Print Transcript
[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 going to discuss what investors need to keep in mind as we approach 2024. TD Asset Management Michael Craig joins us.
MoneyTalk's Anthony Okolie is going to take us to the latest Canadian inflation report and what it may mean for rates.
And in today's a burqa education segment, Hiren Amin is going to show us where you can find market reports on the 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 we get our guest of the day, let's get you an update on the markets. Got some green on the screen on both they and Wall Street. We will start here at home with the TSX Composite Index.
American benchmark crude up another 2% today, just shy of 74 bucks per barrel.
Gotta hundred 94 points on the screen to the upside for the TSX, that's good for a gain of almost a full percent.
I noticed as I sifted through some of the movers that the lumber plays like Canfor and West Fraser Timber are getting a pretty healthy bid today. At 110 bucks and change, West Frasers up more than 7%. Also seeing some of the gold-mining gains to the upside today.
Not quite as strongly as the lumber plays by Kinross up 2 1/2%, eight bucks and $0.30 per share. South of the border, I want to check in on that broader read of the American market, the S&P 500, I screen through the names. It's a bit of a mixed bag in terms of the movers to the upside and downside but you have 18 points on the table in the green or about 1/3 of a percent. The tech heavy NASDAQ, I want to see how the tech plays are fairing against the broader market. A little bit stronger, nothing too dramatic. 77 points for the NASDAQ, up about half a percent.
Carvana, an online auto dealer gaining some interest today. At 58 bucks per share, a lot of interest in the past several weeks, it's up another 4%. And that is your market update.
Markets are betting on rate cuts next year as inflation continues to come down closer to Target levels, but of course today's Canadian CPI report did show it may be a choppy Road ahead to get us towards 2%.
Joining us now with what investors need to be keeping in mind for the new year is Michael Craig, Managing Director and head of asset allocation and derivatives at TD Asset Management. Great to have you back.
>> Thanks for having me.
>> It has been a year dominated with combinations about the cost of living, about central banks, will they or won't they. As we head into 2024, obviously we are not done with that story but surely there are a few other things to keep in mind. What are you thinking about?
>> In many ways, this is the end of the Santa Claus rally.
Markets are pretty shut down now for the year. Lots of people are taking time off.
As we get into next year, I think the disinflation area theme continues. We can expect in any given month to get the print that is higher than a citation for the peak of inflation was June 2022. I would expect to see that continue to go lower next year as the cost of living hampers people spending and peoples demand gets destroyed as they are not able to spend as much as they were previously.
>> Has that story continues to play itself out, can I then, can the audience to sit back, say there's nothing to worry about, inflation is coming back down to the 2% target, it will get there eventually.
Sunny days ahead. There's always things to worry about.
>> It was a pretty stiff dose of medicine to get us there.
I would say that when we reflect on this period of time, we probably didn't need as much hikes as we did, but what happened is you had both, you had central banks fighting with governments, if you will.
Governments continue to have excessive fiscal policy Andrew inflation far higher than it needed to be post-pandemic, and therefore, this is going to lead to some challenges next year as we see inflation fall rapidly and we are stuck it's still very restrictive levels of inflation. I don't think the market is incorrect in thinking about cuts next year.
And I think it's been our view for some time that timing these things is a bit of a bug's game, totally frankly. The expectations for cuts throughout this year has been quite all over the place.
The market was expecting massive cuts last June after various US regional banks fell, but I would say that when cuts come, it will be fairly sharp. I don't think he'll be a trimming here and there. I think it's going to be a pretty sharp cutting cycle as we start to deal with an economy that just can operate at these levels.
>> We have seen a pretty healthy rally since October for a lot of the main benchmark indices. Is the sense there that they are pricing in all of that or could we get further runs in equities next year if all of that plays out?
>> Certainly the tape is pretty strong right now and it's hard to fight that tape. The market is priced for perfection, if you will. I think the earnings story in the US next year is awesome. But if I put that aside for a minute, we have been basically in a trading range for two years now and so from a technical perspective, breaking out of that rain can be quite powerful. So I would say that we are not super bullish at this point. We are fairly balanced in our mix.
Bonds had a great run, stocks of had a great run, cash is paying a lot less because it's believed the rate cuts are coming. For us, we have increased our liquidity, increased our ability to make rapid decisions and I think that there is a wide array of kind of outcomes can happen in the first half of next year.
Our approach is not to say this is what the market is doing, it's, these are the possible paths it could take and what's our plan under each scenario.
>> When I think back on the air we've had so far and perhaps the S&P 500, definitely the NASDAQ, performed a lot better than a lot of people thought heading into the year, if you picked the right seven names, the Magnificent Seven, then you're smiling. If you didn't pick those names, maybe you feel you been on hold and waiting. We see a bit more bread to?
>> There has been in this recent rally, the breadth has picked up.
Small caps, for example, hit 52-week lows a couple ones ago, another heading 52-week highs, quickest reversal since I've been alive. In Europe, it's basically almost D industrializing right now. The PMI is terrible. Germany is in a tough spot. But European equities have had a great run.
I think this rally has been abrupt.
I think a lot of this is been client sitting on excess cash piling into the market. You're starting to see in the US money market funds starting to lose assets which is a good sign that people are starting to reallocate the stock markets.
You have people saying they don't want to pay what it's worth so you been seeing companies that have been left in the dust this year but catching a bit in this last quarter.
>> Let's talk about that because it was a good run starting in October when we got up to that 5% on the 10 year treasury yield, started coming down the other side of it. A lot of people are wondering what is to come, have I missed the run? They saw a bit of a run, they are wondering what 2024 will be.
>> I would say I was surprised by hitting 5%. I think many participants were, and so part of this rally has been a function of us being too high and yields in the first place. But looking at the fixed income market, it's come a long way. A period of celebration consolidation would be a healthy.
So it goes nowhere, no big deal. You're still getting relatively good income. I would say real interest rates, if you take a Canada government bond or US treasuries, for example, they are trading at 4% right now. If we take into account market limitations from inflation over the next 10 years and get the difference of that, you're getting real yields still above water 1/2%. That's still high.
I would expect them to trade at a 0 to 1% range on the long term. So my sense is as we sit here a year from now it will have been a pretty good year in terms of again the backdrop is cuts are likely coming, probably going to get more than the Fed is talking about and inflation is coming off.
The only thing affecting inflation now as rents and that's if you look at real rents online, Zillah, rents are deflating as well.
Bonds are going to become more attractive as we head into 24.
>> What could trip us up next year that perhaps we aren't putting a spotlight on radio?
>> I would say there's two ways to answer the question.
