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[music] >> The S&P is up 20% year today, great start, NASDAQ even stronger with those big attack heavyweights.
Canada, like you say, hasn't had a bad year. On a total return basis, we are up respectably.
Obviously, we looks of the border and we are a little envious of the performance.
I think a lot of the same trends both north and south of the border, but Canada has had a few of the bigger components of our market, the banks have been a little bit of a laggard, some of the energy stocks have like debate, so the big telcos have liked a bit.
But all in all, a very strong start to the year.
If you think about it, relative to where we were back last fall when markets were at their lows, a lot of concern around inflation and there was a view that in order to bring inflation back to more acceptable levels, central bankers, policymakers would have to inflict some pain on the economy. Instead what we've got so far as we've had inflation come down very nicely. At least as quickly as most people expected. But we haven't seen that pain in the economy. You know, the first half of the year, both the US and Canadian economies performed pretty well.
>> And the job market has held up.
>> They have held up very well. I think that explains the strength we've seen which I don't think a lot of people were calling for back in November or December.
>> You see the market can't get too bullish about big gains in the back half of the year. This has to do with what markets are pricing in. What are you saying now?
>> My point on that would be it's been almost a perfect scenario this year.economics 101 tells you that you're not supposed to have your cake and ate it to you, and yet we have seen inflation… Consumption has been strong.
The only weakness we have seen has sort of been in the commodity complex which is actually helped bring inflation down.
So I guess where I'm at now is it's been a very smooth ride so far but for the central bankers, the Fed, the Bank of Canada, to achieve this soft landing or the no landing scenario that some people are calling for, I mean it's still going to be a really tough act to pull off.
So I think it's all about what's priced into markets today? What's priced into markets today where you look at where valuations are, the S&P for example is close to 20 times earnings which is quite elevated. It is telling you that investors expect a soft landing whereas if you sort of go back to some market history, you would say the odds of a soft landing are not as favourable as the markets are implying.
So from the starting point, it's a little bit of a challenge with what's been priced into the markets.
The other part of it is even if inflation continues to behave pretty well, I think the central bankers made it very clear that they intend to keep leaning on the economy.
If the economy continues to hold up, they aren't going to be in a rush to cut rates which means even if we do achieve a soft landing, it's hard to picture an environment where earnings growth is going to re-accelerate in a substantial manner because the policymakers are going to continue to keep things tight.
On the other hand, if all these recessionary signals that we were looking at, inverted yield curves and whatnot, if they aren't giving a false signal, if that is where we are heading, the economic environment is going to be much more difficult. Either way you slice it, I don't see a big rebound in earnings growth over the next two, three quarters.
so that makes me a little bit cautious because I'm not betting on further multiple expansion from what we have already seen.
>> Me talked about some of the indicators.
Are there also some lagging economic indicators that you will be keeping an eye on going forward?
>> I mean, you look at the whole panoply there to try to triangulate what's happening, you and I both said jobs have held up very well. It has. That seems to be more of a coincidence or lagging indicator. You said how inflation has come down. Those tend to be coincident or lagging indicators. All of the classic lead indicators, things like your purchasing managers index, those types of things or, like I mentioned, the inverted yield curve, those tend to be leading indicators and they have been flashing red for some time. So we are really at this point of asking is it different this time?
when you get to this point in the cycle, it's a tendency to say it will be better this time. The odds are, it's probably not.
I'm just trying to be sober and realistic about the odds of achieving this perfect economic scenario.
History would tell us it probably won't happen.
Markets are already pricing in a pretty positive outcome.
So I'm just saying, I'm being cautious.
I'm just being cautious.
>> You also said that Canada's not looking too bad compared to the US markets right now.
Why is that?
>> Like I mentioned earlier, there are a couple of big pockets. Important components of the Canadian market that have been laggards.
They haven't seen that 30, 40, 50% return out of a lot of these other stocks.
Specifically, the banks, the Canadian banks got caught up in the controversy around the problems with some of the US regional banks. You remember the Silicon Valley Bank failing in a couple of the other ones.
A lot of pressure on the deposits, concerned about home losses.
That dragged the Canadian banks down to.
They have started to stabilize here.
I think we have seen better deposit trends.
We haven't seen that deposit flight that really sparked the problems in these US regionals.
I think we have all realized that landing margins are probably going to be a bit pressured here for the next couple of quarters.
So that's kind of in the price.
And so far, the credit concerns, you know, the loan books have held up pretty well so far.
So I think at this point, the banks of kind of stabilize. They are not expensive stocks.
They still got these headwinds that they are going to have to deal with, but they are not expensive.
> What about energy?
>> And I was going to say another big, important part of the Canadian market is the energy space.
Again, there, commodities struggled. In the early parts of the year, I think people had hoped that China's reopening his story would drive the first half of the year.
it has kind of underwhelmed.
While demand has been good but hasn't push that oil commodity complex fire.
so instead of seeing oil prices in the 80s and $90 level, we were looking at 60 to 70.
So again, that's another part of the market, but now you're seeing oil prices have started to strengthen a little bit and valuations again, expectations are quite reasonable for that group of companies.
So if you get a scenario in the back half of the year where the banks and the energy stocks start to work, that could be a really nice tailwind for the TSX, Canadian compass it.
>> A great start to the discussion. And we will get to your questions about Canadian stocks for Michael O'Brien in just a moment.
And a reminder that you can get in touch with us at any time. Just email moneytalklive@td.com or fill out the viewer response box under the player on WebBroker.
Now here's an update on the top stories in the world of business today and a look at how the markets are trading.
Loblaw reported second-quarter results that beat analysts expectations.
The grocery giant said same-store sales grow by 6% and net income rose $508 million last quarter.
Loblaws said that sales growth was driven by inflationary shoppers walking to its discount grocery stores more often, such as no-frills and real Canadian superstore.
