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[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. Every day, I will be joined by guest from across from TD, many of whom you'll only see here. We'll take you through what's moving the markets and answer your questions about investing. Coming up on today show, we will be joined by Michael O'Brien, portfolio manager at TD Asset Management. We will discuss why he thinks there may be a cap on how much higher stocks can run after the recent rally. And in today's WebBroker education segment, we are going to answer if your question on the mechanics of stock indices. Nugwa Haruna is going to join us for that conversation. So here's how you can get in touch with us. Email moneytalklive@td.com or you can follow that viewer response box under the video player here on WebBroker. Before we get to our guest today, let's give you an update on the market action. It not a bad way to start the week on the market. We will start here at home on Bay Street, the TSX Composite Index. about 91 points to the upside or abouthalf a percent. Denison Mines is on the rise. The last time I took a check, they were up more than 8% in the session. The uranium producer says it's offer to acquire UEX expiration has expired. Power Corporation of Canada has also missed expectations, down a little more than 2%. South of the border, let's check on the S&P 500. Of course, we've had a bit of a rally on our hands since around June when things started to turn around. Building on it today, it sort of modest, 1/3 of a percent to the upside. The big action this week not only south of the border but really global investors keeping an eye on US inflation. The latest consumer prices on Wednesday morning. Let's check in on the NASDAQ to see how the tech heavy indexes during this moment. A bit of pressure on this front, down a little more than 20%, down almost 1/10 of a percent. Palantir Technologies, the data analyticsfirm is cutting its sales forecast among uncertainty about government contracts. Did they are almost 12% of the downside at this hour. That's your market update. Though we have seen a bit of a summertime rally in the stocks, the markets are in the green today, last week's jobs report may put a cap on ho high stocks can run right now. Joining us now is Michael O'Brien, probably a manager at TD Asset Management. Great to have you back on the program. Let's make sense of all this. I always try to make sense of the market reactions to this and that, what's the equation we are looking at now? >> Well, I think we went through a period to the last few weeks were good news was good news and bad news was good news. There is so much pessimism baked into the market that I think a lot of the stocks, especially those big, strong growthand technology stocks out of the border were really prime for recovery and we got that over the last two, three, four weeks. We have had a pretty nice run. I think that the reason we saw this set up transpire partly it was expectations, again, pretty pessimistic but also I think a narrative crept into the market that maybe the Federal Reserve was getting close to having done enough. Maybe they won't need to keep raising rates as aggressively as they have. And obviously, if you get a signal that the Federal Reserve is going to slow down or, you know, pave it in the vernacular to a less aggressive rate hike cycle, that's very positive for stock valuations. So I think that's what was kind of underpinning this recent rally. So the reason I was saying last week's payroll report was quite significant is it just kind of gave us a real world data point that, whoa, don't get ahead of yourselves here. The economy is still in pretty strong shape. >> This idea of the pivot, right? It almost feels like hopes and dreams for some investors. Don't worry, we're almost done, there's going to be a pivot. And then you get this really strong jobs report. This has to change some minds. >> what it probably did was solidify the thinking of the Federal Reserve itself. The Fed all along has been communicating that they feeltthey can raise rates pretty aggressively because the economy coming into this rate hike cycle was in fundamentally a good shape and we kind of got that evidence on Friday, that the labour markets out of the borders still drum tight. So to me, that just says, you know, there's going to be more rate hikes. We may get 75 Basis Points in September. So we haven't quite turned that corner yet. So I think the market got a bit ahead of itself these last few weeks. >> What about this argument that the markets are forward-looking instruments? So yes, in anticipation of the continued strength of the US economy, the continued rate hikes you're going to see in the face of strong inflation, all of that got priced out and is behind us now. Again, that's the optimistic taken everything. Don't worry about it, the equity market is a forward-looking answer in. Sometimes I feel like I'm still trying to figure out what exactly the equity market is trying to tell me with the current situation, whether it even knows about the current situation. >> You are absolutely right. The market is