Michael Craig

[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. Every day, I will be joined by guests from across TD, many of whom you will only see here.

We are going to take you through its moving the markets and answer your questions about investing.

Coming up on today show, will be joined by TD Asset Management's head of asset allocation Michael Craig to discuss whether the market strong start to the year is the real deal or just headshake for investors.

Money talks Anthony Okolie will give us a preview of tomorrow's key US inflation report.

In today's WebBroker education segment, Nugwa Haruna is going to take us through how you can find information about market liquidity using the platform.

So here's how you can get in touch with us.

Just email moneytalklive@td.com or you can fill out the viewer response box under the video player here in WebBroker.

Before we get our guest today, let's get you an update on the markets.

The first trading day of the week. We have some green on the screen on both sides of the border. Fairly modest.

Got the TSX up 76 points, a little bit more than 1/3 of a percent.

Ahead of that key inflation report, you are seeing a little bit of strength but it is modest relative to the big movers.

I've seen some money moving in the Canadian real today. I will show UCP at this hour. Not quite as firm as earlier.

Still got some positive upside, modest, $0.67 or shy of, a little more than half a percent. Nutrien is a name that was under a little pressure today.

They are down 2%. Of the border, they have an inflation print that will end tomorrow before the markets open. It will be a big one for investors. But you do have some momentum to the upside.

37 point gain for the S&P 500, the broader read of the American market, of almost a full percent. Tech heavy NASDAQ, how is it cheering against the broader market? A little bit better. It's up about 1.4%.

Tesla wasn't taking part in this modest rally earlier in the session. It is still in negative territory at 193 bucks and change per share, God has laid down 1.8%.

That is your market update.

Markets had a pretty strong start to the year but amid warnings from companies about the outlook for growth, investors may be left wondering whether this rally has more room to run or if this is a false dawn for stocks. Joining us now for more is Michael Craig, head of asset allocation at TD Asset Management. Great to have you back.

>> My pleasure.

>> Let's talk about that. We've had some ups and downs but if you look at where we started this year and where we are now, there have been gains in the broader equity markets. How should investors be viewing it?

>> Well, a few things.

There are only two reasons a stock goes up. You're paying more for the same thing or they have been able to generate stronger earnings. Over time, valuations can make a big change if things get re-rated or derated.

But I will talk about earnings. This rally has been more about valuations going higher, trading now at 19 times.

Commentary from companies has been fairly muted to negative and most earnings elements, most of the earnings reports this quarter have been accompanied by job cuts.

Can markets go a little bit higher?

Sure, but they are certainly not, from evaluation effective, terribly interesting here at least in North America.

And I think you probably want to be a little bit cautious right now, particularly in the US market.

>> Some people have been thinking that this was a classic squeeze kind of situation. There was a lot of negative sentiment heading into the year and the bearish camp got caught offside and then we end up with a short squeeze rally. Any indication and that's what was happening with the gains we saw?

>> Yeah, 100%. If you look at baskets of stocks, they have been heavily shorted. If you look at Tesla there, they had a nice… They are hundred and 88 today, they were at 300 and change in October. So they are down.

There was a big run this month but it is often very depressed levels.

So a lot of companies have been short covered. I don't think a lot of people worship set up well this year.

Many indicators were blown out and it's been a classic counter rally, bear market rally if you will.

You could make a lot of money doing it, but it's a tricky business, trading in these types of markets and an investor should be very mindful of that.

>> Investor should be cautious in this environment in terms of thinking they are missing out on something. I think we see that a few times.

After the tough first half of last year, got into the summer, this rally lasted to the summer and investors kept asking themselves, is this the real deal or the head fake?

Itself like a time to exercise some caution.

>> It's a great market to trade around.

Lots of volatility.

For investors though, I wouldn't get… Are things materially different than they were about to go?

Not really.

I think some of the optimism about rate cuts in the back half of this year have been priced out so that the headwind to companies performance.

I wouldn't say that the market is a universal cell. There are pockets of really interesting value.

If you look at the S and P underneath the top five, six mega-cap names, things are trading materially cheaper so I think there places to make money.

It's a stock pickers market.

But I don't think we are going to have this constant uplift that we've had in previous years. It's going to be more of a grinding market for the foreseeable future.

>> What about the fixed income side?