Canadian National Railway said that there was a drop in the second quarter. The Canadian real giant said economic weakness reduce the demand for oil, grain exports and consumer products.
Wildfires and parts of Canada and the 13 day BC Port strike also had an impact on shipments.
CNR reducedit's outlook for the year.
Finally, Google parent Alphabet delivered stronger-than-expected second-quarter results late Tuesday, reflecting strengthen its cloud business. The Google unit delivered a 28% jump in revenue year-over-year, while turning an operating profit versus a loss a year earlier.
Google also reported a Google ad revenue grew more than 3%, topping analysts expectation.
Here's how the main benchmark index in Canada is trading right now. The TSX is up just about 30 points or we will call that .2%. Of course, the big news is the Fed rate decision that's coming up this afternoon.
Taking a look at the US, the S&P 500 index is modestly down, .1%.
All right, we are back with Michael O'Brien, taking your questions about Canadian stocks. We'll start with the first question. This is nat gas. Michael, what is your outlook for nat gas here in Canada?
>> Natural gas prices I had a rough ride.
We had a much warmer than affected winter in the northern hemisphere,so natural gas prices had been quite weak this year. They seem to be finding a floor here so hopefully the rest is behind us. I think the real story for Canadian natural gas is if you look ahead to 2025, 2026, we have a very large natural gas, LNG, liquefied natural gas plant coming on. It's the LNG Canada project.
It's a very meaningful project.
Phase 1 is scheduled to come on, they've been a little vague but 2025, 2026,and it seems increasingly likely that the second phase of the project will also be sanctioned which means you've got another big demand source that will be in place by the end of the decade.
So here and now, gas prices are at a pretty low level and it's really weather dependent. But if you can look ahead to 25, 2026 and beyond that point, I think it's a real game changer for the Canadian natural gas pricing outlook.
So I think the longer-term perspective for the Canadian natural gas players is actually quite positive.
>> Let's go to the next for your question.
This is on Nutrien.
Could we get your take on Nutrien? Of course, Nutrien recently/production during the BC Port strike. What is your outlook for this company?
>> Again, we talked about week oil prices in the first half of the year, weak natural gas prices, weak fertilizer prices.
The commodity complex has been quite challenged this year.
There are some signs that all of this is starting to find a basin work higher.
Commodity prices, quite broadly, have started to rebound here a little bit, which is a positive.
I think that in Nutrien's case, it is obviously tied to farmer economics.
If you look at the grain complex, whether it's corn, soybeans, wheat, healthy prices, farmers are making good money. The underlying buyer of their product is in good shape.
I think we had a long I would call it a buyer's strike where a lot of the fertilizer inputs and particularly potash, the farmers were holding offer better prices.
I think that is largely behind us now.
it looks like potash prices are bottoming.
There are always a lot of wildcards here.
There is a lot of supply that would typically come out of Belarus and Russia which has been subject to sanctions, so there's always a possibility those sanctions are relaxed, you could see a little more supply in the market.
But it would appear at this point that fertilizer prices have probably bought the and the outlook should be a little more constructive going forward, particularly if grain prices and former economics hold in there.
>> Is there concern about extreme weather in Canada impacting production?
>> It's a double edged-sword. on the one hand, you get difficult weather that hurts crops. That obviously hurts the farmers.
at the same time, the crop shortfalls increase grain prices which help the farmers so it's a little bit of this and that.
I think there is a little bit of concern,well, there always is concerned this time of year when you get into the summer and you need a few good rains across, depending on where you're looking, the Midwest US, Saskatchewan, Alberta, I think there are some concerns about drought conditions in some of the key growing areas, but it's a little early in the summer to really hit the panic button on that.
>> We will move on to the next question on telcos.
What's your view on the telcos?
The telcos here in Canada.
>> It's an interesting space.
This morning, Rogers I had good numbers, stocks responding well. I would say a year or two ago,I was concerned about the valuations. The stockslooked expensive on an historical perspective.
I think that the stocks have had their struggles over the last little while. I think valuations are much more reasonable.
I think the starting point looks decent.
The issue is obviously with the Rogers Shaw deal closing in Rogers being required to spin off Shaw's wireless business to Québec, it changes the competitive dynamic in what has historically been a very stable, oligopolistic telecom world. We all real about our wireless bills.I think is going to want to make a name for itself with the freedom of wireless acquisitions.
Rogers is been having a bigger name out West.
A lot of people have been holding their breath about howthe competitive environment is going to shake out a particularly what they're looking for is an early tell, the back-to-school season.
As you start to put these hot offers in the market to try to sign up your stubs.
A lot of people have been apprehensive that may be these competitors are going to lose their discipline, reprice their base.
My guess is that they will probably behave in an oligopolistic fashion, but that's a concern.
That's what's weighing on the stocks right now.
>> Okay. Great start.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Michael O'Brien on Canadian stocks in just a moment.
And a reminder that you can get in touch with us at any time.
Just email moneytalklive@td.com.
Now let's get to today's educational segment.
In today's education segment, we are going to be answering few questions that viewers have sent in about the WebBroker platform.
Joining us now to help us, Caitlin Cormier, client education instructor with TD Direct Investing. Caitlin, thanks for joining us.
>> Thanks, Anthony. Nice to see you.
> Nice to see you as well. Okay.
Let's get to the first question.
Where can I find information about dividend dates on WebBroker?
This is a great question and definitely an important one as well so I'm going to go through it two different scenarios.
One scenario is the situation if we are looking for dividend information on a specific security. So we already know the security, we are just looking to get some additional information about that specific dividend.
Let's go ahead and hop right into WebBroker and get going.
So what we are going to do is we're going to start up on the top menu under research.
We are going to scroll down to investments and then click on stocks.