forward-looking. The problem is the market doesn't have a crystal ball sometimes they get it right and sometimes they get it wrong. We are all responding to these data points in real time and the market, again, with the set of coming into this, which was pretty bleak and valuations have come down quite a long ways, you know, it wasn't an unreasonable thing to take a bit more optimistic look. If you're convinced the glass is totally full and maybe it's half-empty, why not give it a shot? Coming into it, it's a perspective is very negative. I think one thing the market is increasingly convinced ofis that the Fed, the US Federal Reserve, and I think by extension the Bank of Canada on the side of the border, that they do still have their inflation fighting credentials intact. I think if you look at the action of the bond market especially, but also the stock market, the ways that these longer duration stocks have really picked up, is, okay, we had a bit of a scare earlier in the year but now we have listened to what the central bankers are saying. We have observed what they have done. We get it, they are fighting inflation. They are going to get inflation get away, they are not going to let us go back to the 70s and have a Paul Volker type of moment. I think that's very good in terms of establishing credit ability of the central banks. The problem is that credit ability comes at a cost and the cost is in order to bring inflation back to a more palatable level, around 2%, there's a lot of wood to top. Particularly, we need to see is a softer labour market which implies slower growth. And slower growth typically implies lower earnings. And so it's a bit of a be careful what you wish for because in order to reestablish their inflation credentials, they are going to have to slow down the economy a bit. And the real trick going forward is can they pull off that soft landing that everybody aspires to, where you don't have a significant downturn, or do they overshoot and force us into something a little uglier? >> So we haven't seen that softening of the labour market south of the border. Canada's job rates have been a bit strange. In terms of tightness of the market, but also because we are losing positions. You mentioned the Bank of Canada. Do they have as clear a road ahead as the US Federal Reserve has with its economic indicators or are things a bit icier here? >> It's a little more mixed in Canada because as you say, the last two job report, quite the opposite of what we saw south of the border. The last 2 Job Reports in Canada were surprisingly soft. Canada actually lost jobs in June and July. So the Canadian employment report is notoriously volatile so take everything with a grain of salt but two consecutive months of negative job growth, there's gotta be some signal in there. So I think in that respect, that's got to send a bit of a message to the Bank of Canada that, you know, look, the economy is responding to a pretty aggressive rate hike cycle that we put in place already, so I'm sure that gives them some pause. The other side of it though is that inflation is still very high-end, as you mentioned in that same employment report, wage growth is running north of 5%, which is a pretty healthy level, and the participation rate, which gives you an idea of how much slack is in the labour force, the participation rate fell again which is not a good developing. So that wasn't the type of employment report the Bank of Canada would want to see because on the one hand, the economy does appear to be responding fairly quickly to these interest rate increases. On the other hand, there are still signals that more needs to be done because the labour market, despite these job losses, is still too strong. >> If we got to a point in this country where the Bank of Canada had justification, based on the data, to take a different path than the US Federal Reserve, could make at this point, coming out of the pandemic, trying to get inflation under control, is everyone sort of in lockstep with the Fed and what the Fed does? >> Obviously, the Fed is the 100 pound gorilla on the global central banking scene. But to a certain extent, each central bank can make its own path. If you look at the Bank of Canada in this situation, they were in the situation earlier and harder into this rate cycle. They move quicker than the Federal Reserve did. And we've had that long-standing Bank of Canada policy of targeting a 1 to 3% inflation rate, which goes right back to the early 90s. And so I think the Bank of Canada comes into this with their inflation credentials well intact. And I think that moving quickly, moving aggressively, just reaffirms that the Bank of Canada is on the case. And so I think that does give them flexibility if, you know, if the data requires it, it does give them a chance to maybe diverge a little bit from the path the US is on. But we will see where we end up. I think there won't be a whole lot of surprises on the monetary policy front for the next couple of meetings as we getting closer to your end. Maybe that's where we start to see some of those divergences appear, if these trends continue. >> Fascinating stuff as