We entered this year perhaps with a bit of optimism. We are going to get at some point, just by the duration of time, eventually the Fed is going to stop.

How long we stay at these elevated rates becomes the big question. But at the same time,it seems to be setting fixed income up for some opportunities.

How we feel about that space?

>> Fixed income at the start of the year was fire. High yields, depressed prices.

Really off the hot payroll numbers both in Canada and the US from this past Friday.

We are in a bit of an area where there is lot of crosscurrents right now in the inflation mixture. I think people are generally in agreement that it is going lower, but that speed is up for debate.

We will see a huge number tomorrow, the CPI number tomorrow is going to be very important.

The employment index cost will be important to watch next month. There have been seasonal adjustments.

The streets are hyperventilating over seasonal changes to these because there's a lot of math that goes into these. They are all estimates anyways.

I would say fixed income again is one of the things where I think is going to be a good year but it's awkward to be a straight line.

The key with fixed income, and what we are arguing, is that there may be some volatility and noise, but returning 4 1/2, 5% on the strategy with a ton of optimality if we go into a severe recession and bond yields move material lower and that's been the thesis of fixed income.

The backup does present some opportunities to kind of reengage.

Like stocks, with the economic picture right now, there will be some volatility because many people are quite unsure of what we are going into.

>> Let's talk about an unsure picture.

There was a very strong jobs report, but reports also say headline inflation is going down. People have been throwing around quirky cute phrases.

I think immaculate disinflation.

Could this be a scenario where you tame inflation but don't do too much damage to the labour market or the economy?

The Goldilocks of Goldilocks scenarios. Is that possible?

>> Historically, is not the first time the people tried to talk about a smoother kind of Transition or slowdown.

Central banks have said it's clear that we are going into a recession and we are not going to get monetary easing because we are not going to have inflation where it's needed. That is much more bearish.

we have kind of priced in, priced at a recession so many times now.

We haven't had anything yet.

>> We haven't had an actual recession.

>> I think it is a little bit of you know the last time we had, last time that was the true log, blown out recession, we will not count COVID because it was too short from a market perspective.

This is the first time where we have had the social media echo chamber and the narratives are spinning around that world and I think it has changed the way people are thinking about it. Typically, people aren't really thinking about recessions.

When they hit, they are a shock. This time around they are very aware of it.

We are still waiting and nothing is really happened yet.

So I think it just kind of coping with the world is changing the way we communicate is changing and that is leading to a lot of false starts I think, both recessions starting and not starting. I would really push back about it being a soft landing and that we are going to magically adapt.

Certainly if you look at the housing data on the stateside and Canada, it is not showing a soft landing. It continues to be quite weak.

Housing is such a huge part of the economy so I think it's something to worry about.

>> Fascinating stuff.

A great start to the program. We'll get to your questions about asset allocation for Michael Craig in just a moment time.

A reminder, of course, that you get in touch with us anytime.

Email moneytalklive@td.

com.

Right now, let's get you updated on some of the top stories in the world of business and take a look at how the markets are trading.

It appears Bed Bath & Beyond will wind down at 65 Canadian stores after being granted an initial creditor protection order in this country.

While it is one of the largest retail retreats in recent years, TD Securities says most of those retail vacancies should be back filled over the near and medium term. TD Securities also notes that RioCan REIT has the largest exposure, representing poignant 8% of its gross rents.

We do have some anime and a news in the Canadian mining sector today. B2Gold is acquiring Sabina Gold & Silver in an all stock transaction valued at $1.1 billion.

Sabina is active in the back River gold district of Nunavut. The deal requires the approval of two thirds of Sabina shareholders.

the US tech sector is seeing more layoffs being announced.

This time it's cloud software company Twilio, cutting roughly 17% of its workforce. The companies also planning to close some offices and reorganize its business units. The stock is up a little more than 3%.

Let's check in on Bay Street with the TSX Composite Index. We are in positive territory to start the first trading day of the week, 85 points to the upside, almost half a percent.

And the S&P 500 right now, the broader read of the American market, of course inflation is going to have some influence when it lands before the markets open tomorrow morning but today we are up 40 points, almost a full percent on the S&P 500.

We are back now with Michael Craig, head of asset allocation at TD Asset Management taking your questions about asset allocation, so let's get to them.

The first one off the hop: is it better to hedge your stocks and ETF's against the US currency?