It will bring up whatever security we lost search.
Let's see if it will load for me.
Let's go ahead and put in… There you go.
We have a stock that pays a dividend so we are going to go ahead and scroll down. On the right-hand side of the screen, we are going to see fundamentals. This is where we can actually get a bit of dividend information. We will see our dividend yield showing up right here, so that's the amount of the dividend, the annual dividend divided by the share price. We also have the annual dividend rate which is the actual dollar amount of the rate, the dollar amount of the dividend per year as well as the ex dividend date and the payment date.
So important information about any declared dividends.
But maybe you want more information.
We want to know if the dividends are increasing over time, if there have been missed dividend payments or anything like that.
So instead of looking there, we could stick to the top of the screen and we will select the button here that says events.
There's a little tab. And we are going to click on the dividend tab here.
And this will actually show us the history of dividend payments for this company.
So we can check and see whether the annualized dividend amount has increased over time.
We can kind of ensure they are continuing to pay them consistently every quarter as well as confirm ex dividend dates as well.
So lots of information there if we already know the security we are looking for. But in scenario up that we don't know and we are looking for companies that have an ex dividend date, we can look under research, go under markets and then click the events button there.
same sort of ideas the tab we were just under except for the market as a whole.
And then next, again, we are going to click on the dividend tab.
so what this is showing us is that all companies that have an ex dividend date of today's date, 26 July, so we can see all of these different Canadian companies, we can see with their dividend per share is, the ex dividend date, the payment that the dividend will be paid, the annualized amount of the dividend and whether it's a regular dividend or potentially a special dividend.
So we can see one that is out of the ordinary for the company, but for the most part, they are just regular dividends.
Now of course, we can move forward in time here. Of course, if today is the ex dividend date it's too late to partake.
we would've had to purchase the security before today.
So if I were to choose, for example, tomorrow's day, I should be able to see the events for that day and WebBroker is giving me a bit of trouble here today.
But we should be able to actually refresh and see future dates as well.
Just click on the calendar and it should automatically update for you, even though it isn't automatically updating for me at this moment.
The last thing is you can click, there is a small kind of flag at the top right-hand side in the corner that is greyed out where you can click either US or Canadian to go back and forth, depending on the type of dividend you would like to see, whether it's a Canadian company or a US company.
I'll give it one more shot. There we go.
It's working for me. I switch to a different day and again, we switch US, it will show us the US companies with the ex dividend date of tomorrow, the 27th.
>> Caitlin, thank you very much. We will move to the second question.
How can I buy US stocks in my Canadian cash account?
>> Another good one. Lots of clients have questions around buying US securities just because we are in Canada, typically we are getting paid in Canadian cash, that's the majority of money that we will probably have.
The good news is it is simple to buy a US security in a Canadian account. It's the same as buying a Canadian security but you choose the US option the one that has the US flag beside it.
One thing I like tomention… If I were to choose the US version, when I buy the security in my Canadian account, you can see I have my Canadian account selected, I will be charged in US funds.
So you're gonna take Canadian and exchange it into US. If I get any dividends, it's going to be paid in US and get converted to Canadian in my account I want to go to sell the security, I'm also going to be selling it in US funds converted back to Canadian to be deposited into my account.
So there's a lot of impact of exchange in that scenario and it basically adds kind of an extra layer as to when you want to buy and sell the security when you are considering exchange.
So a lot of clients would choose, instead, to do this transaction in a US dollar account.
So what they are doing is buying and selling in US funds.
The other question that comes up is how you actually get those US funds?
I will just quickly show you where you can actually transfer money.
Under accounts on the far left-hand side, second kind of column here under transfers and withdrawals, you have the cash transfer option.
We are going to click on that.
Is going to bring up a little transaction screen here.
I'm going to choose to go, in this example, to my Canadian account into my US account.
And here I have to choose whether I want to take an amount of Canadian and transferred to whatever I will get in US or if I want to buy a certain amount in US dollars. So let's say I want US$10,000 so I'm just going to put in 10,000 US. And then when I click continue, I will get an exchange rate.
At this point in time, I consider whether I want to go ahead with the exchange right now I choose to cancel and come another time and check with the exchange rate is at that time.
So this type of transaction basically takes out that timing piece where you don't have to worry about what the exchange is at the current moment if you are buying US security.
Instead, it's already in US funds, you are buying and selling US funds and getting dividends in US. It just a way to completely avoid foreign exchange transactions.
>> Great information, as always.
Thanks for answering those your questions for us.
>> Thanks, Anthony.
>> Our thanks to Caitlin Cormier, 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 O'Brien, take your questions about Canadian stocks. We will move to the next question on Enbridge.
How is your guest viewing Enbridge right now?
>> So Enbridge, to us, it looks like a nice, stable company.
In the past, well, a couple of issues that would raise concern.
Obviously, there is that existential question of, are we going to be using oil five years, 10 years, 30 years from now?
Because half of Enbridge's business is oil pipelines. I think people have sort of become more sanguine about that, there will be a day but it's well out into the future.
So I don't think that's the principal overhang on the stock these days.
A second issue which people had some concerns around in the past was the balance sheet was a little more debt than was probably appropriate and the dividend payout ratio was quite elevated.
I think what we've seen, the last of the really big pipeline projects have kind of been completed over the last few years and they transitioned into a company that instead of these huge megaprojects that are on the front page of the newspaper, a lot of singles and doubles, a lot of smaller extensions of existing lines, far less controversial, expensive and difficult.
we are seeing that the growth rate isn't as high as it was, but the delivery of that growth is a lot smoother and so we are actually seeing Enbridge now where their balance sheetsare in pretty good shape. They are generating real free cash flow even after paying their dividend, so to us it's much more balanced now.
