… Over the next six months or so challenging.
So is it with cash, you always want cash.
It was want to have some cash on hand.
You might need it, he might have expenses.
But that should be a very small part of your portfolio.
Nevertheless, we are seeing the move to cash because people are making that kind of judgement now and saying, well, I'm trying to lock the sin, it's only gonna be there for so long.
> Before we finish this discussion, I did want to ask you, in times like these where you see bond yields will be aggressively higher and you seal this kind of activity, this term starts coming up in the press.
As is the work of bond vigilantes?
> I think we are trying to take another period of history and slap it on to this one.
In all fairness, Western democracies are spending too much money.
And in all fairness, we will need to make some decisions about investment and we are, we have now moved away from an area of free money. You have to make decisions, if those decisions are not thoughtful, there is a price to be paid. The UK is a primeexample of what that bond vigilante environment looks like.they had a crisis.
Soon the government will come out with an announcement on spending that will rapidly reduce the deficit.
you are going to see move in the bond market.
in previous periods we had so much excess lock. I think there's a little bit of that aptly right now. The US certainly is runningunsustainable fiscal policy. You see where this is going.
It's going into a dumpster fire if they don't hurt that over the next 10 years.
It's just there hasn't been the political courage yet because there hasn't been enough pain. I think there is a part of that storyto be told.
Right now, there's so much volatility in the market so people are holding back.
But this is a term that I don't think is going to disappear anytime soon because we are in a period of very restrictive money and governments are still running excessive deficits.
>> great insights with Michael Craig.
We'll get to your questions about the markets and asset allocation and just a moment's time.And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
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.
Senior Bank of Canada officials says that price hikes from businesses are contributing to a higher-than-expected inflation. In a speech today in Montréal, Deputy Gov.
Nicolas VincentSaid while corporate pricing behaviour showing signs of stabilizing, there is a risk frequent price hikes could become the norm, making it higher to get inflation back to 2%.
there is a changing of the guard at Lundin Mining. CEO Peter Rockandel will step down at the end of last year, and will be subsided by Jack Lundin, his family holds a 15% interest in the company. In a note to clients, TD Cowen says that while the transition was somewhat inevitable, it does come sooner than expected. Jack Lundin, who in the company as president last year, will assume the top job in January 1.
US retailer Macy's is looking outside the shopping mall for its next phase of growth, the department stores operator will open up to 30 smaller stores in strip malls over the next couple of years. Macy cut its full-year sales and earnings outlook earlier this year citing weak consumer demand. The TSX Composite Index is down. Says of the border, the S&P 500 right now, you're down 53 points, about 1 1/4 of a percent.
Michael Craig, head of asset allocation TD Asset Management is taking your questions so let's get to them. Here's an interesting one. The Fed is warning about hedge funds shorting treasuries futures.
Do you see that as a risk to the bond market?
>> Hedge funds have been buying the cash market to mind cash bonds and then selling futures gainsthey captured the basis difference between those two. Typically should be trading on top of each other but they are not.and they pour in a lot of leverage do that. They might be trying to squeeze a little bit of return but they use leverage to view it.
If you recall in the spring when Silicon Valley Bank at one end off the rails,the front end of the bond market rally, that rally was the destruction of the P&L pools of a lot of trade desks across the US. You could see the stop out as people scramble because everyone was short at security.
Where you have these buildups of leverage, we come in on Friday, we have a very weak from payroll, -200,000, hypothetically.
The bond markets rallying. That basis can explode in because there's so much leverage honour, you would have a disorderly move in the market, typically see treasuries rallying at that. That's what they're getting at.
These tend to create problems in the markets. The Fed is warning about it, it is a risk to be monitored but that's essentially what is happening and how you, as an investor, what do you do about it, just be mindful of using futures on the market because you could be, you could have price moves that don't make a lot of sense because of deleveraging.
>> The Fed warns about it, isn't much they can do about it other than monitor it?
