Robert Pemberton – 08/17/2022

[music] Hello. I'm Greg Bonnell and welcome to MoneyTalk Live brought to you by TD Direct Investing. Every day I'll be joining guests from across TD many of whom you'll only see here. We'll take you through the markets and hope you do what's moving and investing. We'll discuss today whether the so-called Fed Pivot away from aggressive rates is likely with TD Asset Management head of the, Rob Pemberton. And in today's Webbroker education segment will have a look at different tools the platform has to research mutual funds with Jason Natyk. Here's how you can get in touch with us. Just email us@moneytalklive.com or Philip that you viewer response box right here on Webbroker. Before we get to our guests of the day, let's give you an update on the market action. It's been another cautious start of the day. 20,100, you are seeing a pullback for the TSX index. In recent days we've been able to carry on with that Summer rally put into the test that thesis right now. Let's check some of the energy names. A fluid trade, holding modestly. Bay tax up a little more than 1/2%. Lundin Mining may be considering the sale of mine in Portugal but these are unconfirmed reports at this hour. Let's check out what's happening on Wall Street with the S&P 500 of course, where to get the Fed minutes this afternoon. When we pull back the curtain and try to figure out what they are talking about around the table at that last meeting. Investors carefully will be sifting through every bit of information there. Right now, you do have some selling pressure. 4256, down almost 50 points, a little more than a full percent. Let's check on NASDAQ to see what's happening there. Col. Cruz, coming in this morning, positive headlines around the name. Carnival Cruise, at 10 bucks and $0.43 a share demo 7%. And that's a market update. [music] Stronger US economic data has led some market watchers to believe that a "Fed Pivot" away from jumbo sized interest rates hikes is on the way. But is actually case? Joining us now to discuss is today's featured guest, Rob Pemberton Head of Fixed Income at TD Asset Management. Hello. This is the big question of the Summer, really. A little bit low expectations, pivot, pivot, pivot. What's the reality here? >> Good to be here. It is the teeter totter that everyone is talking about right now. The seesaw battle between inflation and growth. The way I would basically characterize it is one that number does not make a trend. We saw yesterday from the Canadian statistics coming in on the headline basis lower. But core inflation continuing to rise. What the Fed, Bank of Canada, Bank of England and the ECB are all focused on now is inflation targeting that lower inflation. At that pivot is still in the process and we are a long way from being done on the rate hikes side. >> I was going to say the beginning of the end, it sounds like a long road. I think we have become accustomed to really quick responses and sort of, getting our needs met very quickly by central banks and it's been a while. Always riding to the rescue. But this seems to be an area where there is saying "listen we have an inflationary problem here and we will do whatever it takes." Some of that reasoning, we are starting to see some credibility that may have been lost earlier in the pandemic. >> While certainly with the responses we saw from a monetary perspective and a fiscal perspective during the pandemic, the economic growth he saw coming out of it definitely saw central banks behind the times with respect to inflation and inflationary pressures. I'm certain then when economic historians look back at this time, they will say that central banks were slow to react. The reaction is been very positive in terms of gaining back much of that credibility and we've seen that, both from where we C-terminal rates of what the market pricing is from where central banks will get to you as well as what we are starting to see from an inflation perspective. My thought process right now is that we are likely to see inflation move lower relatively quickly to probably that for 4. 5 to 5% range. But this could be a much longer slug than the market is currently pricing. > Let's talk with a long day and then. There's been some thought not only from a pivot interview but even as the fact that they will be done soon and they will be cutting again. Because there and after react to weakness in the economy. Some people are thinking not so quickly. The inflation job, bringing it down to Target is there to be a rough one. It's not be a long one. You can't just turn on a dime and get back to the easy monetary policy. Reckoning at all of our needs met in the next couple of days or weeks. >>I think people expecting the Fed to come back into the market are likely to be disappointed over the next two or three years. We certainly believe that the market is mispricing. The rate cuts and 23 and 24, in order to get inflation back down… Certainly some of these cyclical components of inflation are going to come back down at ease. But some of the secular issues associated with it, particularly wages, housing, owners equivalent rent, things along those lines, there and remain sticky and higher for longer. Which tends to mean that overall inflation will remain higher. With that, as I mentioned, the idea that the Fed will be cutting rates in 2023 is, in my opinion, a little misplaced at this stage. I think the market is trying to vet between which former Fed governor whether it's going to be the Arthur Burns of the mid-1970s or whether it's going to be Paul ^. ..