When you think about the defensiveness of their business, regulated pipeline or take or pay contracts, I think it's a pretty reasonable… It's a reasonable place to be in the market. And again, and he dividend investor, obviously that 7% dividend yield would catch their attention.
>> That was my question.
It is a very attractive dividend yield.
Is that sustainable? It seems like they are bringing down their debt.
>> I think the sustainability looks a lot better today than it would've three years ago, four years ago, five years ago.
So they are definitely moving in the right direction from that aspect.
>> Great perspective on Enbridge. We will move to the next question. This is on banks.
There was a real concern about banks earlier this year.
Is that still a concern or have we moved on?
Related to the issues we had in the United States with the banking crisis there.
Is that still something that people should be worried about?
>> Yeah.
I think we want to keep our eyes on it but clearly the panicky situation that we saw in the spring, that has subsided.
Policymakers in the states move pretty quickly to put blanket guarantees on US deposits which seem to calm things down a little bit.
The Canadian banks, just to be clear, never suffered from this same deposit outflow issue. Canadian bank deposits have been very stable and actually growing. The issue has simply been the cost of those deposits has gone up as we all kind of figured this out where moving some of that money sitting around earning zero in checking account and moving it into a savings account are GIC, so the cost of those deposits has gone up but there's never been a question that the Canadian deposit base is stable.
So yes, that's kind of behind us for now, but one of the things I still remember about the financial crisis.
Was we had these flareups from time to time and then things would seem to go away and die down and then they flared back up again.
So just throwing that out as a cautionary tale.
We don't want to have both eyes closed when we are sleeping here. But yes, I think the worst of that phase is behind us and I think investors also, over the last three, four, five months have gained a better appreciation for the differentiation of where the Canadian banks stand relative to some of these US regional banks that don't have the same advantages.
> That is important.
Let's move to the next question.
This is on Shopify. How is Shopify looking? Of course, tech stocks like Shopify have been cutting back on staff, reducing expenses. What are your thoughts on Shopify?
>> Shopify has had an outstanding run recently. They had a very difficult 2022.
They have rebounded very strongly in 2023.
To your point, I think Shopify, the very encouraging thing from an investor's perspective is I would say they have grown up a little bit.
He used to be we'd spend all the money we want to try to drive sales as fast as we can.
We don't really care about profits.
We now really care about free cash flow.
2022, I think the good thing that came out of that beat down that they had was they matured a bit.
They decided they at least showed an appreciation that investors want to see real earnings, real free cash flow, a sustainable business model.
So they have tightened their belts quite considerably.
They are spending less, both on CAP-EX and op-ex. They have reduced their staffing.
they decided they are not going to become a mini Amazon. Those are all very positive things.
At the end of the day, it's personal consumption, spending that really feeds their core customers in small and medium-sized businesses.
That has held up better-than-expected year to date so again, positives. The caution is that it's a very, very expensive stock, so expectations are skyhigh for this company, not just for the next quarter but for the next number of years.
So good business trends, positive signs in terms of a maturing perspective on achieving profitability, but a very expensive valuation.
>> Okay.
Great questions.
We will get back to your questions for Michael O'Brien on Canadian stocks in just a moment. As always, make sure you do your own research before making any investment decisions.
and a reminder that 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.
Time for an update on the markets and are having a look at TD's advanced dashboard.
It's a platform designed for active traders available through TD Direct Investing. We are looking at the heat map function a herewhich gives you a view of the market movers on the TSX 60 by price and volume.
we are looking at financials.
Shares of Royal Bank, TD, BMS, all are looking in the green. We are seeing some bids there.
If we move down into energy, the bottom left corner, a bit of a mixed picture.
We are seeing some modest weakness and Suncor, CNQ, Enbridge.
if we take a look at the other side, under technology, Rogers just reported some positive earnings. The telecom stock is up to the tune of 4%.
Okay, let's take a look at the S and P 100.
Starting with technology, Microsoft is currently in the red. It is seeing some slowingcloud sales and so it is down this morning but the shares of Google are in the green and they also reported some strong second-quarter earnings.
you can find more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
And we are back now with Michael O'Brien from TD asset management taking your question. This one is on big oil companies. Is this a good time to look at the big oil companies?
>> So looking at the big Canadian producers, yeah, is not a bad time. You obviously had a huge run up in the share prices, all the producers as the Russia Ukraine conflict really a big out last spring, there were a lot of concerns around security of supply. Oil was a triple digit prices for a while.
That euphoria has passed.
All of these stocks have pulled back quite a bit.
And now, like I was saying earlier in the show, the quantity complex seems to be finding a bit of a bottom here.
Oil prices leading the way.
And with a healthier oil price backdrop, these companies, they don't look expensive and so if you can find ones were operations are running smoothly and you have that positive view on oil, today is a very good time to be looking at those stocks.
>> And just to wrap up, what is your overall view of the Canadian stock market right now, given what we know?
>> I guess if I was to frame it up, I would feel positive about where evaluations are added. I'm a little nervous about where earnings are going to be. The Canadian market has a lot of very cyclical sectors, very sensitive to the economy, not just the Canadian economy but the global economy. But really is the economy goes, so go the earnings and that's going to be the key for the Canadian market.
>> Always great information. Thanks very much for joining us and welcome back from your vacation.
>> Thank you very much.
>> Our thanks Michael O'Brien, Portfolio manager at TD Asset Management. Always do your own research before making any investment decisions. On a programming now, later today we will have breaking announcements on the US Federal Reserve's rate decision with Andrew Foran, economist with TD. You will be able to find that on our website.
MoneyTalk go.com, after the news breaks at 2 PM, Eastern standard time. On Thursday, Brad Simpson, with TD Wealth will be our guest taking your questions about market strategy.
you get a head start by emailing moneytalklive@td.com.