>> Not really, no.
What they would like to be prime numbers… Those hedge funds need counterparties to finances.
They probably say do my just pulling back there their credit lines a little bit so that's what the moral suasion is but it's hard to… We talked about these shadow markets but they are outside of the Fed's regular tri-control.
>> Interesting question to start the showoff.
Got another one here. We are always right around the corner, right? What should we expect from this earnings season?
>> Depending on the market you are looking at, I think is going to be a challenging one.
I think the market is still too optimistic on earnings and we are seeingactivity across the board that indicates it is quite challenging. On mega-cap tech in the US it's a bit of a wildcard. There's no reason to believe that trainers not continuing, whether it meets expectations is another story. But I would expect to see a slowing in earnings growth.
>> Some of the companies that are more levered I guess to the consumer, they will be looking at what they thinkthe consumer is going to do in the future.
Will they be key to all this?
> What will be interesting I suppose will be, there is a theory in the market about this extended period of growth being a function of excessive savings from pandemic related transfers. If you see, if weakness does play out in the consumers space it will be indicating that the savings are all but exhausted.
>> Let's get to another question here.
How do you see interest rates effecting the housing market on the long term and could you give us an example of how that could play out?
>> In the long term. In the long term, I don't… Look.
I'm trying to think about this.
What's the long term?
> What are we talking, six month, year, 10 years?
>> It's going to exacerbate housing shortages as builders struggled to finance and build. If we continue to population growth, that will make a more challenging backdrop to housing and I think as a society we need to think about restricting demand for housing. No one likes to hear that but the fact is we have a mismatch of supply and demand right now. So that's probably where you can see some problems where you just can't get financed to get materials to build and that is going to be a problem. In the near term, I would expect, certainly for secondary, tertiary properties, that market is going to be struggling because there's just no liquidity so that's just a bit more of an obvious tell. But unless the power of money is changed and gravity doesn't work anymore, there is going to be a material dampening in the coming years.
>> We have seen an aggressive rate hiking cycle over the past year and 1/2 but if you are on a fixed mortgage, he fixed and right before the pandemic or during the early years of the pandemic, you're not sweating it yet, but then renewal comes in whenever that renewal comes and what that interest-rate landscape is is a bit of a wildcard.
>> There are two problems.
On the fixed, you will have a rude awakening when your rate goes from 1 1/2% to six and change.
On the flipside, most of the mortgages that were printed in 21 were variable.
They had amortization extensions. Make of Canada says that you cannot have an amortization her longer than 35 years when you reset.
When those people come to reset, you're gonna see higher payments because of the amortization schedules being tighter.
it's a perfect storm right now for households.
I've heard stories about people selling assets to make mortgage payments and collapsing balance sheets. I don't think this is anywhere near… I think it's a material risk for the Canadian economy in terms of what housing looks like over the next 12 months.
>> The Bank of Canada right now has to worry about a prime mission, getting inflation down.
But if you start to see real strains in the housing market, does that start to affect their thinking?
As to the actions they have taken?
>> If inflation is still too high, they are going to keep their foot on the gas.
if they are terrified, they might make new mistakes.
but they are not gonna make the mistakes of the 70s were they eased too early and they see inflation research.
It's like a forest fire. The fire looks like it's out, you stop with the water cannons but it's still burning under the ground, they are terrified of that scenario happening where it reignites the forest because they have been completely put out those last members of inflation.
So I don't think you're gonna get anything from the bank until you see those inflation numbers at target and they believe it's going to stay there for some time.
>> Interesting stuff as always.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Michael Craig, head of asset allocation at TD Asset Management just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get to today's educational segment.Bryan Rogers, Senior client education structure TD investing is here to talk us through trading hours and opportunities outside of those hours.
>> Yeah, this is a common question we hear a lot Greg.