On the bullish side, the known unknown is that market participants, myself included, use a lot of Imperial analysis to try to understand the future. I would a lot of analysis will lead you to, like yield curves inverted, credit is, bank credit is becoming less available, your seeing stress in auto finance. But you have to be open to the realization that this could just be a normalization from a very bizarre period of time in our lives where we went through a global pandemic, and epic bout of monetary stimulus followed by an epic bout of inflation and we're back to kind of square one, and ultimately that it's the soft landing scenario. And I think that if there's one thing I've learned this year, what keeps you kind of seeing the and employed in this business is a huge amount of humility, knowing that we have a view on the world but that might often, things happen. Like AI this year.
A lot of strategists this year that were bullish were not saying that it was AI but really was AI coming in on the prime time that has driven the market this year. No one called that. On the side words like things to watch for, is the kind of leg monetary policy operates in an unknown but very lagged pace.
People are saying that mortgage prices are high, and prices are still materially higher than there were a couple of years ago.
And we're starting to go into a retrenchment which ultimately does lead to a recession. These are the two angles where I would say there is a not so immaterial election coming in the US next year and right now, it's a coin toss between the two incumbents.
That also creates a tremendous amount of uncertainty so I would say there's a few things, I wouldn't say it's all smooth sailing, I would also say the description of outcomes is wide on the positive and the negative side.
>> We will get back to your questions for Michael Craig in 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.
IT services provider Accenture's says clients are getting cautious when it comes to tech infrastructure spending. The Company is forecasting sales well below analyst expectations for the coming quarter. They are citing economic uncertainty weighing on the sector. All that said, Accenture does expect clients to ramp up their AI ambitions next year.
The aircraft Manufacturing industry closing out there was some sizable new orders.
German Carrier Lufthansa says it's buying as many 200 planes from Airbus and Boeing and deals that are valued at a total of $9 billion. The deals add to an order book for both Manufacturers that will keep them busy for the rest of the decade.
We have Apple pushing pause on the sales of some of it smart watches right before the holidays. The tech giant is embroiled in a patent dispute over technology that's linked to the watches blood oxygen feature.
As a result, Apple is halting sales of the Series 9 and Ultra 2 smartwatches.
The other models are not affected. We bought Apple right now flat with a little bit of green on the screen. A quick check in on Bay and Wall Street. The TSX Composite Index, we've got prices of crude further to the upside today.
We'll be generous and rounded up, 200 points on the table to the upside for the TSX, almost a full percent. South of the border, we have agreed on the screen, not quite as firm as we have your own Bay Street but we've got the S&P 500 up 17 point, a little more than 1/3 of a percent.
Okay, we are back with Michael Craig, head of asset allocation at TD Asset Management, taking your questions about asset allocation.
First question here. Given our high household debt levels, should we be worried about the Impact of upcoming mortgage renewals? By hour, I take this to me Canada.
>> Yeah, I mean, sure, if your household costs go up 1500 or $2000 a month, that's weighty. I think the Bank of Canada is well aware of this issue and as much they talk very tough on inflation which is their primary mandate, financial instability is also on their mind. It's where it's not so much banks being concerned about it but it is where you have weaknesses in the mortgage market?
It's a bit of a cottage industry now in terms of rentals and what have you. You could see some stress in that grey market, if you will.
What is a mean? It means that rates here are too high and ultimately we are going to see lower rates in Canada because I don't think the economy, by the way, 1/3 of houses are owned outright so the stress is very cute. It's not broad-based, it's very acute. My senses this is why aggregate demand falls, because we have less money to spend.
There is a high probability path that you see inflation come down sharply and 24.
>> Let's talk about that path because he talked about it a bit off the top because I guess the conventional wisdom heading into the rate hiking cycle is going up in 25 basis point increments is going to shock things and they needed to.
Could they get aggressive if things turn on them?
>> Housing, look, we live in a very much credit fuelled world. We buy, many people use their credit card to live off and credit expansion requires asset backing, and generally speaking, that's residential real estate.
If prices fall precipitously, 10% correction, we get back to COVID levels, probably not long-term, but if you see a real material fall in house prices, that will lead to a credit crunch whereby credit really dries up because the asset you were using to finance your lifestyle is now worth materially less.
The banquet, and this is what drove the US to QE a decade ago or more than a decade ago. You want prices to moderate, you want affordability, but you can't have it all.
You don't get housing to be very, very affordable without having a deep recession. And so it just the challenging trade-off that the bank is facing right now and ultimately the government is facing so to me it's the policy outcome from this will be fascinating and will be interesting to see which side gives but it will be a source of tremendous uncertainty in our economy into 24 and 25. We've got a few years of these coming.
>> Ultra 2 another audience question about the stock market.
Do you expect this Rally to last? Is it worth getting out of A GIC early to get into stocks now? You're on the platform we cannot give direct investing advice but we can talk about the rally and the fact that people are starting to get out of cash instruments.
>> This is the old adage.
I will say first of all that GIC's are very useful tool when you've got cash that you're there for short-term needs and it needs to be invested, great.
If you a purchase coming up in a few years, I GIC is a great insurance he is.
For those who are older or not working anymore, sometimes GICs, just know you have that certainty makes a ton of sense.
For this were looking to build wealth, more often than not, GICs don't keep up with inflation.
They are certainly not going to get you to your investment goals.
Is this the right time? I have no idea. As a he keep going up? Beats me. But I would say for a bigger term perspective to the viewer, why are you in GICs in the first place if it's longer-term money? If it is longer-term money, I don't think people realize, having your investment go down and 1/4 doesn't feel great. Not have enough money when you needed to retire is a lot worse and I think people need to shift their focus on what really risk is to not having enough to send your kid to school, to retire, to go on a trip, not about, oh my God, I didn't time the market perfectly.
I'm a professional investor. Let me tell you, market timing is the least of things, we are not hired here to do that.
We are here to create long-term wealth and I think investors might need to reset what they are concerned with him think about compounding money over time. It's not always super exciting but that's ultimately the way to long-term wealth.
>> Have we become too short-term in the last couple of years?
>> Totally. It's gotten worse because we are bombarded by information. When I started out, we didn't have the access that we do now. When it was in-your-face all day, you and think about it.
>> The soccer game, what I have for dinner.
>> Now, I check my smart phone and look at my portfolio, oh my gosh, my portfolio is down, should I do something? It's quite an unhealthy, outside of those who are actively trading which is a small slice, I think it's a fairly unhealthy way to think about money because it's painful. We feel pain or euphoria when prices change. Just the way we are wired. Sometimes you just need to step back and I wouldn't say forget about it, but look at it like you would go, you go for an annual checkup.
You should think about the same way when you're thinking about your personal will and finances. It's a better way to think about money.
>> There is another question here.
Discontinuation with the stock market rally we've seen. Are there sectors I should avoid? We cannot give direct advice on the platform but this is interesting.
You talked about the market breadth of widening out. Are there certain sectors that become more vulnerable?
>> It's hard to answer that question because we look at it in terms of distillation of outcomes.
Stable utility is haven't really taken part in the rallies this year. If you are looking for a cyclical left… While it has run a lot you should have a, we certainly have investments in technology.