¸of the 1980s. Arthur Burns, from a historical perspective was reluctant to raise rates meaningfully to quell inflation were as we know Paul Volcker had a great deal when it came to raising rates in dealing with tough medicine upfront. In order to provide a better outcome for the economy along returns. >> With this sort of divergent reviews in the market with push and pull with people figuring out where they want to be, what does it mean of the fixed income space? How should we approach it as investors? >> From our perspective, some key things that happened. The idea that we have seen an aggressive hike early on in this cycle, and we continue to believe that we will see 50 or 75 going forward in the next couple… Central bankers broadly in North America want to get to at least 3 1/2% which we are 100 points away from him. So we are going to continue to see that. But from a fixed income perspective, what that means we are likely to see more volatility. Partly because we're going to see more volatility in both inflation numbers and in economic growth in assets broadly speaking and were also going to see greater volatility in the numbers as a result of the Fed dropping forward guidance. So today's numbers in retail sales, yesterday's numbers in CPI, housing data, employment data, all of that is going to drive market outcomes which means we are likely to see a broader range, particularly at the front end of the yield curve as investors are trying to price 50 or 75. To me that's kind of picking at nits. It's going to be 50 or 75. (. . . . ) long-term yields, short-term yields with break-ins and continued to point to long-term control of inflation. We believe that the longer end of the yield curve is likely to behave better. Better than the front end of the yield curve which is why you're seeing the inversion of the yield curve where short-term yields to maturity are higher than longer term yield to maturity and that is really under the basis that central banks can affect aggressively initially. But over the longer term, we are more likely to see things moderate back towards more of 2.5% overnight range. But that several years out. >> For some people, that inversion of the yield curve is not a good sign for what's coming had in the economy. People always want to say "this Time is different". Is it different this time? Or is this a dire warning sign? > I don't know if I would use the word dire. But inversion of the yield curve generally means there will be some economic pain ahead. The two-year tenure curve is inverted. The one I'm focused on is three months, 10 years. It still remains positive the margin but it is not inverted yet. I expected to invert before the end of the year. Which really points to an economic slowing in 2023, 2024. And as a reminder to our viewers, the central bank has a very blunt tool with monetary policy. And what they're looking to do is decrease demand in the economy overall. And if they can do that, there will be slowing. It's just a question of if it will be a painful slowing or will it be more moderate and softer. I think there are different definitions of how you think about that. There's gotta be a requirement for some unemployment increases in order to take some of the pressure of the labour markets. There's going to be a need for final demand to decrease up across multiple services. The train engineer that. An analogy I used in a conversation not too long ago about this would be: the central banks trying to land at C-130 Hercules cargo plane on a postage stamp. It will be a tough one to achieve a very soft landing and it's certainly something you're looking at trying. We think that the probabilities of a recession or greater than 50% over the next 12 to 18 months. > Fascinating stuff and a great start to the show. Related to your questions of fixed income for Robert Pemberton in just a moment's time. A reminder of how to get in touch with us, you can email us here@moneytalklive.com. Let's get you update on the top stories in the world and how the markets are trading. [music] > Target's efforts to clear the shelves taking a heavy toll on the bottom line. Retailers are reporting almost a 90% drop in its recent quarter compared to the same period last year. Target aggressively marked down rices to clear that excess inventory. The company says the moves are necessary to free up state space for high demand goods ahead of the holiday shopping season. Target standing by its full-year sales forecast is now well-positioned for a rebound. Lowe's managed to beat expectations. While the number of sales transactions were down 1/4, those customers were spending more per visit on average in part due to soaring inflation and it appears to pursue purchase new freezers, patio furniture and barbecues during the pandemic are now content with their new setups. with sales in those categories showing weakness in the quarter. However it says it's a pickup in sales, the professional contractors. Elon Musk says he was just joking about buying storied English football club Manchester United. Shares of the soccer team which are publicly listed and traded in New York got a boost in the pre-market after Musk tweeted quote: I'm buying Manchester United. You're welcome. The billionaire of Tesla later said he is not buying any sports teams. Let's check in the markets. South of the border, the S&P 500 down 45 points, about a full percent. We'll see what we can get later this afternoon in terms of points. Getting a little more insight on that discussion on the table. At the last meeting. We are back now with Rob Pemberton, Head of Fixed Income at TD Asset Management taking your questions about fixed income. What is your outlook for high-yield bonds in this environment? >> Interestingly in the current environment, let's call it the summa Rally that we've seen since beginning of June, has seen high-yield bonds spreads compress over that time created to a point where we don't see a great deal of value in the market as a whole. They came from approximately 600 basis points. The spread above government bonds. To approximately 400. In our mind, given an outcome for a less than soft landing, that does not represent value and we have been very proactive in increasing the credit quality in our high-yield portfolio and increasing the liquidity in it in order to take advantage of opportunities when they present themselves. >> High-yield is interesting, obviously, because