I think most that are self-directed investors trade between the 9:30 AM Eastern time to 4:30 PM Eastern time. But then you're thinking, what about outside of that?
what if I missed at 4 o'clock deadline, am I out of luck?
The answer is no, at least in some cases.
This is going to be one of the things that you need to US dollars securities within TD Direct Investing.
So you can trade after hours.
You can go into that extended session.
Stocks trade pretty much 24 hours a day around the world but the most common time periods were trading happens, that's obviously the 930 to 4, but then typically up until around 7 PM which is when TD Direct Investing will allow you if you missed the 4 o'clock and you want to possibly see if you could set a price and get out of your trade if there was an announcement or some kind of bad news or earnings, maybe you want to sell after hours.
So I'll take just a moment to show everyone how to do that WebBroker and what's available if you did want to do something like that.
So we jumped over to the WebBroker platform.
You can see on here I have in order to get open already. I'm going to go back. Let me go back slightly and to show you, if you are going to buy and sell, remember it's the same procedure.
You can click on buy and sell.
TD Bank is the example here.
If I click on the buy button here, it opens up the order ticket and now you have the option to do a market limit, said in order.
I pulled up to the on purpose because I just want to show you, right here on this good till section, that's what I was mentioning, you can only do this with US dollar stocks.
If you ever go into a Canadian stock that just trading on the Canadian exchange, you can see on here it's not coming up as an option, just as I do a day order, I cannot do a day plus extended order.
But if I look at a different stock, let's sample of something like Apple that we know is on the US exchange, I want to click the US flag and if I go buy or sell, now that I'm on the order ticket, if I want to sell the stock, if I put in 100 shares and I click on, it has to be a limit order, meaning you do have to specify a price you'll notice it will be available even then, but what we are looking at is on this good till section, I see there is day, meaning it's of the day, or specify, that would be specify until the end of the month or something like that, or I do good till cancelled, but then this last one down at the very bottom, all these three of the top are those regular hours, 930 to 4 o'clock, but day plus extended hours means it can go up until 7 o'clock.
If I missed the 4 o'clock deadline, I still sell afterwards and I would have to specify a price, I would have to put in a specific limit order, if I specify my price and he gets hit I could sell that stock after hours.
>> Alright.
So this is placing a trade after the market.
I am not an early bird but what if you are an early bird and you want to get in before the market opens in the morning, what's the process there?
>> I like to sleep into, but if you do get up really earlyand maybe you want to try, sometimes there might be a situation before 9:30 AM that maybe there is news, sometimes companies will have a earnings before the market bell anything, I want to buy the stock before the market opens or maybe there was some type of news or event.
Then you could possibly get in before the opening bell at 930.
Stocks trade all the time.
You will see that there are indications, WebBroker is not a real-time streaming platform.
You can refresh it but if you refreshing it all the time, even before 930 and, you can see on the bid ask, it will be a little bit different than what the last trader closing price was, and that's what's indicating what's happening in the premarket.
In TD Direct Investing, you can look at that from 8 AM until the 9:30 AM. If we jump back into WebBroker, it still the same process.
If we are in this order to get that I'm in right now, it's just a matter of timing it.
Harvard enter a trade like this, let's say just before 8 o'clock or even slightly after 8 o'clock, if it was 8 AM Eastern time or 805 or whatever time it might be, if I still do the same thing and click on sell or buy, then I go Dave was extended, it automatically will traverse that whole time being, if I entered it at 8 o'clock, it will stay open from 8 AM to 7 PM. If it's a limit order when I specify the price, it will stay open across the Dave was extended market.
if you're looking for a little bit more information on this good till area, you can actually, this is something that's in WebBroker all over the place.
You can click on the?.
I know it's kind of small.