always and a great start to the program. We are going to get your questions about equities, specifically Canadian equities, for Michael O'Brien from TD Asset Management in just a moment. Our minor, course, you can touch with us anytime with this question. Email moneytalklive@td. com or fill out the viewer response box under the video player here on WebBroker. Now let's get you updated on the top stories in the world of business and a look at how the markets are trading. It's a multibillion-dollar deal in the pharmaceutical space, Pfizer has an agreement to buyblood disorder drugmaker Global Blood Therapeutics for $5.4 billion. It's the latest in a string of acquisitions for Pfizer as it looks put cash to work following the success of its COVID 19. With sales of that vaccine slowing, the pharmaceutical giant has been on the lookout for deals. Nvidia is warning of a sales slowdown as demand for its gaming products weakens. The chipmaker says revenue is expected to fall 19% compared to the previous quarter, with gaming being that main sore spot. Nvidia says sales in the unit for the second quarter architected to fall 44% to just over $2 billion. The company made the announcement ahead of its second-quarter earnings report, which is expected on August 24. Barrick Gold managed to beat expectations in its latest quarter despite the challenges facing the global mining industry. While inflation is pressuring production costs, a boost in Barrick's copper output help the bottom line. While the company is warning of persistent inflationary pressures, it didn't raise its cost guidance. Shares of its mining rival Newmont came under sickness can pressure last month after it raised its cost forecasts. That as global miners continue to grapple with higher input costs. A quick check in on the markets again. We'll start here at home on Bay Street with the TSX Composite Index. Not a bad start to the week, 19,000, 686 points, a little more than of 1/3 of a percent. The benchmark, the S&P 500, the read of the broader market in the states, it's losing some of its early ground in the morning, still in positive territory but we saw some weakness in the NASDAQ it, and some of the tech names, we are up just a little shy of 1/10 of a percent. We are back now with Michael O'Brien, portly manager at TD Asset Management. We are taking your questions on Canadian equities. Look at your questions as they come in off the platform. Here's one. Would you deploy new money here, or wait in this rising rate environment? >> So as we discussed earlier, I am a little cautious in the short term about the broader macro You know, about the broader market outlook. At the same time, I think the answer is selectively yes, there are some opportunities out there, there are some pretty inexpensive stocks, some sectors that have been beaten up a bit. So yeah, I would say, selectively I'm comfortable putting some money to work here. But the bigger picture is, you know, I don't think this rally is going to continue going straight up. We've got a pick and choose a bit. >> Now here's something, you've obviously been doing this a while, I've been asking questions of people who do this kind of thing a while, and we know, leave a motion out of it, have a strategy. I find it hard myself this summer trying to make sense of the markets, make sense of the rally, leaving a motion out of it. How important is it at times like this, the great debate, is this a bear market rally, what's going on? >> That's just such a fundamental lesson of investing, the old axiom is that to emotions rule equities, rule stocks, and that's fear and greed. And at any given point in time, either fear or greed have ascendancy and that cloud your judgement. It's the hardest thing to do but it's the simplest thing to understand. Step back, look at things rationally, try to invest with your head not your heart. >> Good advice indeed. Here's a question coming of the platform. Why does crude oil keep going down? I'm looking at West Texas intermediate on the screen and and it's below 90 bucks a barrel. A different story than we were telling a couple of weeks ago. >>it's definitely had a soft patch here recently. I think part of this is a lot of macro investors, hedge funds and whatnot, they viewed energy as a nice way to sort of by a hedge against inflation. There is an inflation hedge notion that everything else might be hurt by inflation but energy, which was causing it, is obviously going to benefit from it. And so I think as people's concerns, as we talked about concerns about inflation running away from us, have kind of eased off a little bit lately, I think maybe the need for that macro hedge has tailed off. But then, when the supply demand fundamentals, the actual physical market, I think there is a bold case and a bear case to be made. The bear cases with concerns about the global macro, but the global economy slowing down, obviously a lot of investors are worried about demand destruction. So they are focusing on the demand side, high prices, weaker growth equals less demand. The more constructive or the bullish take on this is I think investors that are looking at the supply side are