That's all for our show today. See you tomorrow.
[music]
Canada, like you say, hasn't had a bad year. On a total return basis, we are up respectably.
Obviously, we looks of the border and we are a little envious of the performance.
I think a lot of the same trends both north and south of the border, but Canada has had a few of the bigger components of our market, the banks have been a little bit of a laggard, some of the energy stocks have like debate, so the big telcos have liked a bit.
But all in all, a very strong start to the year.
If you think about it, relative to where we were back last fall when markets were at their lows, a lot of concern around inflation and there was a view that in order to bring inflation back to more acceptable levels, central bankers, policymakers would have to inflict some pain on the economy. Instead what we've got so far as we've had inflation come down very nicely. At least as quickly as most people expected. But we haven't seen that pain in the economy. You know, the first half of the year, both the US and Canadian economies performed pretty well.
>> And the job market has held up.
>> They have held up very well. I think that explains the strength we've seen which I don't think a lot of people were calling for back in November or December.
>> You see the market can't get too bullish about big gains in the back half of the year. This has to do with what markets are pricing in. What are you saying now?
>> My point on that would be it's been almost a perfect scenario this year.economics 101 tells you that you're not supposed to have your cake and ate it to you, and yet we have seen inflation… Consumption has been strong.
The only weakness we have seen has sort of been in the commodity complex which is actually helped bring inflation down.
So I guess where I'm at now is it's been a very smooth ride so far but for the central bankers, the Fed, the Bank of Canada, to achieve this soft landing or the no landing scenario that some people are calling for, I mean it's still going to be a really tough act to pull off.
So I think it's all about what's priced into markets today? What's priced into markets today where you look at where valuations are, the S&P for example is close to 20 times earnings which is quite elevated. It is telling you that investors expect a soft landing whereas if you sort of go back to some market history, you would say the odds of a soft landing are not as favourable as the markets are implying.
So from the starting point, it's a little bit of a challenge with what's been priced into the markets.
The other part of it is even if inflation continues to behave pretty well, I think the central bankers made it very clear that they intend to keep leaning on the economy.
If the economy continues to hold up, they aren't going to be in a rush to cut rates which means even if we do achieve a soft landing, it's hard to picture an environment where earnings growth is going to re-accelerate in a substantial manner because the policymakers are going to continue to keep things tight.
On the other hand, if all these recessionary signals that we were looking at, inverted yield curves and whatnot, if they aren't giving a false signal, if that is where we are heading, the economic environment is going to be much more difficult. Either way you slice it, I don't see a big rebound in earnings growth over the next two, three quarters.
so that makes me a little bit cautious because I'm not betting on further multiple expansion from what we have already seen.
>> Me talked about some of the indicators.
Are there also some lagging economic indicators that you will be keeping an eye on going forward?
>> I mean, you look at the whole panoply there to try to triangulate what's happening, you and I both said jobs have held up very well. It has. That seems to be more of a coincidence or lagging indicator. You said how inflation has come down. Those tend to be coincident or lagging indicators. All of the classic lead indicators, things like your purchasing managers index, those types of things or, like I mentioned, the inverted yield curve, those tend to be leading indicators and they have been flashing red for some time. So we are really at this point of asking is it different this time?
when you get to this point in the cycle, it's a tendency to say it will be better this time. The odds are, it's probably not.
I'm just trying to be sober and realistic about the odds of achieving this perfect economic scenario.
History would tell us it probably won't happen.
Markets are already pricing in a pretty positive outcome.
So I'm just saying, I'm being cautious.
I'm just being cautious.
>> You also said that Canada's not looking too bad compared to the US markets right now.
Why is that?
>> Like I mentioned earlier, there are a couple of big pockets. Important components of the Canadian market that have been laggards.
They haven't seen that 30, 40, 50% return out of a lot of these other stocks.
Specifically, the banks, the Canadian banks got caught up in the controversy around the problems with some of the US regional banks. You remember the Silicon Valley Bank failing in a couple of the other ones.
A lot of pressure on the deposits, concerned about home losses.
That dragged the Canadian banks down to.
They have started to stabilize here.
I think we have seen better deposit trends.
We haven't seen that deposit flight that really sparked the problems in these US regionals.
I think we have all realized that landing margins are probably going to be a bit pressured here for the next couple of quarters.
So that's kind of in the price.
And so far, the credit concerns, you know, the loan books have held up pretty well so far.
So I think at this point, the banks of kind of stabilize. They are not expensive stocks.
They still got these headwinds that they are going to have to deal with, but they are not expensive.
> What about energy?
>> And I was going to say another big, important part of the Canadian market is the energy space.
Again, there, commodities struggled. In the early parts of the year, I think people had hoped that China's reopening his story would drive the first half of the year.
it has kind of underwhelmed.
While demand has been good but hasn't push that oil commodity complex fire.
so instead of seeing oil prices in the 80s and $90 level, we were looking at 60 to 70.
So again, that's another part of the market, but now you're seeing oil prices have started to strengthen a little bit and valuations again, expectations are quite reasonable for that group of companies.
So if you get a scenario in the back half of the year where the banks and the energy stocks start to work, that could be a really nice tailwind for the TSX, Canadian compass it.
>> A great start to the discussion. And we will get to your questions about Canadian stocks for Michael O'Brien in just a moment.
And a reminder that you can get in touch with us at any time. Just email moneytalklive@td.com or fill out the viewer response box under the player on WebBroker.
Now here's an update on the top stories in the world of business today and a look at how the markets are trading.
Loblaw reported second-quarter results that beat analysts expectations.
The grocery giant said same-store sales grow by 6% and net income rose $508 million last quarter.
Loblaws said that sales growth was driven by inflationary shoppers walking to its discount grocery stores more often, such as no-frills and real Canadian superstore.