What do we think about currency hedging as investors?

>> Okay, some feelings on that. One, rule of thumb of equities, I've never been a huge fan of hedging equity currency exposure because typically that's out of the stocks.

For example, if the US, 40% of the revenues in the S&P comes from internationals. If US dollars weaker, those will have better sales. With Europe, you tend to get pluses and minuses. It's a tricky call saying you're gonna hedge… CAD tends to be, if we go into a recession, you may lose on stocks and the Canadian dollar.

We are bearish as an outright asset class.

We do see US quite elevated. Any type of valuation measure is showing the US to kind of overshot and it's continued to weaken since the end of the third quarter.

Much more sense if you are a fixed income investor and currency drives a lot more of your return. On the equity side, it's not a clean way to invest in equities and it's something I typically would advise people to do.

If you are right about the dollar, move your equity risk into Europe or Japan or Canada.

That's a more clever way of dealing with US dollar weakness than trying to buy hedge product.

>> If they want to embark on a hedging strategy, you have to have conviction about where currencies are headed.

It seems like a pretty volatile time to have that kind of conviction.

>> If you have a whole bunch of companies, so you have a US portfolio, and they are all domestic the focus, you may want to think about those holdings if you are bearish and currency.

The flipside is if you have a portfolio with most of revenues overseas, then it's kind of like it doesn't really make a difference.

>> Interesting stuff. Another question asking about our focus as investors. Is it better to invest in North America or focus more international?

I know that Canadian investors over the years have been criticized on the retail side of being too focused on Canadian names.

What we think about global exposure?

>> I think it makes sense to have some global exposure.

That's what we have in our portfolios. We have global exposure.

I think Canada set up quite well over the next 10 years or so to think about where the last decade was all about software and this decade it will be all about decarbonisation, infrastructure investment.

So when you think about commodity companies, agriculture companies, energy companies, Canada ranks the top the list so I think it's an important part of the portfolio.

So I wouldn't be blowing out Canada going to Japan, but I think it's important that investors do you have some exposure in Europe and Japan for different reasons.

You get that diversification which is like a free gift to lower your risk or get better risk-adjusted returns and then you can take on more risk because of that. It makes a lot of sense for what people are thinking about. As you talked about decarbonisation and Canada's energy exposure. Should we be thinking about some of these, I think some people take a look at the TSX energy Index and think, oil and gas, traditional, maybe the sun is going to set on them at some point. We think of them as energy companies that will transition along with the rest of the world or to be think of them as oil and gas companies?

>> It depends on the company. Some companies have portfolios of renewable investments.

In energy space, and oil and gas, their expertise is in energy is so it's not crazy to think they might repurpose for different types of energy. My thought is we will be using oil well past the end of our lives.

It's all going to disappear overnight.

Renewables are helpful but they are not anywhere near as efficient as using gasoline for transportation.

So I think you kind of have to look at it as both.

You want exposure and renewables but right now in the energy space, you mentioned to business, built these widgets, by the way the value of those widgets it's going higher, it's an interesting business to own and that's kind of an energy company.

Energy prices kind of drift higher over time for various reasons, less supply.

They are not being paid to invest in their businesses other than maintenance cap-ex, they returned a lot of money back to investors.

What killed oil companies was going on massive exploration and development expeditions.

They are not doing that anymore.

Because of the pressures of where they are at and what they're going to do with their money.

> Interesting stuff. Let's take another question.

Lots coming in for Michael Craig.

What does your guest like for the fixed portion of a portfolio?

Speaking of opportunities, which would be thinking of that opportunity for fixed income?

>> So there are a few ways of thinking about it.

Right now, cash is earning you 4 1/2% so it's not a bad time to do that.

You're getting a higher rate of return.

I wouldn't say put 30% of your portfolio in cash, but 5% make sense, gives you optimality. I talked about the marks being volatile and one way to address that is having cash on hand to take advantage if you like things. Within fixed income I think there are two areas we particularly liked.

Governments as a position in case you go into some kind of mild or severe recession, that's kind of like your flood insurance if you will, your basement floods, you're not happy about it but it's good to have that insurance.

Also the yields they are in Canada you call at 3.2%, in the US 38, so not bad yields.

And at the other end, the Bärbel it was, I like the 0.5 in the corporate space.