we all know about risk remembered we've done our homework in the space. The reason why they are high-yield is because they are considered riskier investments. >> Absolutely. You know, some of those high-yield have been living and breathing (…) Those issuers who were newer to the high-yield environment have a bit of a challenge in terms of navigating that and those at the very cusp the end of it, the lowest rated high-yield borrowers, some of them it may be bankrupt already and just don't know it yet. >> Wow. Given the fact that earlier you said that, we are probably more than 50% chance at least in your view, of a recession over the horizon. It seems to be space to try to tread cautiously. If that's where we think would end up economically. >> It is. And I think it's a really good, great way to frame the conversation around this. It is that there is a lot of asymmetric and idiosyncratic risk in the high-yield markets. So investors looking to do something like by a big high-yield ETF may not be taking on the risks they think they're taking on as a result of that. So it's really important for investors who want to be involved in that space to know that there's a team involved, really looking at the clear fundamentals underlying that part of the marketplace and where value truly lies. >> Always important to know exactly what you're investing in. That's a good point. Another question we have is about the corporate space. Can we get your view on corporate bonds? >> So corporate bonds overall, we've Artie talked with the high-yield market which obviously is a corporate bond market. In the investment grade high-yield market, we do see opportunity to add incremental yield there. With some really strong names. And really, doing it in a way that helps to preserve capital in an environment where we see higher volatility. So in an environment like wearing today, exposures to investment grade credit can provide definite improvement to portfolio positioning and yields. And we are taking opportunity to do that. >> Corporate's interesting in the sense that we are talking about the sovereign bond yields and what's happening because of central-bank action. What is it look like in the corporate space in terms of for investing? > So, we've seen from the first half of this year, probably the worst. Whether it be sovereign bond market from a return perspective or corporate bond market from a return perspective. Just because of what yields have done. Since 1973. So, it's been a while since anybody has seen that. I know I was in grade school. >> I was too. I don't recall it to clearly but I was alive. >> I was a little older than that but it certainly means that investors have had a bit of a shock looking at the returns that they have seen for the first half. When we look at it going forward, we are now seeing portfolios with yields 4.5 to 5% as a result to corporate credit which we believe is a really good starting place for investors when thinking about that balanced portfolio and longer-term outcomes. >> Interesting stuff. Another question coming in, obviously the first half of this year, a big part of the conversation was soaring commodity prices. We keep hearing that rising commodity prices will help the Canadian economy. But the outlook is in is bright now. Does that put our economy at risk? >> Well, I think there are definitely challenges in certain sectors. The commodity prices in various aspects of that marketplace have rolled over little bit. Certainly with a loosening of exports in wheat has helped foodstuff as we've seen some grains moving out of Ukraine. Second order effects, probably still meaning that harvest yields will be low. I don't know how many Ukrainian farmers are planting wheat right now. So it could be a challenge for next year's market for sure. And in the oil side, we have an leasee that and in some of the metals, coppers, we see that coming down as well. Really a testament to what's going on in China. In the economic slowing there. So that will have an impact. On the other side of it though, we continue to see really strong cash flow yields coming out of the oil and gas sector in Canada as well as the minerals and mining sector. If we kind of have disaggregated returns for the return of the year for the equity space, oil gas and mines and materials up year-by-year and the rest of the market was down. So, will we see that impact us? Certainly from an employment perspective there is likely to be some slowing in those sectors. We think it's good to be the cause of the recession in Canada? Or a recession? It will be the sole cause. But it certainly will be something that will lead towards it. >> We bought up China with so many concerns that we had on her plate. Through the pandemic and through this part of the recovery in the first half of this year. Not that we are not paying attention in China but some of the data is starting to turn from there. A small open economy, I don't feel we can ignore these areas. >> We can't. And that's true. Canada plus or minus is doing have a percent of global GDP. We are not an island. If we can talk on an island, the UK is not doing so well either from a net at an economic and inflation perspective. The China has certainly seen some real challenges from an economic growth perspective. The zero COVID policy continues to weigh on that. Production in various aspects of their GDP gets shut in in cities where you have large COVID outbreaks. We've seen the PBOC liquidity increase in rates and there is a potential for China to actually have to think about the recession word. Probably a little early this stage. But certainly something that has the potential to occur for the Chinese leadership. … There's a number of things on that front. Clearly, some of the issues surrounding Taiwan have brought greater concerns to the forefront which means we will probably continue to see increased defence spending in the G7 as a result of what we are seeing there. >> A lot happening out of the world