It's not a, in terms of I've got to stay away, it's a hard question to answer because it really depends on how things play out next year which again goes into your what do you think the market is going to do?
It's what's your view on the market and then you make choices.
>> As always, make sure you do your own research before making any investment decisions.
we are going to get back to your questions for Michael Craig on asset allocation in 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 our educational segment of the day.
If you are looking to do more research on the markets, WebBroker has tools which can help.
Joining us now with more, Hiren Amin, Senior client education instructor at TD Direct Investing. Always great to see you, my friend. Let's talk about in-depth analysis of the markets and where we can find in WebBroker.
>> Let's go for it, Greg. Great to be back again.
When it comes to investing, a lot of investors sometimes don't know where to get started. As a plethora of information available out there but there is also a one-stop shop solution you can find a WebBroker and that's what we're gonna show you here today. We are going to go to the report section. On WebBroker, and then go to the research cabin under the markets: we can see there's a section called reports.
So within here, you're going to find essentially a broader read on the market, on specific sectors and industries, you will find pretty much everything you want to get a pulse on where the market is or where the industries and sectors are. Now, there are a lot of reports in here so I'm not going to bore everyone with every single one of these but there are a couple of that I would like to highlight that I think really speak well to getting a sense of the market. One of the ones I want to point out is we use top-rated research firms, MorningStar, quant research, Argus, there some that we use the will find over here. Argus is one that I'm going to point to. They have a really good one. This one that I really like looking at is the day ahead report. If I open this it will open a PDF file. Let's expand this. This is fantastic. It's usually published after the market Anthony gives you a forward-looking recap first of all and what happened during the day and then looking into the next day or week. Numbers coming through on indexes, some of the commodities, how they are trading. A key economic events that are going to be published over the next couple of days, those numbers are presented to you over here.
Along with that, they give you a global perspective on how different markets are trading around the world and then we also have, if I scroll a little bit further down here, we have a Canadian section as well here that gives you insights into our markets base over here.
It's a great, short read to get a pulse on the day-to-day things.
If I close this out, the other one I wanted to go up to you is MorningStar's quarterly Outlook report. This is a fantastic one because it kind of looks at the overall perspective on all the industries and sectors. The viewer was asking, where we finding breadth? That's what you're talking about. This may be one place you might want to look at to get that information.
They do a great breakdown of the sectors and give you a quick inflation report, the key economic data and they do kind of a side by side on a global look and then break it down and give you where the valuation seemed to be in all the different sectors. This is one of my favourite ones that I also look at as well.
The last thing I will mention on this point is you can get some of these reports emailed directly to your inbox. If you want to do that, go to the inbox button here, click on the news and research tab, down here on research, check this box off and then you can choose which of the reports, not all of them are available but the majority of them are going to show up to be emailed to you so you can choose which ones to be sent your inbox. You can say you want this one and let's say you want and additional one, then you can choose a different report and have an email set up and sent off to us.
>> A lot of useful places for people to take a look through a broker and look at those reports.
I noticed as you are going through the pages, there were some buckets full of names. What if one catches my eye I want more specific reports on that stock? How do I get there?
>> Absolutely. The way you're going to do that is you're going to put the ticker symbol of what you're interested in. We were chatting about Apple and their watch the let's say we want to get some news on Apple. I'm going to load up Apple and by symbol box. Once it brings you to the stock profile, you're going to go to the report section over here. What you're gonna find within this report section is specific to the company. This is where you gonna find what the research analysts are basically coming up with those different ratings that they give on these companies in different price targets that they attribute to them and then just commentary, the thesis behind why they gave this. This will be a little bit different than just looking at numbers and buy and sell at this or that price, this gives you the why behind it.
These reports are good ones to read, the Argus analyst report. This does a great job of giving you the ratings with and they go into a spiel about why, presenting a case for why they believe this rating should be the way it is.
The other report that I will also say as a favourite of mine on individual stocks is the Thomson Reuters document. This is more of a fundamental breakdown. Go through some of the financial statements and give some of those ratios and disappear comparison for you and stacks up against the benchmarks. Another quick one to look at individual stocks there and that's how you do it.
>> Great stuff as always. Thanks for that.
>> My pleasure.
>> Hiren Amin, senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
We are back with Michael Craig, taking your questions about asset allocation.
Let's take a look at the next one here.
Come get your guest to talk with preparing for the US election? This is our regular viewer and question contributor, Jeff.
Thanks for that, Jeff.
>> Is not going to be an easy analysis.
I'd say you have to look at it through three different prisms. One is that Biden wins. If Biden is able to pull it out it's unlikely Democrat-controlled Senate, so he'll be a lame-duck and will likely spend his next four years in foreign policy but you won't get any big bills.
Market will probably be neutral, slightly bullish.
Trump wins, he will likely, their whole control of the control both parts of Congress, the house and Senate, and then you have to assume that job number one will be tax cuts and tarriffs.
All the people who are betting I would be very cautious because things could change but this time around I'm more comfortable thinking about that it's more small-cap mid-cap US domestic focused equity stocks that are really holding up the US economy because their competition is going to be facing higher prices.
Probe on market perspective, tariffs are not terribly great if you have a one-off shot for inflation.
It will lead to a tighter job market in the US but affect consumption as well.
It's a bit of a challenge.
If the bond market is shown to be having extreme spending, if what happened in the UK happens here could be painful for the bond market. Then you have a flipside.
You have to think that other countries might counter those so large US does not do great probably in the international market. A lot of volatility with the term presidency. And in the third outcome, that is 1/3 candidate, I don't think 1/3 party candidate has much of the hope for winning but there is, you can see the kind of angst with noon and the Democratic Party to find another candidate, they were rapidly running out of time.
This is local ability. It depends on Canada coming forth. On the Republican side, if Nikki Haley wins the nomination, I think she wins the election.
I think she would be premarket. A couple of scenarios. I think leading into the election you're going to have a lot of stress in the market because of the uncertainty. Our work historically has shown that outside of recessions there are usually rallies after elections but there will certainly be a lot of ways to think about it but it will I think this election is going to matter a lot, much more than previous ones because we are getting to, hopefully this all gets resolved by 2028 where society starts to align again around a certain direction and I think we are anywhere near close to it but it's part of the process of alignment of interests. I think this is the last step whereby definition in the later 2020s you will have new leadership in both parties.
>> Next question broadens it out to the planet. What does Michael think of the current geopolitical mess and will that affect markets?
>> So on the two wars that are happening right now, the bigger story is they haven't had a huge impact directly on the markets. Initially there was a shock with what's happening in Israel and in Gaza but those have all been… Oil is materially lower, that was preinvasion. Where there is stress building which I don't think is on people's radars is our ability to ship commodities is becoming impaired.
There are pipelines that aren't working.