realizing that there'd have to be an awful lot of demand destruction to really change that fundamental tightness in the market. And particularly as we go into the back half of the year, you got to remember, for the last number of months, the US has been pumping a million barrels a day out of its strategic reserve to try to Prices. China has been… China had some of the weakest demand numbers we've seen in a long time in recent months because of COVID lockdowns. Assuming that staff eventually runs its course later in the year, things start to tighten up pretty quick, and I guess the one thing that I would point to is to me, something that's very significant is in t we had OPEC essentially tell us that they have a very, very limited spare… Excess capacity left, and so to me, if you got OPEC running at essentially out of spare capacity, it just makes the supply demand set up a little asymmetrical where anything that sort of shakes production is going to translate very quickly into price. So that's… The bears are worried about demand destruction, the bowls are focused on supply which still looks very tight. >> We take those big macro considerations and bring it back home to Canadian equities, obviously we have seen a big run-up this year and some of those big Canadian energy names, but I'm being told that even with crude at these prices, a little south of 90 bucks a barrel for West Texas intermediate, these companies that are making cash and they are washing cash right now. >> Yes. So yes, they are very profitable and what's oil today, 85, 80, mid to high 80s, all the Canadian or, you know, all the major Canadian producers are very profitable at these levels and they remain very committed to returning cash to shareholders. So as an example, just the other week, Canadian Natural Resources, which is one of the largest producers in Canada, they announced a special dividend. People hadn't seen that coming. But that's just one example of what I would say is a newfound religion on the part of most of the industry, both in Canada and the US to really try to return more cash to shareholders as opposed to chasing production growth which was the old model back in the last decade. >> Let's get back to the platform. Another question here, this one about the rails, namely C and R. Canadian National Railway. Your thoughts on this one? >> CN is an interesting one right now where the last couple years, they kind of fell off the pedestal a bit. For years, CN had been viewed as the best run, best operated North American railway. Then, in recent years, they kind of lost their edge a little bit. A little sloppier than we had grown to expect on execution. We got an activist investor got involved recently. We had management turnover, a new CEO coming in. What I would say at this stage is the early results under the new management have been encouraging. The execution has been much better, much more see and like it, if I could put that way. So that's been an encouraging development. So the new CEO, the new management team has gotten off on the right foot. The one other thing which is potentially positive for both CN and CP is for the Canadian rails in particular, relative to the US rails, the Canadian rails have a lot of exposure to bulk commodities. And so if you think of last year, Canada had a terrible grain crop. It was one of the weakest grain crops in many years. It's not in the been yet, but as we sit here in early August, the outlook is much more positive for the Canadian agricultural outlook. The grain crop should be up substantially this year which should be, for CN and CP, should be a nice driver of volumes going forward. So they've got that in the back pocket. At the end of the day, these are circles. >> Is going to ask you, whether we are in a growth or contraction., We all need to eat. I would assume they would feel the pains of a recession, just like anyone else. >> Yes, absolutely. The way I look at it, the rails, CNN CP, CP especially has a very large bulk franchise by which I mean grains and potas, things like that. They are more resilient than some of their peers in the industrial or material space. Tat the end of the day, they live and die on economic activity, and if people are building less things, buying less things, shipping less things, that will translate into weaker volumes and weaker pricing for the rails. So absolutely, they are very much sensitive to the economic wins and if we end up in a recession, eventually that will flow through the numbers. >> A few of the rails there. As always, make sure you do your own research before making any investment decisions. You will get back to your questions for Michael O'Brien on Canadian equities in just a moment. Just a reminder that you get in touch with us anytime, email moneytalklive@td.com. Now it's time for today's educational segment. we talk a lot about the various stock indices on the show, it could be a little confusing for novice investors. we actually received some viewer questions asking for a bit of an explainer. Here to give us an overview is Nugwa Haruna, Senior client education instructor at TD Direct Investing. Nugwa, always such a pleasure to