Canadian National Railway said that there was a drop in the second quarter. The Canadian real giant said economic weakness reduce the demand for oil, grain exports and consumer products.
Wildfires and parts of Canada and the 13 day BC Port strike also had an impact on shipments.
CNR reducedit's outlook for the year.
Finally, Google parent Alphabet delivered stronger-than-expected second-quarter results late Tuesday, reflecting strengthen its cloud business. The Google unit delivered a 28% jump in revenue year-over-year, while turning an operating profit versus a loss a year earlier.
Google also reported a Google ad revenue grew more than 3%, topping analysts expectation.
Here's how the main benchmark index in Canada is trading right now. The TSX is up just about 30 points or we will call that .2%. Of course, the big news is the Fed rate decision that's coming up this afternoon.
Taking a look at the US, the S&P 500 index is modestly down, .1%.
All right, we are back with Michael O'Brien, taking your questions about Canadian stocks. We'll start with the first question. This is nat gas. Michael, what is your outlook for nat gas here in Canada?
>> Natural gas prices I had a rough ride.
We had a much warmer than affected winter in the northern hemisphere,so natural gas prices had been quite weak this year. They seem to be finding a floor here so hopefully the rest is behind us. I think the real story for Canadian natural gas is if you look ahead to 2025, 2026, we have a very large natural gas, LNG, liquefied natural gas plant coming on. It's the LNG Canada project.
It's a very meaningful project.
Phase 1 is scheduled to come on, they've been a little vague but 2025, 2026,and it seems increasingly likely that the second phase of the project will also be sanctioned which means you've got another big demand source that will be in place by the end of the decade.
So here and now, gas prices are at a pretty low level and it's really weather dependent. But if you can look ahead to 25, 2026 and beyond that point, I think it's a real game changer for the Canadian natural gas pricing outlook.
So I think the longer-term perspective for the Canadian natural gas players is actually quite positive.
>> Let's go to the next for your question.
This is on Nutrien.
Could we get your take on Nutrien? Of course, Nutrien recently/production during the BC Port strike. What is your outlook for this company?
>> Again, we talked about week oil prices in the first half of the year, weak natural gas prices, weak fertilizer prices.
The commodity complex has been quite challenged this year.
There are some signs that all of this is starting to find a basin work higher.
Commodity prices, quite broadly, have started to rebound here a little bit, which is a positive.
I think that in Nutrien's case, it is obviously tied to farmer economics.
If you look at the grain complex, whether it's corn, soybeans, wheat, healthy prices, farmers are making good money. The underlying buyer of their product is in good shape.
I think we had a long I would call it a buyer's strike where a lot of the fertilizer inputs and particularly potash, the farmers were holding offer better prices.
I think that is largely behind us now.
it looks like potash prices are bottoming.
There are always a lot of wildcards here.
There is a lot of supply that would typically come out of Belarus and Russia which has been subject to sanctions, so there's always a possibility those sanctions are relaxed, you could see a little more supply in the market.
But it would appear at this point that fertilizer prices have probably bought the and the outlook should be a little more constructive going forward, particularly if grain prices and former economics hold in there.
>> Is there concern about extreme weather in Canada impacting production?
>> It's a double edged-sword. on the one hand, you get difficult weather that hurts crops. That obviously hurts the farmers.
at the same time, the crop shortfalls increase grain prices which help the farmers so it's a little bit of this and that.
I think there is a little bit of concern,well, there always is concerned this time of year when you get into the summer and you need a few good rains across, depending on where you're looking, the Midwest US, Saskatchewan, Alberta, I think there are some concerns about drought conditions in some of the key growing areas, but it's a little early in the summer to really hit the panic button on that.
>> We will move on to the next question on telcos.
What's your view on the telcos?
The telcos here in Canada.
>> It's an interesting space.
This morning, Rogers I had good numbers, stocks responding well. I would say a year or two ago,I was concerned about the valuations. The stockslooked expensive on an historical perspective.
I think that the stocks have had their struggles over the last little while. I think valuations are much more reasonable.
I think the starting point looks decent.
The issue is obviously with the Rogers Shaw deal closing in Rogers being required to spin off Shaw's wireless business to Québec, it changes the competitive dynamic in what has historically been a very stable, oligopolistic telecom world. We all real about our wireless bills.I think is going to want to make a name for itself with the freedom of wireless acquisitions.
Rogers is been having a bigger name out West.
A lot of people have been holding their breath about howthe competitive environment is going to shake out a particularly what they're looking for is an early tell, the back-to-school season.
As you start to put these hot offers in the market to try to sign up your stubs.
A lot of people have been apprehensive that may be these competitors are going to lose their discipline, reprice their base.
My guess is that they will probably behave in an oligopolistic fashion, but that's a concern.
That's what's weighing on the stocks right now.
>> Okay. Great start.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Michael O'Brien on Canadian stocks in just a moment.
And a reminder that you can get in touch with us at any time.
Just email moneytalklive@td.com.
Now let's get to today's educational segment.
In today's education segment, we are going to be answering few questions that viewers have sent in about the WebBroker platform.
Joining us now to help us, Caitlin Cormier, client education instructor with TD Direct Investing. Caitlin, thanks for joining us.
>> Thanks, Anthony. Nice to see you.
> Nice to see you as well. Okay.
Let's get to the first question.
Where can I find information about dividend dates on WebBroker?
This is a great question and definitely an important one as well so I'm going to go through it two different scenarios.
One scenario is the situation if we are looking for dividend information on a specific security. So we already know the security, we are just looking to get some additional information about that specific dividend.
Let's go ahead and hop right into WebBroker and get going.
So what we are going to do is we're going to start up on the top menu under research.
We are going to scroll down to investments and then click on stocks.
It will bring up whatever security we lost search.