Russia is trying to sell indirectly to India and China and more recently was happening in the Middle East, shipping lanes are becoming obstructed because of the threat of attack. This is very problematic. It will create scarcity in the commodity world. The outcome is probably want to have some commodities in your portfolio. That's where the stress is. We can spend hours on what exactly, but I think those two wars are kind of front and centre and the outcome is creating stress on the commodity site. The last thing I would say is that it does continue to ensure that there is a bid for defence companies because we've had this nice peace dividend since 1991. I think the Delta now on a multiyear basis starts to go the other way where there is more spending on defence. That is a long-term trend but you just have to pick your spot.
>> We will get back your questions for Michael Craig on asset allocation 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 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.
The battle against inflation has been front and centre all year. We have been working our way down. We got new numbers out of Canada but we sort of stalled out November.
Anthony Okolie has been digging into all the numbers and what TD Economics expects out of this Canadian inflation print when it comes to the future rate. What are we seeing there?
>> It's a bit of a mixed picture for the Canadian inflation data in November. I think the key take away is on the headline inflation.
There's little progress month over month and we continue to see service inflation strong in November as well. CPI stayed at 3.1% year-over-year, that matched what we saw in October, came in slightly above expectations as well. A core inflation at 3.25% on an annual basis. As the chart shows, headline and core inflation have been trending lower since June 2022 where it peaked. If you look at the Bank of Canada yearly inflation measures, the so-called true and median core rates were unchanged, averaging 3.45% year-over-year.
The good news is that when we look at the three month on an annualized pace, it actually felt it 3.2% for CPI median and 2.6% for cpi trim measures and TD Economics suggest that that data suggest that year-over-year pace of inflation should be heading lower over the coming months.
When we break down the data bike category, one of the things that pop so it is grocery prices continuing to rise but at a slower pace. We saw broad-based drops across grocery prices which slowed for 1/5 straight month. Service prices remain elevated in November, that match October space as well. Stats Canada said the price for travel tours jump 26% year-over-year in November due to events held in destinations at cities at the US.
Offsetting that spike in travel and tourism, Canadians paid more for cell phone plans in November to the tune of about 22% lower year-over-year. That was part of Black Friday promotions that we saw across the industry. Now the heavily weighted shelter component did take a small step in the right direction, cooling 25% year-over-year pace in November.
That's down slightly from the pace we saw in October. Canadians continue to feel the impact of higher prices, mortgage costs and rent which are the highest contributors year-over-year rise in November. Looking ahead, TD Economics sees weaker demand in the economy next year and that should continue to weigh on inflationary pressures in coming months.
>> You just illustrated that there is the headline number, always lots of things going on underneath and TD Economics looks at what's going on underneath. Has it changed her mind at all about when rates are coming?
>> They are steadfast and when they think rate cuts are coming.
It might take a bit more time for inflation to come down in Canada but TD Economics believes that the Bank of Canada will see enough progress in inflation by the spring to start cutting interest rates. That should help growth pickup in the latter part of next year and improve real GDP growth to 1.5% in 2025.
>> Interesting set. Thanks for breaking it down.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
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. This is the heat map function giving us a view of the market movers.
Let's start with the TSX 60. We are screaming through by Price and volume. Got a fair amount of green on the screen.
Let's start with what's not positive.
Cameco, is been a pretty good year for the uranium play.
Seeing a bit of giveback today for Cameco.
It's down about 3%. The rest of the energy bucket showing some strength. The financials also in positive territory.
And the material sector, those of the Big Three when it comes to the top line number for the TSX Composite Index. You get them acting together, Shopify up a little more than 2% and you can understand why we got the TSX Composite Index right now up about a full percent. South of the border, we are adding to the gains of recent days not quite as firmly, more of a mixed bag, including even among the chipmakers, AMD is getting a modest bid today, its rival and video which has done very well this year off the back of AI is down a little shy of 2%. Pfizer getting a bit of a bid.
We can play this game of up and down but you can see what I'm talking about, it's a mixed bag at their for the S&P 500.
You can get more information on the TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now with Michael Craig from TD Asset Management. Let's get back to your questions.
The viewer is wondering, what maturity of bond funds should do the best over the next year? If we are talking about central bank rate cuts and fixed income, how should they be thinking about duration?
>> It all depends on what your financial circumstances are but from our perspective, rate cuts are likely coming.
Who knows? Maybe they don't. But let's say they do. Though shorter duration funds are funds that have lower term maturity.
You see a big yield move but they don't get a big price move and you have the issue of reinvestment risk as those come down.
Our approach has been to use kind of more of a universe approach call it which is a duration of eight or nine years now let's call it 15. I think that's really going to get, again, you're going to have some credit in their, but as yields fall, you have much more sensitivity to changes in yields. Those are also the funds that did quite poorly in October this year. At one point this year they were down for another up six on the years they've had a good run.
>> One last question here and this is sort of a crystal ball in for you. We talked a lot about central banks rate cuts. Someone wants to know, how many rate cuts should we expect for 2024? Add them up!
It's an impossible question.
>> As long as this is included in the outtakes of 2024 things that were totally wrong… The market is looking for six by next January.
I think we are gonna see North hundred and 50 basis points of cuts in the next 12 months and the basis for that is that when I look at, when you look at short-term interest rates for history, they usually, this is been a very sharp hiking cycle.
Usually it's a lot slower. And when they do start cutting, they usually wait too long. I would be shocked to see no cuts in the first quarter and then when they start cutting is far more severe than people expect.
I don't think it's out of the possible Odysseus 200 lower at this time next year.
Before I let you go, Michael, to round back up to the top, but forward-looking, but I wanted to ask you, what surprised you the most this year? We ended this year with a certain idea what was going to happen and then life gets in the way.
You make a plan and then life gets in the way.
>> The biggest I would say for me the biggest surprise was so in March we had the second and third largest regional lenders buckle and we saw the 21st century version of a bank run, people are texting each other and pulling the money out.
That was very dire.
I guess what surprised me is I even struggled now to say if that happened, the market was up 20% in June.
To me, that was a wonder was like, that's different.
You step back and you say, there are, the Fed didn't do anything to interest rates but they expanded balance sheets materially at that time. We get into these late cycle environments which only happen, and a typical investment career, you see it maybe half a dozen times, really weird things can happen with a slight change in liquidity because it's late cycle. I didn't see that one coming.
It was a euphoric move.
Used to be stocks go up 60%, that's crazy, but that's exactly what happened.
>> It's been a fascinating year. We really appreciate all the time you given us over the year. I look forward to more conversations and 24.
>> My pleasure. Happy new year. See you on the other side.
>> Our thanks to Michael Craig, Managing Director and head of asset allocation and derivatives at TD Asset Management.
Always be sure to do your own research before you make any investment decisions.
Stay tuned for tomorrow show. Jacky He, VP, portfolio research at TD Asset Management will be our guest, taking your questions about consumer discretionary stocks. You can send us questions in ahead of time, just email moneytalklive@td.com.