see you. Bring us through this. Let's start with the basics. As I said, we've had questions coming in off the platform, Nugwa is here to answerthem about market indices. >> Thank you for having me. For instance, you touched on it a few times about the markets are up today, the markets are down today, and the idea behind this is a stock market index. So what a stock market index looks to do is give investors an idea of just how well the economy is bearing because it's made up of essentially a hypothetical portfolio that's holding different kinds of publicly traded companies across different segments on the financial market, so investors are able to look at the specific information based on the current prices, looking at the historical performances to give them an idea of how do these specific segments perform. Let's look at some examples. We talk today about the Dow Jones industrial average. Those are very popular ones, but I want to focusing on Canadian equities. So I will talk about the TSX Composite Index. This is an index that tracks the performance of the largest, about 250 publicly traded companies on the Toronto Stock exchange and the idea is these companies make up about 70% of market capitalization and so investors are able to see how, just how well these really large companies are performing. Now, there is also the TSX 60, and what that does is it tracks 60 large publicly traded companies on the Toronto Stock exchange and these companies are typically leading companies in leading industries. So besides that these larger indices, we have smaller indices such as sector indices and what these aim to do is to give investors just an idea of what the market activity is for companies in specific industries or sectors. And then there's also things like packed indices and what those aim to do is unlike a sector index that would take specific companies in a sector and just track them based on their sizes, a capped index may say hey, this company is very large, making about 60% of the soul industry, we are going to Its effect on the industry as a whole by capping it to around 25%. Investors may essentially think, how can I trade an index? While you cannot trade in index, investors could search out index funds and what these funds look to do is mirror the performance of these indices by holding the companies that these indices track. >> Alright, so that gets us immediately curious now. That gives us a great overview of how these are constructed and about market activity. Where do you find information about them on WebBroker? >> Once on WebBroker, I am able to see how the TSX compass it is performing and some other major indices. But if you want to dig a little more, you can click on the research tab. Under markets, I'm going to go indices. Once here, I'm presented with some information about major indices, I'm going to focus on the left side of the screen right now. The first thing I'm able to see is actually comparison of different indices, so I can see how the TSX Composite Index is performing, compared to the Dow Jones industrial average, which tracks 30 prominent companies in the United States. If an investor wants to throw in some more indices on there, all they have to do is scroll down. I can add the NASDAQ, I can also add the TSX 60 which we talked about. Now I scroll up and once I'm back here I can look at this chart here and see how each of these indices have performed compared to each other. Now, if you want to get more information on sector indices, all you have to do is click on sector indices over here andlet's say I want to know well, what companies make out, for instance, the energy sector index? I would click on here. Once I do that, a little box pops up. I scroll down a little and I will click on where it says members. So once I do this, I will see the different energy companies that trade on the Toronto Stock exchange that make up the TSX energy index. Finally, if I want to do a little more of a comparison, if I say, well, I know how the sector itself is performing, but I have a specific stock in mind and I want to see how it's performed compared to its peers, well, you can actually do that by clicking on the charts tab here. And it's going to take me to a chart based on whatever timeframe I choose. We will stick with three years for now. Once here, I'm going to click on comparisons. And I'm going to pull up, you know, an energy company. I'm going to pull up ARC resources. Once I do that, I'm then able to compare how this specific company is performing compared to its peers in this same… That are being tracked in the same index. So once again, just giving investors an idea of how specific indices perform compared to themselves or how companies perform compared to others in the same index. Investors are able to use these tools we have in our broker. >> Great stuff as always. Thanks for joining us. >> Thanks for having me. >> Thanks to Nugwa Haruna, Senior client education instructor at TD Direct Investing. Be sure to check out the learning centre on my broker for educational videos, live interactive master classes and some upcoming webinars including on financial literacy, a WebBroker demo to take you deeper into the site and investing strategy. Before we get back to your questions on Canadian equities for Michael O'Brien, a reminder of how you get in touch with us. You have a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind, so Sen. 