Let's see if it will load for me.
Let's go ahead and put in… There you go.
We have a stock that pays a dividend so we are going to go ahead and scroll down. On the right-hand side of the screen, we are going to see fundamentals. This is where we can actually get a bit of dividend information. We will see our dividend yield showing up right here, so that's the amount of the dividend, the annual dividend divided by the share price. We also have the annual dividend rate which is the actual dollar amount of the rate, the dollar amount of the dividend per year as well as the ex dividend date and the payment date.
So important information about any declared dividends.
But maybe you want more information.
We want to know if the dividends are increasing over time, if there have been missed dividend payments or anything like that.
So instead of looking there, we could stick to the top of the screen and we will select the button here that says events.
There's a little tab. And we are going to click on the dividend tab here.
And this will actually show us the history of dividend payments for this company.
So we can check and see whether the annualized dividend amount has increased over time.
We can kind of ensure they are continuing to pay them consistently every quarter as well as confirm ex dividend dates as well.
So lots of information there if we already know the security we are looking for. But in scenario up that we don't know and we are looking for companies that have an ex dividend date, we can look under research, go under markets and then click the events button there.
same sort of ideas the tab we were just under except for the market as a whole.
And then next, again, we are going to click on the dividend tab.
so what this is showing us is that all companies that have an ex dividend date of today's date, 26 July, so we can see all of these different Canadian companies, we can see with their dividend per share is, the ex dividend date, the payment that the dividend will be paid, the annualized amount of the dividend and whether it's a regular dividend or potentially a special dividend.
So we can see one that is out of the ordinary for the company, but for the most part, they are just regular dividends.
Now of course, we can move forward in time here. Of course, if today is the ex dividend date it's too late to partake.
we would've had to purchase the security before today.
So if I were to choose, for example, tomorrow's day, I should be able to see the events for that day and WebBroker is giving me a bit of trouble here today.
But we should be able to actually refresh and see future dates as well.
Just click on the calendar and it should automatically update for you, even though it isn't automatically updating for me at this moment.
The last thing is you can click, there is a small kind of flag at the top right-hand side in the corner that is greyed out where you can click either US or Canadian to go back and forth, depending on the type of dividend you would like to see, whether it's a Canadian company or a US company.
I'll give it one more shot. There we go.
It's working for me. I switch to a different day and again, we switch US, it will show us the US companies with the ex dividend date of tomorrow, the 27th.
>> Caitlin, thank you very much. We will move to the second question.
How can I buy US stocks in my Canadian cash account?
>> Another good one. Lots of clients have questions around buying US securities just because we are in Canada, typically we are getting paid in Canadian cash, that's the majority of money that we will probably have.
The good news is it is simple to buy a US security in a Canadian account. It's the same as buying a Canadian security but you choose the US option the one that has the US flag beside it.
One thing I like tomention… If I were to choose the US version, when I buy the security in my Canadian account, you can see I have my Canadian account selected, I will be charged in US funds.
So you're gonna take Canadian and exchange it into US. If I get any dividends, it's going to be paid in US and get converted to Canadian in my account I want to go to sell the security, I'm also going to be selling it in US funds converted back to Canadian to be deposited into my account.
So there's a lot of impact of exchange in that scenario and it basically adds kind of an extra layer as to when you want to buy and sell the security when you are considering exchange.
So a lot of clients would choose, instead, to do this transaction in a US dollar account.
So what they are doing is buying and selling in US funds.
The other question that comes up is how you actually get those US funds?
I will just quickly show you where you can actually transfer money.
Under accounts on the far left-hand side, second kind of column here under transfers and withdrawals, you have the cash transfer option.
We are going to click on that.
Is going to bring up a little transaction screen here.
I'm going to choose to go, in this example, to my Canadian account into my US account.
And here I have to choose whether I want to take an amount of Canadian and transferred to whatever I will get in US or if I want to buy a certain amount in US dollars. So let's say I want US$10,000 so I'm just going to put in 10,000 US. And then when I click continue, I will get an exchange rate.
At this point in time, I consider whether I want to go ahead with the exchange right now I choose to cancel and come another time and check with the exchange rate is at that time.
So this type of transaction basically takes out that timing piece where you don't have to worry about what the exchange is at the current moment if you are buying US security.
Instead, it's already in US funds, you are buying and selling US funds and getting dividends in US. It just a way to completely avoid foreign exchange transactions.
>> Great information, as always.
Thanks for answering those your questions for us.
>> Thanks, Anthony.
>> Our thanks to Caitlin Cormier, 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 O'Brien, take your questions about Canadian stocks. We will move to the next question on Enbridge.
How is your guest viewing Enbridge right now?
>> So Enbridge, to us, it looks like a nice, stable company.
In the past, well, a couple of issues that would raise concern.
Obviously, there is that existential question of, are we going to be using oil five years, 10 years, 30 years from now?
Because half of Enbridge's business is oil pipelines. I think people have sort of become more sanguine about that, there will be a day but it's well out into the future.
So I don't think that's the principal overhang on the stock these days.
A second issue which people had some concerns around in the past was the balance sheet was a little more debt than was probably appropriate and the dividend payout ratio was quite elevated.
I think what we've seen, the last of the really big pipeline projects have kind of been completed over the last few years and they transitioned into a company that instead of these huge megaprojects that are on the front page of the newspaper, a lot of singles and doubles, a lot of smaller extensions of existing lines, far less controversial, expensive and difficult.
we are seeing that the growth rate isn't as high as it was, but the delivery of that growth is a lot smoother and so we are actually seeing Enbridge now where their balance sheetsare in pretty good shape. They are generating real free cash flow even after paying their dividend, so to us it's much more balanced now.