That's all the time we have for 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 going to discuss what investors need to keep in mind as we approach 2024. TD Asset Management Michael Craig joins us.
MoneyTalk's Anthony Okolie is going to take us to the latest Canadian inflation report and what it may mean for rates.
And in today's a burqa education segment, Hiren Amin is going to show us where you can find market reports on the 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 we get our guest of the day, let's get you an update on the markets. Got some green on the screen on both they and Wall Street. We will start here at home with the TSX Composite Index.
American benchmark crude up another 2% today, just shy of 74 bucks per barrel.
Gotta hundred 94 points on the screen to the upside for the TSX, that's good for a gain of almost a full percent.
I noticed as I sifted through some of the movers that the lumber plays like Canfor and West Fraser Timber are getting a pretty healthy bid today. At 110 bucks and change, West Frasers up more than 7%. Also seeing some of the gold-mining gains to the upside today.
Not quite as strongly as the lumber plays by Kinross up 2 1/2%, eight bucks and $0.30 per share. South of the border, I want to check in on that broader read of the American market, the S&P 500, I screen through the names. It's a bit of a mixed bag in terms of the movers to the upside and downside but you have 18 points on the table in the green or about 1/3 of a percent. The tech heavy NASDAQ, I want to see how the tech plays are fairing against the broader market. A little bit stronger, nothing too dramatic. 77 points for the NASDAQ, up about half a percent.
Carvana, an online auto dealer gaining some interest today. At 58 bucks per share, a lot of interest in the past several weeks, it's up another 4%. And that is your market update.
Markets are betting on rate cuts next year as inflation continues to come down closer to Target levels, but of course today's Canadian CPI report did show it may be a choppy Road ahead to get us towards 2%.
Joining us now with what investors need to be keeping in mind for the new year is Michael Craig, Managing Director and head of asset allocation and derivatives at TD Asset Management. Great to have you back.
>> Thanks for having me.
>> It has been a year dominated with combinations about the cost of living, about central banks, will they or won't they. As we head into 2024, obviously we are not done with that story but surely there are a few other things to keep in mind. What are you thinking about?
>> In many ways, this is the end of the Santa Claus rally.
Markets are pretty shut down now for the year. Lots of people are taking time off.
As we get into next year, I think the disinflation area theme continues. We can expect in any given month to get the print that is higher than a citation for the peak of inflation was June 2022. I would expect to see that continue to go lower next year as the cost of living hampers people spending and peoples demand gets destroyed as they are not able to spend as much as they were previously.
>> Has that story continues to play itself out, can I then, can the audience to sit back, say there's nothing to worry about, inflation is coming back down to the 2% target, it will get there eventually.
Sunny days ahead. There's always things to worry about.
>> It was a pretty stiff dose of medicine to get us there.
I would say that when we reflect on this period of time, we probably didn't need as much hikes as we did, but what happened is you had both, you had central banks fighting with governments, if you will.
Governments continue to have excessive fiscal policy Andrew inflation far higher than it needed to be post-pandemic, and therefore, this is going to lead to some challenges next year as we see inflation fall rapidly and we are stuck it's still very restrictive levels of inflation. I don't think the market is incorrect in thinking about cuts next year.
And I think it's been our view for some time that timing these things is a bit of a bug's game, totally frankly. The expectations for cuts throughout this year has been quite all over the place.
The market was expecting massive cuts last June after various US regional banks fell, but I would say that when cuts come, it will be fairly sharp. I don't think he'll be a trimming here and there. I think it's going to be a pretty sharp cutting cycle as we start to deal with an economy that just can operate at these levels.
>> We have seen a pretty healthy rally since October for a lot of the main benchmark indices. Is the sense there that they are pricing in all of that or could we get further runs in equities next year if all of that plays out?
>> Certainly the tape is pretty strong right now and it's hard to fight that tape. The market is priced for perfection, if you will. I think the earnings story in the US next year is awesome. But if I put that aside for a minute, we have been basically in a trading range for two years now and so from a technical perspective, breaking out of that rain can be quite powerful. So I would say that we are not super bullish at this point. We are fairly balanced in our mix.
Bonds had a great run, stocks of had a great run, cash is paying a lot less because it's believed the rate cuts are coming. For us, we have increased our liquidity, increased our ability to make rapid decisions and I think that there is a wide array of kind of outcomes can happen in the first half of next year.
Our approach is not to say this is what the market is doing, it's, these are the possible paths it could take and what's our plan under each scenario.
>> When I think back on the air we've had so far and perhaps the S&P 500, definitely the NASDAQ, performed a lot better than a lot of people thought heading into the year, if you picked the right seven names, the Magnificent Seven, then you're smiling. If you didn't pick those names, maybe you feel you been on hold and waiting. We see a bit more bread to?
>> There has been in this recent rally, the breadth has picked up.
Small caps, for example, hit 52-week lows a couple ones ago, another heading 52-week highs, quickest reversal since I've been alive. In Europe, it's basically almost D industrializing right now. The PMI is terrible. Germany is in a tough spot. But European equities have had a great run.
I think this rally has been abrupt.
I think a lot of this is been client sitting on excess cash piling into the market. You're starting to see in the US money market funds starting to lose assets which is a good sign that people are starting to reallocate the stock markets.
You have people saying they don't want to pay what it's worth so you been seeing companies that have been left in the dust this year but catching a bit in this last quarter.
>> Let's talk about that because it was a good run starting in October when we got up to that 5% on the 10 year treasury yield, started coming down the other side of it. A lot of people are wondering what is to come, have I missed the run? They saw a bit of a run, they are wondering what 2024 will be.
>> I would say I was surprised by hitting 5%. I think many participants were, and so part of this rally has been a function of us being too high and yields in the first place. But looking at the fixed income market, it's come a long way. A period of celebration consolidation would be a healthy.
So it goes nowhere, no big deal. You're still getting relatively good income. I would say real interest rates, if you take a Canada government bond or US treasuries, for example, they are trading at 4% right now. If we take into account market limitations from inflation over the next 10 years and get the difference of that, you're getting real yields still above water 1/2%. That's still high.
I would expect them to trade at a 0 to 1% range on the long term. So my sense is as we sit here a year from now it will have been a pretty good year in terms of again the backdrop is cuts are likely coming, probably going to get more than the Fed is talking about and inflation is coming off.
The only thing affecting inflation now as rents and that's if you look at real rents online, Zillah, rents are deflating as well.
Bonds are going to become more attractive as we head into 24.
>> What could trip us up next year that perhaps we aren't putting a spotlight on radio?
>> I would say there's two ways to answer the question.
On the bullish side, the known unknown is that market participants, myself included, use a lot of Imperial analysis to try to understand the future. I would a lot of analysis will lead you to, like yield curves inverted, credit is, bank credit is becoming less available, your seeing stress in auto finance. But you have to be open to the realization that this could just be a normalization from a very bizarre period of time in our lives where we went through a global pandemic, and epic bout of monetary stimulus followed by an epic bout of inflation and we're back to kind of square one, and ultimately that it's the soft landing scenario. And I think that if there's one thing I've learned this year, what keeps you kind of seeing the and employed in this business is a huge amount of humility, knowing that we have a view on the world but that might often, things happen. Like AI this year.