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 writing your question and hit send. We will see if one of our guests can get you the answer right hereat MoneyTalk Live. We are back now with Michael O'Brien taking your questions on Canadian equities. We have a lot of questions coming in on the plat form. This one is aboutthe telecom space. Would TELUS stock advance more over the years then Rogers Communications? Very specific, I don't know if we can answer this. We can talk about Telus and Rogers and what they are going for them. >> I'll give you the pros and the cons. One thing I like very much about both companies is their exposure to the Canadian wireless industry. I think particularly this last number of quarters we've seen good strength across the wireless industryin terms of subscriber additions, in terms of revenue growth, in terms of margins. So it's a good space to be, and that's what you would expect because wireless, it's benefiting as the economy reopens, things like foreign students coming back, immigration picking up, business travel resuming. Those are all things that we thought would lead to some pretty robust wireless results and that's what we've seen recently. So it's a good space to be right now. We believe, in terms of the two companies, Rogers is a less expensive valuation then Telus, but it also is a messier story because there is a lot of controversy around the Rogers Shaw acquisition and whether it will be approved by the competition Bureau . And obviously the major network outage recently did not help the sentimenteither. With Telus, it's a cleaner story but you have to be a bit more… >> You pay for that cleanliness. The whole shot transaction, course, makes me think of political headwinds. When you talk about any company or sector, particularly telecom, because we know that in Canada, even with the Harper Conservatives, they are always looking for those extra players in the wireless space. They always say they want to see less consolidation and more competition. Now you have the Rogers Shaw consolidation. >> The telcos had been whipping boys to the politicians for as you say many years, whether conservative or liberal. It's just that politicians have figured out that individual Canadians are like paying a lot for their cell phone bills, so that's just part of the territory. But the good news for a telecom investor is that, you know, maybe despite that were because of that, these have been very profitable companies for many years and the industry dynamics have been very stable in terms of how these companies compete against each other. and so overall, it's been a good place for investors to be despite thepolitical noise. >> Let's throw BCE into the mix. If we are talking about the big telcos… >> Absolutely. The big three, BCE has a little less wireless exposure in their mix. They have a little more of the traditional wireline, Internetservices as well. But they are all well run companies and they've all competed, recognizing that they are effective oligopolies, which really triggers the politicians. And so the politicians, as you know, for years tried to introduce more competition into the market, but the reality is these are very expensive networks to build and maintain. We saw how important that was first through the COVID pandemic 10s of millions of Canadians suddenly had to work from home, and the robustness of the networks was very critical. Obviously he got reinforced again when Rogers went down just to realize how helpless so many of us were. You can access your Internet, your TV doesn't work, your phone doesn't work. We realized just how dependent we are on this. So I think the government, over time, has shown some realism that we have to create an industry environment where they make enough money to keep reinvesting in these networks so that Canadians can have world-class networks. So the dream of injecting fourth or fifth or sixth wireless players, that has to be tempered with a bit of reality so that the proposal on the table right now, the proposed remedy Rogers is offering the competition Bureau, is that they would sell the Shaw wireless assets to cover core, which Québecor has a very solid track record in the wireless business within their own footprint, with in Québec, and so I think a lot of industry observers are a little puzzled why the competition Bureau is pushing back on that as a remedy. It seems like an obvious solution and if you were going to try to find a home for the Shaw wireless business to create a more sustainable forest player and wireless, it just seems like a logical choice. So I think a lot of investors frankly are scratching their heads, trying to figure out why the competition Bureau still is hesitating about this. >> We will see how that was going to play out. That's telcos of the wireless space. Let's talk about convenience. What do you think of Alimentation Couche-Tard as a