Investment grade. You're getting that high cash shield from governments plus the spread. The prices come down a little bit but you are still getting all the yields north of five, 6%. Presuming you are okay with the credits and refinancing profile isn't too bad, it's an attractive place to earn pretty elevated sources of income but without a lot of risk.

>> Is that the key in terms of talking about corporate, investment quality?

If you enter economic downturn or recession, we get a bit concerned, perhaps, depending on the company, about their balance sheet.

>> High yield is very speculative of great credit.

It's a phenomenal asset class in terms of risk versus reward. But if you go into a project, you expect to see default rates rise in the high-yield space.

The challenges, high-yield companies, you get more defaults in that space than you would in the investment grade at the risk with investment grade space is being downgraded to high yield.

You gotta do your research and understand what that risk looks like but that's generally the risk with investment grade.

> What does that research look like for like a retail investor?

They might be used to looking at an equity and then looking at the company's balance sheet and wondering about this. If you are doing the homework from the fixed income side, are you looking for some of the same things?

>> Generally speaking, an equity investor will spend a lot of their energy on the income statement and the growth of income over time. Fixed income investor it's more of the balance sheet and what is their capacity to pay.

They care about the cash flow needed to pay it back but you want to look at the balance sheet to understand the leverage, refinancing risk and ultimately that is a typical determiner of the viability of a company. It's different, you know, you have people who do both the generally speaking, credit and equity analysis are in different camps. They are typically pointed against each other because equity person wants more leverage and money back to shareholders and the credit person wants to make sure that cash is kept on hand to pay back the debt so there's always a bit of a clash between those two investment groups because they want different things and companies.

>> Interesting set. At home, do your own research before you make investment decisions. We'll get back to your questions for Michael Craig on asset allocation in just a moment.

A reminder that you get in touch with us at any time. Email moneytalklive@td.com.

Now, let's get to our educational segment of the day.

When you are evaluating a potential investment, its liquidity is one of the things you may be want to consider.

WebBroker has tools which can help.

Joining us now with more is Nugwa Haruna, Senior client education instructor with TD Direct Investing. New book, always good to see you.

Let's talk about we are talking about here we talk about liquidity.

Let's talk.

>> It's always a pleasure bring here, Greg. When it comes to liquidity, the basic definitionI liquidity it is the ease at which you can turn an asset or security into cash without impacting its market value. Now investors may hear of liquidity and when you are an investor and you hear that word, it could mean market liquidity or accounting liquidity.

So starting with market a liquidity, it's the ability to turn securities into cash and so you may hear of money market securities being also called cash equivalents and that's because they are some of the most illiquid assets out there.

On the other end of the spectrum, you may hear about things like real estate being not as liquid. So yes I can decide to sell my house tomorrow and get cash for it, but chances are I would need to put a very steep discount on my asset price for me to be able to turn that into cash.

Soul is going to WebBroker and take a look at some of the tools investors can use to track the liquidity of a security. So once in WebBroker, I'm going to click on research. Under investments, I'm going to click on stocks. I'm just going to use the stock that we have on screen already.

One indicator of the liquidity of a security could be the bid and the ask spread. So essentially, this is the difference between the bid, how much buyers are willing to pay for that security, as well as the ask, how much sellers are willing to receive for that security.

So the wider that spread between the bid and the ask, this can indicate a stalemate between the buyers and the sellers, meaning that securities may not move that often.

When that spread is more narrow, you may find that more transactions are taking place.

Another indication of liquidity could be the volume.

So this essentially indicates how much people are interested in buying or selling this specific security.

Investors taking a look at this may take a look at the bid and asset spread as well as the volume.

There other securities that you may find are not as liquid as others. For instance, small-cap securities may experience less liquidity than more large-cap securities and then also after market hours there may be a high experience of more illiquid markets, so wider spreads there endlessly.

>> Nugwa, when I heard you were going to talk about liquidity today, my mind swung to what you just talk about, the spread between bid and ask, the shares that are changing hands, the opportunity to get in or out of a position. Accounting liquidity, I gotta admit I don't know much about this. What is it and how can you find out about it on WebBroker?

>> That term, Greg, is just use, liquidity, you might say what does that mean? When we talk about accounting liquidity, this on the other hand is a company's ability to meet its financial obligations.