A lot of strategists this year that were bullish were not saying that it was AI but really was AI coming in on the prime time that has driven the market this year. No one called that. On the side words like things to watch for, is the kind of leg monetary policy operates in an unknown but very lagged pace.
People are saying that mortgage prices are high, and prices are still materially higher than there were a couple of years ago.
And we're starting to go into a retrenchment which ultimately does lead to a recession. These are the two angles where I would say there is a not so immaterial election coming in the US next year and right now, it's a coin toss between the two incumbents.
That also creates a tremendous amount of uncertainty so I would say there's a few things, I wouldn't say it's all smooth sailing, I would also say the description of outcomes is wide on the positive and the negative side.
>> We will get back to your questions for Michael Craig in 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.
IT services provider Accenture's says clients are getting cautious when it comes to tech infrastructure spending. The Company is forecasting sales well below analyst expectations for the coming quarter. They are citing economic uncertainty weighing on the sector. All that said, Accenture does expect clients to ramp up their AI ambitions next year.
The aircraft Manufacturing industry closing out there was some sizable new orders.
German Carrier Lufthansa says it's buying as many 200 planes from Airbus and Boeing and deals that are valued at a total of $9 billion. The deals add to an order book for both Manufacturers that will keep them busy for the rest of the decade.
We have Apple pushing pause on the sales of some of it smart watches right before the holidays. The tech giant is embroiled in a patent dispute over technology that's linked to the watches blood oxygen feature.
As a result, Apple is halting sales of the Series 9 and Ultra 2 smartwatches.
The other models are not affected. We bought Apple right now flat with a little bit of green on the screen. A quick check in on Bay and Wall Street. The TSX Composite Index, we've got prices of crude further to the upside today.
We'll be generous and rounded up, 200 points on the table to the upside for the TSX, almost a full percent. South of the border, we have agreed on the screen, not quite as firm as we have your own Bay Street but we've got the S&P 500 up 17 point, a little more than 1/3 of a percent.
Okay, we are back with Michael Craig, head of asset allocation at TD Asset Management, taking your questions about asset allocation.
First question here. Given our high household debt levels, should we be worried about the Impact of upcoming mortgage renewals? By hour, I take this to me Canada.
>> Yeah, I mean, sure, if your household costs go up 1500 or $2000 a month, that's weighty. I think the Bank of Canada is well aware of this issue and as much they talk very tough on inflation which is their primary mandate, financial instability is also on their mind. It's where it's not so much banks being concerned about it but it is where you have weaknesses in the mortgage market?
It's a bit of a cottage industry now in terms of rentals and what have you. You could see some stress in that grey market, if you will.
What is a mean? It means that rates here are too high and ultimately we are going to see lower rates in Canada because I don't think the economy, by the way, 1/3 of houses are owned outright so the stress is very cute. It's not broad-based, it's very acute. My senses this is why aggregate demand falls, because we have less money to spend.
There is a high probability path that you see inflation come down sharply and 24.
>> Let's talk about that path because he talked about it a bit off the top because I guess the conventional wisdom heading into the rate hiking cycle is going up in 25 basis point increments is going to shock things and they needed to.
Could they get aggressive if things turn on them?
>> Housing, look, we live in a very much credit fuelled world. We buy, many people use their credit card to live off and credit expansion requires asset backing, and generally speaking, that's residential real estate.
If prices fall precipitously, 10% correction, we get back to COVID levels, probably not long-term, but if you see a real material fall in house prices, that will lead to a credit crunch whereby credit really dries up because the asset you were using to finance your lifestyle is now worth materially less.
The banquet, and this is what drove the US to QE a decade ago or more than a decade ago. You want prices to moderate, you want affordability, but you can't have it all.
You don't get housing to be very, very affordable without having a deep recession. And so it just the challenging trade-off that the bank is facing right now and ultimately the government is facing so to me it's the policy outcome from this will be fascinating and will be interesting to see which side gives but it will be a source of tremendous uncertainty in our economy into 24 and 25. We've got a few years of these coming.
>> Ultra 2 another audience question about the stock market.
Do you expect this Rally to last? Is it worth getting out of A GIC early to get into stocks now? You're on the platform we cannot give direct investing advice but we can talk about the rally and the fact that people are starting to get out of cash instruments.
>> This is the old adage.
I will say first of all that GIC's are very useful tool when you've got cash that you're there for short-term needs and it needs to be invested, great.
If you a purchase coming up in a few years, I GIC is a great insurance he is.
For those who are older or not working anymore, sometimes GICs, just know you have that certainty makes a ton of sense.
For this were looking to build wealth, more often than not, GICs don't keep up with inflation.
They are certainly not going to get you to your investment goals.
Is this the right time? I have no idea. As a he keep going up? Beats me. But I would say for a bigger term perspective to the viewer, why are you in GICs in the first place if it's longer-term money? If it is longer-term money, I don't think people realize, having your investment go down and 1/4 doesn't feel great. Not have enough money when you needed to retire is a lot worse and I think people need to shift their focus on what really risk is to not having enough to send your kid to school, to retire, to go on a trip, not about, oh my God, I didn't time the market perfectly.
I'm a professional investor. Let me tell you, market timing is the least of things, we are not hired here to do that.
We are here to create long-term wealth and I think investors might need to reset what they are concerned with him think about compounding money over time. It's not always super exciting but that's ultimately the way to long-term wealth.
>> Have we become too short-term in the last couple of years?
>> Totally. It's gotten worse because we are bombarded by information. When I started out, we didn't have the access that we do now. When it was in-your-face all day, you and think about it.
>> The soccer game, what I have for dinner.
>> Now, I check my smart phone and look at my portfolio, oh my gosh, my portfolio is down, should I do something? It's quite an unhealthy, outside of those who are actively trading which is a small slice, I think it's a fairly unhealthy way to think about money because it's painful. We feel pain or euphoria when prices change. Just the way we are wired. Sometimes you just need to step back and I wouldn't say forget about it, but look at it like you would go, you go for an annual checkup.
You should think about the same way when you're thinking about your personal will and finances. It's a better way to think about money.
>> There is another question here.
Discontinuation with the stock market rally we've seen. Are there sectors I should avoid? We cannot give direct advice on the platform but this is interesting.
You talked about the market breadth of widening out. Are there certain sectors that become more vulnerable?
>> It's hard to answer that question because we look at it in terms of distillation of outcomes.
Stable utility is haven't really taken part in the rallies this year. If you are looking for a cyclical left… While it has run a lot you should have a, we certainly have investments in technology.