long-term hold? Those are convenience stores and gas bars. >> The reality is, Couche-Tard has been a very successful acquirer of other convenience store chains. They literally started with 1 Convenience Store in Québec many, many years ago and now they are the second or third largest global convenience store chain with operations in Canada, the United States, Europe, getting into Asia. So the strength of this company, the strength of this management team has been their ability to acquire and integrate these convenience stores across the globe. They generate very solid free cash flow which gives them possibility to do that. And the convenience store business itself is a very stable business, relatively low economic sensitivity. You're buying gasoline, chips, pop, beer. So relatively low economic sensitivity. The concern that I've had or a concern that I've had with this stock that sort of tempers the bullish side hereis as they've sort of gobbled up all the convenient storage change is what's left to buy? >> The kingdoms have been conquered, what's left to do? >> One thing that was a little concerning a while ago, a year or two ago, they made an offer to buy a French grocery chain, Carrefour, which is very off strategy in my opinion. So whenever you see a company and veering off strategy, you worry about what are the implications. So to their credit, They've backed off and sort of return to their roots. They've been very good about returning cash to shareholders. But that would be my one source of concern going forward is if you again start to see they are getting outside of their traditionalcompetency,that would be worrying. >> One coming off the platform. Diversification. Should one hold a stock such as Magna while also holding the REIT that is mostly based on Magna's industrial occuancy? there's a sort of symmetry here. >> it's okay to have exposure to both names. Brookfield, when you get into Brookfieldfamily companies, that's another good example, they have a number of subsidiaries that are publicly traded, it's okay as long as you understand just how much exposure you have to the bigger group, right? again, it depends on your conviction level but the one thing I would say is kudos to the investor for understandingthis is one of the most basic things about portfolio construction is the notion of understanding when you have compound bets throughout your portfolio, by which I mean you have a number of different securities which you would think offer diversification because you are buying different staff, but at the end of the day, they are all really bets on the same thing. So it could be Magna and its REIT or it could be things like a number of companies across a number of industries, but they are all driven by interest rates going higher or commodity prices going higher. it's about understanding with the real economic impact of your economic exposures are cross your portfolio, it's a very important part of portfolio instruction. so like I said, kudos to the investor for recognizing that and asking the right question. >> We will get back to your question for Michael O'Brien on Canadian equities in a moment. As always, make sure you do your own research before making any investment decisions. A reminder that you can get in touch with us at any time. Give a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind soSend 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 will see if one of our guests can get you your answer right here at MoneyTalk Live. Crude oil below 90 bucks a barrel. TD Securities has some new commentary on what's weighing on the price. Anthony Okolie joins us now is more. Anthony. >> TD Securities is saying they are less bullish on oil because of the point to higherUS inventories and lower demand for gasoline. We did hear news that OPEC and its allies are adding about 100,000 barrels of oil to supply in September and that did help prices rally briefly. But prices have since fallen as low as the mid-90 range per barrel. The weakness in oil continues to be demand driven according to TD Securities. finally, China has also been a big factor according to TD Securities. there has been a lot of disappointment around the reopenings after COVID 19 Lockdowns in China. We are seeing recent restrictions in China as well. There are also worries that the COVID zero restrictions in China could continue into the foreseeable future. TD Securities concludes that any narrative from the Fed pointing to high rates for longer and confirmation that the US Chinese economies are slowing will serve as a catalyst for the move for crude oil. >> If we start talking about downside moves and we've seen them already and perhaps even further downside moves, of course audience mainly says, where do we see the price had it, does TD have an opinion? >> Yeah, they see the recent loosening in global markets and the demand risks from China and US suggest that the price of crude oil could move materially below the US$90 mark. In addition to that, TD Securities believes that… Doesn't believe that the Fed will pivot to a less hawkish stance which will put further pressure on demand on oil into 2023. > It's always a