If it has any debt, how is it able to pay off its debt? Investors are able to track this information by looking at the balance sheet which essentially shows the assets, with the company owns, the liabilities, what the company owes, which is equal to shareholders equity. So it's going to WebBroker and give you a quick way investors can see just how illiquid a company itself is.

We are going to stick with the stock that we have on screen. But this time, we are going to go into fundamentals.

So what I go on here, this is where information is collected from the financial statements of a company, things like the cash flow statement, the balance sheet. If investors want to see just how illiquid that company is, we are going to scroll down and we will take a look at the current ratio. So essentially, the current ratio takes into account the short-term assets. So how quickly is able to turn its assets into cash within a year and divides that by its short-term liabilities so the debt that the company needs to pay off within a year.

So when investors are looking at this number, they want to number that's in line with the industry average or slightly higher because this may indicate the company is more liquid and has a better financial health.

Any number that's much lower than industry average may be a warning sign. There's also the quick ratio.

This is almost similar to the current ratio but the difference is it takes those short-term assets and subtracts inventory because inventory may not be as liquid as companies want you to believe.

So if you want a stricter number on how illiquid a company is, you can use the quick ratio and then once again, you are looking for a ratio that's in line with the industry average or higher to give you an idea of the company health. So essentially what investors are thinking about liquidity, you want to ask yourself which liquidity is being spoken about, market or accounting?

>> Great stuff as always.

You took me back to the securities course.

Now I'm back on board. Thanks for that.

>> Thank you.

Have a great day.

>> Nugwa Haruna, senior client education structure 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.

including an introduction to technical analysis.

Forget back to your question for Michael Craig, a reminder about how you can get in touch with us.

Do you have a question about investing, or what is driving the markets?

there so we can get in touch with us.

Email us@moneytalklive@td.com or fillet the viewer response box under the video player in WebBroker. We will see if one of our guest can get you the answer right here at MoneyTalk Live.

okay, we are back with Michael Craig, taking your questions about asset allocation. Your popular, we are getting lots of questions. We will try to get through them. Your view on oil? Bears pound the table on recession, bulls pound the table on supply shortage.

who is right?

> This is a horrible answer but they are both going to be right. What I mean by that is recession is kind of a 12 to 18 month call, right? And if we go into a slowdown, you're going to see demand for energy fall.

Energy to GDP is tied. The longer term, assuming there is some type of growth trajectory coming out of recession than those supply issues come back online and we did a lot of work on this within our commodities group, there's no one supply out there and that's going to be a real challenge for prices to be depressed for a long period of time.

I think over the next little while, oil has come off material from the highs, it's below where it was pretty invasion of Ukraine.

One of headwinds towards well.

But it doesn't take much to get things going.

And there are building two political risks in the Middle East. I've no idea how this plays out.

One morning you check your Bloomberg or whatever you use to follow the markets and oil spiked 20 bucks, but there is that risk in the Middle East right now that I don't think the markets are accounting very much.

I have no idea whether it's going to happen or not but it's something to be mindful of. The balance of risks are more likely to drive oil higher. The so horrible answer because I'm waffling but it's a murky picture for the next little while.

Recession, definitely huge headwind.

Geopolitics, tailwinds and oil prices, over time, that supply story is definitely going to be a driver over the next 10, 12 years.

>> A logical answer from my point of view.

Not murky at all.

Let's get another question. We talked about this in the past.

How are options affecting the markets? R0 dated options distorted the market?

>> I want to clarify the guests question.

I think what they are referring to is the One day options. Historically, options trading, they expire on the third Friday of every week, and we trade that data, then we started doing the end of the month, and as the market evolves, we have more updates to today where you can actually trade options expiring the next day.

And I would say that on particular events, it is creating a lot of kind of weird crosscurrents at the end of the day. I will give you an example.

Last quarter, a data release came out was quite negative.

I was like, oh boy, it's going to be a long day. Markets open at 930. By 10 o'clock, we were rallying.

I was like, was going on? It doesn't make any sense? What happened is that there was so much pent-up protection purchased in the option market that when the actual data came out everybody rushed to monetize that because the way options are managed it created a huge bid for stock and the market value increase. See you actually get these really weird events that will occur on a very short term basis that make no sense until you understand the position beforehand and that's what's causing the market changes. On a long-term basis, it's not doing much. On a longer term basis, is creating distortions and it's encouraging speculative behaviour on the stock market.