But right above the top right-hand side here, this will give us, if I open this up, it will take me to a page and that will give me information on everything to do with the order ticket. If you scroll down probably about half way, you can probably do control F if you want to be really quick, but if you scroll down halfway, you'll say that it's as good till, that's the good till section it gives you more information about what day plus extended, it tells you all the details in case you forgot what I was referring to, the 8 AM to 920 basically for the early session and 4 PM till 7 PM for the extended. So there's a little bit more detail. Like Greg said, if you get up earlier you just missed the boat at 4 o'clock and you want to try to sell your stock, you still have that option with a plus extended.
>> Great stuff as always, Bryan. Thanks for that.
>> Thanks, Greg.
>> Bryan Rogers, Senior client education instructor with 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. October is also investor education month. Here is a preview of what they have planned.
All right, we are back with Michael Craig, talking asset allocation a lot of question coming in the past couple of minutes. We are starting to get a few of them. Someone wants to know, if stocks are we can bond yields are rising, like today situation,where should investors look for the short term?
>> Short term means a lot of different things to different people. I will say maybe a year or so out.
As assets get cheaper, you start putting together your bio list.
I think there are some really interesting companies that are getting into by zones.
I think on a longer term view, you need to have exposure to AI. I think it's a place is going to make a lot of sense. Energy, again, if you get a bit of weakness there, that's a market that is going to be a perpetual, chronic under supply so probably a good and interesting place to make money longer term. And on the yield front, treasuries will continue to sell off until they break things.
When they break things, historically, they've gone the other way and yields have fallen.
I would keep my eyes on the government market in terms of if we go and if, when we roll into a recession, that's probably where we will see the move happening in terms of the other way.
>> Is the case to you when investors are doing their homework on what moves they might want to make in the market, they need to be patient and prepared for a bit of volatility?
You can't time the market, so they are not going to choose the exact right moment.
>> I've been doing this a long time and trading actively, I've done this in a previous role, it is really exhausting and it's a full-time job. You have to be staring at your screen from market open to market close and have very disciplined stop at levels and stuff like that.
Most people can't do it. I'd say 99% of people can't do it. I know about five people through my career I've met who are consistently successful at trading.
The rest of us mere mortals, you have to have… You have to use the benefit of time.
It's on your side.
If you believe in something, let it play out, have patience.
That's what investing is all about, kind of understanding what represents good value and then having the patience to let your thesis player.
>> Another question came in on the heels of that question, and I follow him. We have of you are asking, when you do see as market turn in a different direction to the path we have been on, which stock sectors should rebound first?
>> I would expect to see interest rates move. Depending on the depth of a recession, your early cyclical's move, homebuilders get a bid, US financials might be interesting. And then I would probably want to barbel that two types of tactics that are going to be keeping it productivity gains and back and see you back tofrom forms of AI.
>> Does this take us back to a longer-term investment thesis? What are you trying to do, you gotta figure out what your goals are.
>> Exactly. You might have in the near-term, interim, long-term goals, if you need cash next year, your investment should reflect that.
that medium-term bucket, let's say, you're looking to pass on, endowments or to your children, if you have that, it's a completely different type of asset mix that you need to think about in the shorter term.
this is something I think sometimes investors miss, not all investments need to be kind of in the same area.
You have to think about the time horizon you're going to be holding them for.
>> We will get back to your questions for Michael Craig in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
and a reminder, of course, you can get in touch with us here at MoneyTalk Live at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us. You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send. We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
We are into the month of October now and along with a few things, is going to bring more interest rate decisions from our central bank, the Bank of Canada, also from the Fed. So we bought some jobs report coming in at the end of this week that are going to be pretty key in that analysis. Anthony Okolie joins us now with a look at what to expect from the latest payroll data.
>> I will start here in Canada. The labour market in Canada seems to be tracking towards better supply demand balance, according to TD Economics. The survey of employment payrolls and hours for the month of July came in last week, showed the labour demand continued to ease here in Canada.
Job vacancies also fell substantially.
They hit lows not seen since May 2021.
The number of unfilled positions fell below 30% and vacancies in the accommodation and food services as well as trade actually counted for just over one third of the decline as the chart shows.