When you think about the defensiveness of their business, regulated pipeline or take or pay contracts, I think it's a pretty reasonable… It's a reasonable place to be in the market. And again, and he dividend investor, obviously that 7% dividend yield would catch their attention.
>> That was my question.
It is a very attractive dividend yield.
Is that sustainable? It seems like they are bringing down their debt.
>> I think the sustainability looks a lot better today than it would've three years ago, four years ago, five years ago.
So they are definitely moving in the right direction from that aspect.
>> Great perspective on Enbridge. We will move to the next question. This is on banks.
There was a real concern about banks earlier this year.
Is that still a concern or have we moved on?
Related to the issues we had in the United States with the banking crisis there.
Is that still something that people should be worried about?
>> Yeah.
I think we want to keep our eyes on it but clearly the panicky situation that we saw in the spring, that has subsided.
Policymakers in the states move pretty quickly to put blanket guarantees on US deposits which seem to calm things down a little bit.
The Canadian banks, just to be clear, never suffered from this same deposit outflow issue. Canadian bank deposits have been very stable and actually growing. The issue has simply been the cost of those deposits has gone up as we all kind of figured this out where moving some of that money sitting around earning zero in checking account and moving it into a savings account are GIC, so the cost of those deposits has gone up but there's never been a question that the Canadian deposit base is stable.
So yes, that's kind of behind us for now, but one of the things I still remember about the financial crisis.
Was we had these flareups from time to time and then things would seem to go away and die down and then they flared back up again.
So just throwing that out as a cautionary tale.
We don't want to have both eyes closed when we are sleeping here. But yes, I think the worst of that phase is behind us and I think investors also, over the last three, four, five months have gained a better appreciation for the differentiation of where the Canadian banks stand relative to some of these US regional banks that don't have the same advantages.
> That is important.
Let's move to the next question.
This is on Shopify. How is Shopify looking? Of course, tech stocks like Shopify have been cutting back on staff, reducing expenses. What are your thoughts on Shopify?
>> Shopify has had an outstanding run recently. They had a very difficult 2022.
They have rebounded very strongly in 2023.
To your point, I think Shopify, the very encouraging thing from an investor's perspective is I would say they have grown up a little bit.
He used to be we'd spend all the money we want to try to drive sales as fast as we can.
We don't really care about profits.
We now really care about free cash flow.
2022, I think the good thing that came out of that beat down that they had was they matured a bit.
They decided they at least showed an appreciation that investors want to see real earnings, real free cash flow, a sustainable business model.
So they have tightened their belts quite considerably.
They are spending less, both on CAP-EX and op-ex. They have reduced their staffing.
they decided they are not going to become a mini Amazon. Those are all very positive things.
At the end of the day, it's personal consumption, spending that really feeds their core customers in small and medium-sized businesses.
That has held up better-than-expected year to date so again, positives. The caution is that it's a very, very expensive stock, so expectations are skyhigh for this company, not just for the next quarter but for the next number of years.
So good business trends, positive signs in terms of a maturing perspective on achieving profitability, but a very expensive valuation.
>> Okay.
Great questions.
We will get back to your questions for Michael O'Brien on Canadian stocks in just a moment. As always, make sure you do your own research before making any investment decisions.
and a reminder that 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.
Time for an update on the markets and are having a look at TD's advanced dashboard.
It's a platform designed for active traders available through TD Direct Investing. We are looking at the heat map function a herewhich gives you a view of the market movers on the TSX 60 by price and volume.
we are looking at financials.
Shares of Royal Bank, TD, BMS, all are looking in the green. We are seeing some bids there.
If we move down into energy, the bottom left corner, a bit of a mixed picture.
We are seeing some modest weakness and Suncor, CNQ, Enbridge.
if we take a look at the other side, under technology, Rogers just reported some positive earnings. The telecom stock is up to the tune of 4%.
Okay, let's take a look at the S and P 100.
Starting with technology, Microsoft is currently in the red. It is seeing some slowingcloud sales and so it is down this morning but the shares of Google are in the green and they also reported some strong second-quarter earnings.
you can find more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
And we are back now with Michael O'Brien from TD asset management taking your question. This one is on big oil companies. Is this a good time to look at the big oil companies?
>> So looking at the big Canadian producers, yeah, is not a bad time. You obviously had a huge run up in the share prices, all the producers as the Russia Ukraine conflict really a big out last spring, there were a lot of concerns around security of supply. Oil was a triple digit prices for a while.
That euphoria has passed.
All of these stocks have pulled back quite a bit.
And now, like I was saying earlier in the show, the quantity complex seems to be finding a bit of a bottom here.
Oil prices leading the way.
And with a healthier oil price backdrop, these companies, they don't look expensive and so if you can find ones were operations are running smoothly and you have that positive view on oil, today is a very good time to be looking at those stocks.
>> And just to wrap up, what is your overall view of the Canadian stock market right now, given what we know?
>> I guess if I was to frame it up, I would feel positive about where evaluations are added. I'm a little nervous about where earnings are going to be. The Canadian market has a lot of very cyclical sectors, very sensitive to the economy, not just the Canadian economy but the global economy. But really is the economy goes, so go the earnings and that's going to be the key for the Canadian market.
>> Always great information. Thanks very much for joining us and welcome back from your vacation.
>> Thank you very much.
>> Our thanks Michael O'Brien, Portfolio manager at TD Asset Management. Always do your own research before making any investment decisions. On a programming now, later today we will have breaking announcements on the US Federal Reserve's rate decision with Andrew Foran, economist with TD. You will be able to find that on our website.
MoneyTalk go.com, after the news breaks at 2 PM, Eastern standard time. On Thursday, Brad Simpson, with TD Wealth will be our guest taking your questions about market strategy.
you get a head start by emailing moneytalklive@td.com.
That's all for our show today. See you tomorrow.
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