Is that healthy?

I think in many casesit's being used in a not very healthy way.

>> Not particularly healthy in the short term. The bond return shouldn't make much more diffidence.

Long-term investors who are not playing in the space shouldn't be too concerned?

>> If you think, the world's going crazy, this isn't working anymore, this is why.

you might have a view on a particular slice of data, doesn't mean you can make any money because the reaction in the market and positioning might not be what you expect based on the actual reaction so does create a much more challenging backdrop to short-term investing.

>> Fascinating stuff. There been days when I was wondering why this was happening.

>> One day options.

>> Is starting to make a lot more sense.

The next question is just one word question. Tesla?

We don't talk individual names but if we can talk electric vehicles and the future there? Everybody's got a take on EVs.

>> It's not my area of expertise.

I don't look at TV companies.

The only thing I would say is that this is not like a new thing anymore.

I don't want to use the term commoditized, I don't think it's fair, but everybody and their brother and sister are creating EV cars.

If you are running an auto company, you're making EVs now.

I think that the investment strategy will be all about the mix of shovels and various ingredients in EVs, not necessarily the manufacturers.

If you're looking at that as a thematic play, I would say look at where the pinch points are, where the things that are needed?

That kind of leads me to battery, who's got the best batteries, I think that's where the action is.

It's becoming somewhat of a commoditized thing because quite frankly, everyone's doing it now.

> There are no automakers just sitting back and watching one auto company take it all.

We are going to get back your questions for Michael Craig and asset allocation in a moment. Do your own research before you make any investment decisions.

A reminder that you can get in touch with us anytime.

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.

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Write in your question and hit send. We will see if one of our guest can get you the answer at MoneyTalk Live.

If you are a market watcher, you're going to have your eyes on a release tomorrow morning, consumer prices for the month of January out of the United States.

we've been hearing from Jerome Powell and where they are going with the future of race. It's gonna be a big one. Anthony Okolie has been digging into the TD Securities outlook for the implications of what will happen tomorrow.

>> TD Securities expects core US prices to stay strong on a month over month basis in January.

as a recent relief from goods deflation is coming to an end likely.

inflation remains worryingly high.

it was down in December from above 7% in November and a peek over 9% as the chart shows. That was driven by falling gas prices particularly between November and December. Core inflation finished off in December, 5.7% down from 6% in November.

In terms of headline inflation, TD Securities expects inflation coming up .4% increase month over month. That is its firmest month over month gain since October. It will be driven largely by the rebounding of energy inflation as gas prices were up for the first time in three months. Core prices meanwhile are looking to gain by 3.4% month over month.

That's equivalent to what it was back in December.

These month over month projections imply that the headline and core CPI will continue to lose speed on a year-over-year basis in January.

When we look under the hood, we expect the core good segment to provide less, mainly in used car prices, which are expected to come in at .7% month over month decline, down from the average of just over 2% over the last four months. Of course, this has been driven by higher borrowing costs for automobiles and slower consumer demand. TD Securities is forecasting service inflation, near its three-month moving average at around .5% in January.

But they are still forecasting a strong result for rents.

TD Securities does acknowledge that rent and shelter remain a key wildcard for CPI and the largest risk to the production.

Part of it is in January, the CPI report will include new methodologies for the calculation of owners equivalent rent.

Finally, TD Securities expects the cost of other categories like lodging away from home to show significant declines while airfare prices will show a more modest decline in January.

>> We get this report landing tomorrow. If it comes in stronger than expect, what TD Securities think about the passive rate heights for the rest of the year?

>> They think it will reinforce strong economic datathat we have seen recently and will likely price the market pricing for the upcoming rate hikes higher. But as the chart shows, investors have boosted the price of the terminal rate and funds rate to just over 5%, and that's up from the 4.9% when we got the January jobs report.

TD Securities believes 80s softer than expected print may reinforce Powell's remarks, reinforcing the odds that the Fed stops rate hikes soon.

>> It's gonna be a big one. We are going to find out at 8:30 AM Eastern time tomorrow.

Thanks.

>> My pleasure.

>> MoneyTalk's Anthony Okolie.

Let's check out the markets right now.Starting with the TSX Composite Index, is a 58 points, a little bit more than 1/4 of a percent.

a bit of money moving into the rails.