It's not a, in terms of I've got to stay away, it's a hard question to answer because it really depends on how things play out next year which again goes into your what do you think the market is going to do?
It's what's your view on the market and then you make choices.
>> As always, make sure you do your own research before making any investment decisions.
we are going to get back to your questions for Michael Craig on asset allocation in 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 our educational segment of the day.
If you are looking to do more research on the markets, WebBroker has tools which can help.
Joining us now with more, Hiren Amin, Senior client education instructor at TD Direct Investing. Always great to see you, my friend. Let's talk about in-depth analysis of the markets and where we can find in WebBroker.
>> Let's go for it, Greg. Great to be back again.
When it comes to investing, a lot of investors sometimes don't know where to get started. As a plethora of information available out there but there is also a one-stop shop solution you can find a WebBroker and that's what we're gonna show you here today. We are going to go to the report section. On WebBroker, and then go to the research cabin under the markets: we can see there's a section called reports.
So within here, you're going to find essentially a broader read on the market, on specific sectors and industries, you will find pretty much everything you want to get a pulse on where the market is or where the industries and sectors are. Now, there are a lot of reports in here so I'm not going to bore everyone with every single one of these but there are a couple of that I would like to highlight that I think really speak well to getting a sense of the market. One of the ones I want to point out is we use top-rated research firms, MorningStar, quant research, Argus, there some that we use the will find over here. Argus is one that I'm going to point to. They have a really good one. This one that I really like looking at is the day ahead report. If I open this it will open a PDF file. Let's expand this. This is fantastic. It's usually published after the market Anthony gives you a forward-looking recap first of all and what happened during the day and then looking into the next day or week. Numbers coming through on indexes, some of the commodities, how they are trading. A key economic events that are going to be published over the next couple of days, those numbers are presented to you over here.
Along with that, they give you a global perspective on how different markets are trading around the world and then we also have, if I scroll a little bit further down here, we have a Canadian section as well here that gives you insights into our markets base over here.
It's a great, short read to get a pulse on the day-to-day things.
If I close this out, the other one I wanted to go up to you is MorningStar's quarterly Outlook report. This is a fantastic one because it kind of looks at the overall perspective on all the industries and sectors. The viewer was asking, where we finding breadth? That's what you're talking about. This may be one place you might want to look at to get that information.
They do a great breakdown of the sectors and give you a quick inflation report, the key economic data and they do kind of a side by side on a global look and then break it down and give you where the valuation seemed to be in all the different sectors. This is one of my favourite ones that I also look at as well.
The last thing I will mention on this point is you can get some of these reports emailed directly to your inbox. If you want to do that, go to the inbox button here, click on the news and research tab, down here on research, check this box off and then you can choose which of the reports, not all of them are available but the majority of them are going to show up to be emailed to you so you can choose which ones to be sent your inbox. You can say you want this one and let's say you want and additional one, then you can choose a different report and have an email set up and sent off to us.
>> A lot of useful places for people to take a look through a broker and look at those reports.
I noticed as you are going through the pages, there were some buckets full of names. What if one catches my eye I want more specific reports on that stock? How do I get there?
>> Absolutely. The way you're going to do that is you're going to put the ticker symbol of what you're interested in. We were chatting about Apple and their watch the let's say we want to get some news on Apple. I'm going to load up Apple and by symbol box. Once it brings you to the stock profile, you're going to go to the report section over here. What you're gonna find within this report section is specific to the company. This is where you gonna find what the research analysts are basically coming up with those different ratings that they give on these companies in different price targets that they attribute to them and then just commentary, the thesis behind why they gave this. This will be a little bit different than just looking at numbers and buy and sell at this or that price, this gives you the why behind it.
These reports are good ones to read, the Argus analyst report. This does a great job of giving you the ratings with and they go into a spiel about why, presenting a case for why they believe this rating should be the way it is.
The other report that I will also say as a favourite of mine on individual stocks is the Thomson Reuters document. This is more of a fundamental breakdown. Go through some of the financial statements and give some of those ratios and disappear comparison for you and stacks up against the benchmarks. Another quick one to look at individual stocks there and that's how you do it.
>> Great stuff as always. Thanks for that.
>> My pleasure.
>> Hiren Amin, senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
We are back with Michael Craig, taking your questions about asset allocation.
Let's take a look at the next one here.
Come get your guest to talk with preparing for the US election? This is our regular viewer and question contributor, Jeff.
Thanks for that, Jeff.
>> Is not going to be an easy analysis.
I'd say you have to look at it through three different prisms. One is that Biden wins. If Biden is able to pull it out it's unlikely Democrat-controlled Senate, so he'll be a lame-duck and will likely spend his next four years in foreign policy but you won't get any big bills.
Market will probably be neutral, slightly bullish.
Trump wins, he will likely, their whole control of the control both parts of Congress, the house and Senate, and then you have to assume that job number one will be tax cuts and tarriffs.
All the people who are betting I would be very cautious because things could change but this time around I'm more comfortable thinking about that it's more small-cap mid-cap US domestic focused equity stocks that are really holding up the US economy because their competition is going to be facing higher prices.
Probe on market perspective, tariffs are not terribly great if you have a one-off shot for inflation.
It will lead to a tighter job market in the US but affect consumption as well.
It's a bit of a challenge.
If the bond market is shown to be having extreme spending, if what happened in the UK happens here could be painful for the bond market. Then you have a flipside.
You have to think that other countries might counter those so large US does not do great probably in the international market. A lot of volatility with the term presidency. And in the third outcome, that is 1/3 candidate, I don't think 1/3 party candidate has much of the hope for winning but there is, you can see the kind of angst with noon and the Democratic Party to find another candidate, they were rapidly running out of time.
This is local ability. It depends on Canada coming forth. On the Republican side, if Nikki Haley wins the nomination, I think she wins the election.
I think she would be premarket. A couple of scenarios. I think leading into the election you're going to have a lot of stress in the market because of the uncertainty. Our work historically has shown that outside of recessions there are usually rallies after elections but there will certainly be a lot of ways to think about it but it will I think this election is going to matter a lot, much more than previous ones because we are getting to, hopefully this all gets resolved by 2028 where society starts to align again around a certain direction and I think we are anywhere near close to it but it's part of the process of alignment of interests. I think this is the last step whereby definition in the later 2020s you will have new leadership in both parties.
>> Next question broadens it out to the planet. What does Michael think of the current geopolitical mess and will that affect markets?
>> So on the two wars that are happening right now, the bigger story is they haven't had a huge impact directly on the markets. Initially there was a shock with what's happening in Israel and in Gaza but those have all been… Oil is materially lower, that was preinvasion. Where there is stress building which I don't think is on people's radars is our ability to ship commodities is becoming impaired.
There are pipelines that aren't working.