TD Economics notes that the wage growth is still a concern. Obviously, average weekly earnings picked up pace in July. We saw average weekly hours falling in the same period. We will get more clarity on wage growth this Friday but TD Economics is that the data could provide a solid case for the Bank of Canada to hold on rates.
Also this week, we got the US jobs opening report for August, it came in this morning. TD Securities was expecting a rebound in the number and it actually came in much higher-than-expected.
The number came in at nine 600000 Job Openings in August versus the 8.9 million in July and also above economic forecast.
This is down from the peak of just over 12 million in the spring of 2022.
Due to the leg and the jobs report, doesn't take into account autoworkers strike. That is not captured in the data.
But a key focus of the report is on the portion of the report which is a leading indicator of the wage growth dynamics and the rate of people quitting jobs in the US was unchanged at 2.2%. That again is still the lowest we have seen since January 2021.
It also matches the months before the pandemic. Layoffs have also been flat, the data suggesting employers are reluctant to part ways with workers in a tight labour market.
Attention will focus on this Friday's US payrolls data and TD Securities is forecasting an above forecast estimate of 210,000 jobs. That is well above the 165,000 and consensus estimates. They see unemployment coming down slightly to 3.7%.
Keeping in mind that the last three report showed that on a plane became below 200,000. So big focus on jobs this week.
We will wait for the Canadian and US jobs report on Friday.
>> Jobs will be the big one.
But there are increasing signs that the aggressive rate hiking cycle has had an effect on the economy. What does that mean for economic growth or maybe lack of growth next year for Canada and the US?
>> TD Economics recently put out their economic forecast and they believe that after an economic slowdown in 2024 and a subsequent rebound in 2025 and 2026, they see longer-term Canadian GDP growth stabilizing around 1.7% annually.
And with inflationary pressures easing over the medium term, TD Economics sees the Bank of Canada cutting policy rates back to the neutral of 2 1/4% by 2025.
Turning to the US, US economic growth is expected to grow, come in about 2.3% this year but will slow to 1.3% in 2024 according to their economic forecast and then gradually rise back to growth of around 1.8% in 2025. TD Economics also expects rates to remain in the 5.25 to 5.5% range for the next few quarters.
>> Interesting stuff as always. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, let's get you updated on the markets.
We are having a look at TD's advanced dashboard,a platform designed for active traders available through the TD Direct Investing platform. We are looking at the heat map function here, screening by price and volume. You can see when it comes to the financials and energy space, there is some pressure to the downside although it is interesting, the uranium plays, obviously we have to look at the oil and gas plays, with interesting is if you dig into the mining space,it's a mixed bag there. You have the likes of First Quantum down 1 1/3%. You've seen some strength, it's modest. Kinross Gold and Barrick Gold as well. South of the border, we will screen through the S&P 100, to give us a tidier picture of the market, see what's happening down there. Again, it's interesting. we are seeing you at the name Intel. Not really beneficiary of the AI excitement. Up 1/2% today. A chipmaking brother and not doing quite as well.
you got a name like Amazon down to the tune of a little more than 3%. You can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
we are back now with Michael Craig from TD Asset Management, we are talking asset allocation, let's get your questions. We have a lot coming in.
let's see what we've got. What's your outlook for the oil and energy sector?
Could West Texas intermediate, American benchmark crude, near 100 bucks per barrel?
>> It could.
I don't think it's in either producers or consumers interest that it does only because when oil starts to move rapidly to those higher numbers, it starts to create demand destruction and producers don't want to see it go up to 100 and then down to 70. It's a possibility but I don't think it's going to live in the hundreds for long before you see a retracement back to a lower price.
>> Would be, obviously, is not an American's interest but let's think of the Biden administration.
We haven't heard much about the White House in Saudi Arabia.
Biden did make it clear that he wasn't enjoying the higher price of crude.