Let's check out CN Rail.

Positive territory coming off the highs of the session, although it wasn't impressively high to begin with. B2Gold in the newsin the process of acquiring Sabina Gold & Silver. It opened at 2% the downside and is down to the tune of a little less than 3%.

Off the lows of the session but still negative. South of the border, head of that inflation print, you got the S&P 500 making some games today up 40 points, almost a full percent. The tech stocks may be a little firmer than the broader market.

Let's check at the NASDAQ. It is up to the tune of almost 1 1/2%. Tesla was negative.

We showed you earlier in the program that some other tech stocks are rallying, including Microsoft.

272 bucks and change per share, up almost 3.6% on that one.

We are back now with Michael Craig from TD Asset Management. Magna, auto earnings, margins look like they are getting squeezed. Is there value or stay away in a recession?

We can't talk individual names with Michael Craig but we can talk about what we are seeing out there with auto parts, auto parts makers, recession.

>> It's as simple as this.

Rate hikes, the material hiking cycle, usually people talk about housing.

But let's not forget that a huge amount of borrowing is used words auto leasing and financing and the last I checked, not so long ago, you could grow 41% for as long as you want. Now it's quite a bit higher.

I can't see how demand for auto, and you've seen it in used car pricing this season, how that's good for the auto sector.

I would expect to see a real slowdown in auto purchases.

Probably not a great story for that whole supply chain. I don't follow the company myself but is a challenge.

>> It's a big ticket item.

1% has now moved maybe to 4, 5%.

>> Even higher. Yeah.

maybe people drive their cars longer get a bit more repair work.

But in terms of production, unit sales, I can't see it going anywhere below her.

>> Let's talk about the financials. What is your expectation for financial sector performance?

I guess the pros and cons.

> It's a very broad statement. A lot of companies fall into the bucket.

The market on the bank side has definitely differentiated between the higher quality banks, e and valuation differential.

Banks had a good run this year. I look at this as a dividend type story for the foreseeable future.

I don't see prices going materially higher because until we have some type of resolution about what the upcoming slowdown looks like, banks are generally derivatives of the economy.

They grow with the economy. And I just don't think the economy is going to grow much in the next 12, 18 months.

So I would say that's a dividend call.

Long-term, franchises are going to do well.

It's on a call to worry too much.

In many ways, in the view of the market this year, it's kind going nowhere.

That's probably a fair call on financial.

>> When we think about the financial space, we are talking about the lifecos that get put in there. If investors take a look at those space, is there a difference between bank and light company businesses?

>> they would've had a nice tailwind with higher rates last year.

That has probably seen its course. They tend to have a little bit less economic sensitivity but they are not an area that I'm too concerned with. It's kind of a hold as we go through this.

> We just got this one off the platform.

Shoot it down if you want but I will throw it your way. Somebody is wondering about what your excitation would be for precious metals in this environment?

>> Yeah, sure.

So as a committee, the asset allocation committee with TD Asset Management, goal is neutral. It is had a nice run. Took some money off the table. A few things with gold. I will focus on gold and silver.

Still very tight policy. It is going to trade with the dollar, if you will.

So I think that's a bit of a tailwind.

On a real interest rate basis, we will get to the level where bonds are right now, it's high. It's like 1/2% real rate.

That's typically a headwind to gold.

Not releasing a whole lot of retail flows but there has been tremendous central bank buying.

I'm not very excited about gold at these prices to be totally frank, but I would be looking to accumulate 1600, 1700 if you will.

It's another form of insurance, if you will, but I think you are paying up for it right now.

>> Before we let you go, I know you are a modest guy, but people love it when you are in the program and get tons of questions in real time.

I have some fan mail.

Thanks for your guest, Mr. Craig.

He's great for insights Echopass the simple narratives.

>> I appreciate that.

Very kind.

>> The audience appreciates having you here too. Look forward to next time.

>> My pleasure.

>> Our thanks to Michael Craig.

Head of asset allocation at TD Asset Management.

As always, do your own research before you make any investment decisions.

Stay tuned. Tomorrow show, Hafiz Noordin is going to be on, active fixed income portfolio manager at TD Asset Management.

We will be talking about fixed income. You can get those questions in in advance.

Email moneytalklive@td.com.

That's all the time we have for the show today.

Take care and we will see you tomorrow.

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