Russia is trying to sell indirectly to India and China and more recently was happening in the Middle East, shipping lanes are becoming obstructed because of the threat of attack. This is very problematic. It will create scarcity in the commodity world. The outcome is probably want to have some commodities in your portfolio. That's where the stress is. We can spend hours on what exactly, but I think those two wars are kind of front and centre and the outcome is creating stress on the commodity site. The last thing I would say is that it does continue to ensure that there is a bid for defence companies because we've had this nice peace dividend since 1991. I think the Delta now on a multiyear basis starts to go the other way where there is more spending on defence. That is a long-term trend but you just have to pick your spot.
>> We will get back your questions for Michael Craig on asset allocation 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 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.
The battle against inflation has been front and centre all year. We have been working our way down. We got new numbers out of Canada but we sort of stalled out November.
Anthony Okolie has been digging into all the numbers and what TD Economics expects out of this Canadian inflation print when it comes to the future rate. What are we seeing there?
>> It's a bit of a mixed picture for the Canadian inflation data in November. I think the key take away is on the headline inflation.
There's little progress month over month and we continue to see service inflation strong in November as well. CPI stayed at 3.1% year-over-year, that matched what we saw in October, came in slightly above expectations as well. A core inflation at 3.25% on an annual basis. As the chart shows, headline and core inflation have been trending lower since June 2022 where it peaked. If you look at the Bank of Canada yearly inflation measures, the so-called true and median core rates were unchanged, averaging 3.45% year-over-year.
The good news is that when we look at the three month on an annualized pace, it actually felt it 3.2% for CPI median and 2.6% for cpi trim measures and TD Economics suggest that that data suggest that year-over-year pace of inflation should be heading lower over the coming months.
When we break down the data bike category, one of the things that pop so it is grocery prices continuing to rise but at a slower pace. We saw broad-based drops across grocery prices which slowed for 1/5 straight month. Service prices remain elevated in November, that match October space as well. Stats Canada said the price for travel tours jump 26% year-over-year in November due to events held in destinations at cities at the US.
Offsetting that spike in travel and tourism, Canadians paid more for cell phone plans in November to the tune of about 22% lower year-over-year. That was part of Black Friday promotions that we saw across the industry. Now the heavily weighted shelter component did take a small step in the right direction, cooling 25% year-over-year pace in November.
That's down slightly from the pace we saw in October. Canadians continue to feel the impact of higher prices, mortgage costs and rent which are the highest contributors year-over-year rise in November. Looking ahead, TD Economics sees weaker demand in the economy next year and that should continue to weigh on inflationary pressures in coming months.
>> You just illustrated that there is the headline number, always lots of things going on underneath and TD Economics looks at what's going on underneath. Has it changed her mind at all about when rates are coming?
>> They are steadfast and when they think rate cuts are coming.
It might take a bit more time for inflation to come down in Canada but TD Economics believes that the Bank of Canada will see enough progress in inflation by the spring to start cutting interest rates. That should help growth pickup in the latter part of next year and improve real GDP growth to 1.5% in 2025.
>> Interesting set. Thanks for breaking it down.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
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. This is the heat map function giving us a view of the market movers.
Let's start with the TSX 60. We are screaming through by Price and volume. Got a fair amount of green on the screen.
Let's start with what's not positive.
Cameco, is been a pretty good year for the uranium play.
Seeing a bit of giveback today for Cameco.
It's down about 3%. The rest of the energy bucket showing some strength. The financials also in positive territory.
And the material sector, those of the Big Three when it comes to the top line number for the TSX Composite Index. You get them acting together, Shopify up a little more than 2% and you can understand why we got the TSX Composite Index right now up about a full percent. South of the border, we are adding to the gains of recent days not quite as firmly, more of a mixed bag, including even among the chipmakers, AMD is getting a modest bid today, its rival and video which has done very well this year off the back of AI is down a little shy of 2%. Pfizer getting a bit of a bid.
We can play this game of up and down but you can see what I'm talking about, it's a mixed bag at their for the S&P 500.
You can get more information on the TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now with Michael Craig from TD Asset Management. Let's get back to your questions.
The viewer is wondering, what maturity of bond funds should do the best over the next year? If we are talking about central bank rate cuts and fixed income, how should they be thinking about duration?
>> It all depends on what your financial circumstances are but from our perspective, rate cuts are likely coming.
Who knows? Maybe they don't. But let's say they do. Though shorter duration funds are funds that have lower term maturity.
You see a big yield move but they don't get a big price move and you have the issue of reinvestment risk as those come down.
Our approach has been to use kind of more of a universe approach call it which is a duration of eight or nine years now let's call it 15. I think that's really going to get, again, you're going to have some credit in their, but as yields fall, you have much more sensitivity to changes in yields. Those are also the funds that did quite poorly in October this year. At one point this year they were down for another up six on the years they've had a good run.
>> One last question here and this is sort of a crystal ball in for you. We talked a lot about central banks rate cuts. Someone wants to know, how many rate cuts should we expect for 2024? Add them up!
It's an impossible question.
>> As long as this is included in the outtakes of 2024 things that were totally wrong… The market is looking for six by next January.
I think we are gonna see North hundred and 50 basis points of cuts in the next 12 months and the basis for that is that when I look at, when you look at short-term interest rates for history, they usually, this is been a very sharp hiking cycle.
Usually it's a lot slower. And when they do start cutting, they usually wait too long. I would be shocked to see no cuts in the first quarter and then when they start cutting is far more severe than people expect.
I don't think it's out of the possible Odysseus 200 lower at this time next year.
Before I let you go, Michael, to round back up to the top, but forward-looking, but I wanted to ask you, what surprised you the most this year? We ended this year with a certain idea what was going to happen and then life gets in the way.
You make a plan and then life gets in the way.
>> The biggest I would say for me the biggest surprise was so in March we had the second and third largest regional lenders buckle and we saw the 21st century version of a bank run, people are texting each other and pulling the money out.
That was very dire.
I guess what surprised me is I even struggled now to say if that happened, the market was up 20% in June.
To me, that was a wonder was like, that's different.
You step back and you say, there are, the Fed didn't do anything to interest rates but they expanded balance sheets materially at that time. We get into these late cycle environments which only happen, and a typical investment career, you see it maybe half a dozen times, really weird things can happen with a slight change in liquidity because it's late cycle. I didn't see that one coming.
It was a euphoric move.
Used to be stocks go up 60%, that's crazy, but that's exactly what happened.
>> It's been a fascinating year. We really appreciate all the time you given us over the year. I look forward to more conversations and 24.
>> My pleasure. Happy new year. See you on the other side.
>> Our thanks to Michael Craig, Managing Director and head of asset allocation and derivatives at TD Asset Management.
Always be sure to do your own research before you make any investment decisions.
Stay tuned for tomorrow show. Jacky He, VP, portfolio research at TD Asset Management will be our guest, taking your questions about consumer discretionary stocks. You can send us questions in ahead of time, just email moneytalklive@td.com.
That's all the time we have for the show today. Thanks for watching. We will see you tomorrow.
[music]