two-sided conversation Canada. Well, your energy stocks might not be happy about that. When I was driving back from vacation last week, I was kind of happy to see the price of oil a little lower. Great stuff as always, Anthony. > My pleasure. >> Anthony Okolie of MoneyTalk. Let's turn our eyes on the markets now and see how we're doing. More than halfway through the lunchtime trading session on Bay Street and Wall Street. We got the TSX Composite Index up 1/4 of a percent, 40 points. Barrick Gold off the top of the show, despite the global challenges faced by the mining industry, input cost and inflation, there is a 3.7% gain on that stock at this hour. South of the border, the S&P 500, the big show of the week is going to be the inflation print on Wednesday. Until we get that, we are making guesses about what we are going to get a Wednesday. We started the session in positive territory. The S&P 500 building on gains of recent days in recent weeks that we have fallen into negative territory this week, pretty modest to downside, six points and less than. 2%. The NASDAQ 100, a little more to the downside, down about 1/4 of a percent. Some of those tech stocks drag it, including Nvidia. Let's check in on the big chipmaker, cutting sales forecasts on weakness in gaming division and that stock making its weight felt, it's down 8%. We are back now with Michael O'Brien, taking questions on Canadian equities. He is a big one he had gotten to yet. Your outlook for the banks. >>For the banks? Well, by historical measures, the banks are quite expensive. Historically, over long period of time, unless you are in a recessionary or crisis environment,the typical range would be between 10 or 12 times forward earnings. The banks today are below the 10 times level, which gives you an indication that obviously investors are pricing it a lot of concerns about where the economic environment might be headed. So I think the big questions to get your head around our first, how significant is the credit cycle going to be in terms of potential loan losses they might incur, and second, are their balance sheets and their capital levels sufficient enough to absorb that? I'm on the more optimistic side of this. I think that Canadian banks are proven through a number of difficult periods that they are very resilient businesses, but clearly that's what you are seeing in the share prices right now. > Can we take a read of what we heard from the big Wall Street banks? It's always interesting, Ray, for earnings season, the big Wall Street banks leave for the Americans. We get our banks at the end of the earnings season. But they put money aside for a rainy day and that hit the bottom line. Can we read into that perhaps what we might get from our banks? [video buffering and repeating] >> Weeks here is I think the level of impaired loan-loss is another one, so ones that are in real trouble, the ones that aren't going to pay back, I think they are still going to be very well contained here. But I suspect some management teams are going to exercise a little bit of caution or prudence and set aside a few more for, like you said, a rainy day, if things deteriorate, these might become impaired down the road. So you never quite know how the investor is going to react to that, but I would read it as I suspect we are still going to see that the bank loan books are in very good shape. >> Alright. We will know in the next couple weeks. Another question here coming off the platform. Gold. Can gold prices hold current levels if we ended up in a recession? How would gold, I guess, react? >> Gold where is a lot of different hats so I think one of the things that's been pressuring gold here is it's traditionally been an inflation hedge. That's one of the reasons, whether it's negative real interest rates or … Bankers are pretty adamant that they are going to bring inflation down by whatever means necessary. That is a headwind to gold. on the other hand, I think we can look around the globe and realize there are a lot of hotspots, a lot of difficult situations, whether talking about Russia Ukraine, whether we are talking about the Taiwan Straits and Nancy Pelosi's visit to Taiwan and the Chinese reaction, there are a lot of hotspots right now and so that is another hat of gold, it is a bit of a safe haven bid in times of geopolitical controversy. So I think it really depends on sort of which has the upper hand here. I think if central bankers continue to wrestle down inflation, continue to raise rates, gold is going to struggle to go much higher. But if we get missiles getting shot out of North Korea or whatever, that can sometimes put a safe haven bid under the asset. >> That was a great conversation, Michael. I appreciate you meeting with us. >> You're welcome. >> That was Michael O'Brien. Stay tuned, tomorrow, Beata Caranci, chief economist at TD Bank will be taking your questions about the economy. Remember, you don't have to wait until we hit live at noon Eastern time tomorrow. You can get your questions in ahead of time. Email moneytalklive@td.com. That's all the time we have for the show today. Thanks for watching, we will see you tomorrow. [music]