They do have a strategic reserve.
>> Yeah. It's at its lowest levels in many years.
You could be cynical and say it's election engineering in terms of trying to get votes in the last round of midterm elections but the longer term picture for oil is quite bright. We are not producing enough and demand continues to grow. Our petroleum usage continues to be on the rise. So this is where, it's a weird set up where energy producers are being basically told by shareholders, don't increase production.
But the price continues to rise so it is a sweet spot to be in right now as a producer.
>> Is that the biggest risk right now is it more of a risk of a very hard landing which could impact the crude market?
>> Near term, that would certainly be an issue but I say hard landing, it's not consensus at all. Many people are still in the camp that we are going to see no landing and just keep driving on.
If we see that hard landing scenario, oil will go lower as it has traditionally done, but there is a realm of possibilities about what might play out.
>> Let's take another question from the audience.
We've got plenty coming in four Michael Craig.
Thoughts on AI right now as hype cycle dies down?
you touch on it a few times but obviously there was an explosion of interest in the spring which drove names like Nvidia higher.
I feel it right now it's not enough for company to say, hey, we are doing AI stuff.
Companies were just throwing it out in past quarters.
>> There are a few things.
One, there are different ways of playing AI. It's companies that are re-jeering their business models around it that are going to be able to drive down unit labour costs and make more money and have more margin. That's one way of thinking about it. What companies are best set up to incorporate AI into their business practices.
There are some who have a lock on a particular type of processor. And then companies that are delivering it, like the Microsoft of the world that are able to deliver the goods to work words.
You gotta pick your price.
If you bought Amazon at the highs of the 2000s, you lost 95% of your money before it became a multitrillion dollar stock so you do need to be mindful of valuations. I would say that historically speaking, market sense of massively overhyped new kinds of transformative technology in the near term and when they forget about it to the price rips higher and then collapses and markets forget about it as it continues on over the next 20 years.
So I think AI will follow a similar trajectory.
Maybe Nvidia will stay high for the next five years.
But if I am thinking of investing for the next 10 or 15 years, this is where I want to be, okay, where is the right price that I want to pay and believing in that cycle and if you're correct, it will return handsomer terms. That's the way I would think about it. But if you are trading around the next 90 days, that's a whole other question.
You need to be able to differentiate the two in the space.
>> Were almost no time for questions. I will squeeze one more in now. This is a big one in terms of we talked at the start of the show about thoughts of the beginning of the year. The idea was that China would be off to the races after the lifting of the COVID restrictions. How worried should we be about a slowing Chinese economy?
>> A few things on that.
It was right for couple of months and then rapidly fizzled out.
You have to understand how much damage to the average person was incurred to COVID lockdowns and heavy-handed governments and assault on industry.
so in China, there's a few things. One, I don't think we will see a precipitous collapse anytime soon. But China over the 2020s might look something like Japan of the 1990s were there has been overinvestmentin infrastructure. It takes a long time to absorb that introduction to the economy. And there isn't really any sources of investment opportunities there and you got excessive production versus demand.
Essentially, China needs to transfer wealth from government, local governments for the household sector. They don't have enough domestic consumption to maintain local growth rates. So long story show, it's probably dead money. Stocks are trading at about 1/3 of their valuation.
It's already someone pricing. In terms of additional stress to the world, it's probably a deflationary source of impulse due to weak growth and it's kind of going to go nowhere until you see policy just to the current realities they are facing.
>> Always an insightful conversation. I look forward to the next one.
>> My pleasure.
>> Our thanks to Michael Craig, head of asset allocation at TD Asset Management.
As always at home, do your own research before making any investment decision.
Stay tuned for tomorrow's show. We will have a discussion about economics, all things related, with Rannella Billy-Ochieng', Senior economist at TD.
You can get a head start with your questions for the show, just email moneytalklive@td.com. That's all the time we have the show today.
thanks for watching. We will see you tomorrow.
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