as always. Make sure you do your own research before making an investment decision. We will be back with your questions with Rob Pemberton and just moments time. A reminder that you get in touch with us at any time by emailing MoneyTalkLive@td.com. Now let's get to today's educational segment. If you're looking to research different types of mutual funds, Webbroker has tools which can help you. Joining us now is Jason Natyk, client education instructor TD Direct Investing. Jason great to see you. Take us through the offers when it comes to mutual funds on the platform. >> Thank you for having me back I appreciated. For investors, mutual funds can be a way to diversify their portfolio. … By making one trade as opposed to several trades for an individual stock. Let's check with the mutual fund overview page and Webbroker. It's a great place to start. So to get there, the page can be found by choosing "research" from the top of the screen and then under investments, we will select "mutual funds". Here's a wealth of information available. From quickly breaking down mutual fund categories. To also comparing high and low performing funds over a given period of time. As well, you get the opportunity to compare whole mutual fund categories against each other. You can see here that I've got the top three categories selected and investors get the opportunity to to make sure it meets their own investing objectives and time frames that they're looking at. Now, the section I wanted to highlight on the screen is the featured screens. Which, if we scroll down just a little bit further, it will be on the left hand side. These are popular screen categories that help you narrow down your search for possible investment opportunity. Let's dive in and take a quick, closer look. At the actively managed bond funds. You can see there are 140 matches listed here. Up top, we can see the the screen criteria that this particular screen is used to match the mutual funds against. Then down below, we can also see all of the different funds that are meeting the criteria. Now, what's cool about this particular screen is that you have the ability to take this screen and refine it to make it your own. I'll just go ahead and choose the "edit" screen button from above the results. And here we can add either completely new criteria to really personalize results or we can tweak it just to refine it to make sure it meets your needs. Let's just amended the screen to narrow the results a little further. All reduce the minimum investment quantity just a touch. From here, will go ahead and reduce the MER the lowest percentage and then let's tweak the rating a little as well. You can see that the match criteria, the matched funds have been reduced quite significant way. We will go ahead and choose that. From here, will be able to see the matches and now look a little bit deeper into her new choices. On this page, we can see the funds and how they stack up against each other. We can even sort the funds based on the opportunity of specific criteria one given more priority just by clicking on the call headers. You also have the ability to save the screen so you don't have to re-create the wheel each and every time you're editing the featured screen. >> I do like that saving function a few times. I forgot to do it a few times but I don't make that mistake anymore. So we are building funds meeting our criteria. What about eventually if we decide to make an investment? How do we do that? >> We can now select a few funds that have piqued our interest in our list. All select the top five the list. Listed above are results we have. We have a compare tab. This gives us the opportunity to compare and review each of the funds and add a little bit of a deeper level against one another. Now we're looking a little bit deeper behind the curtain. You'll have the opportunity to once again to bit of a deeper dive. We can even see some of the criteria that we chose to kind of, enhance a little bit on the featured screens. We got our MorningStar ratings along with the MER. To buy something from here is the easy part. We will select the "buy'' selection once we click on that we will notice the quote listed on the right-hand side which will reflect the NAV from the previous day. As long as you have your mutual fund order and by 3 PM Eastern time you will get today's prices. From here, you can select option which we have a "buy, sell and switch. " The switch allows you to switch between funds within the same fun family. Then we need to choose our quantity tag. For mutual funds, you have the opportunity either to choose a civic number of units you want to purchase or you can elect to choose a specific dollar amount because mutual funds unlike stocks, you have the opportunity to buy partial units. So once that's been complete, you can go ahead and put in your amount and make sure that it's meeting the minimum amount and then go ahead and preview order and place it from there. It's really that easy. Quick and easy and you're on your way. >> Jason, great stuff as always. Thanks for joining us. >> Jason Natyk client education instructor TD Direct Investing. Make sure to check of the learning centre Webbroker for more educational videos, master classes and upcoming webinars including understanding market stocks and if you should pay off your debt before investing in how to capital gains impact profit? Now before we get back to questions about fixed income Rob Pemberton, a reminder of how he can get in touch with us. Send us your questions. You can get in touch with us by sending us an email anytime@moneytalklive@td.com or you can use the question boxright below the screen on Webbroker. Just write in your question and hit send. Maybe one of our guests can get you the question answered you need here at MoneyTalk Live. >> We're back now with Rob Pemberton Head of Fixed Income at TD Asset Management taking your questions about fixed income. This one honing in on us here at home. Our interest rates going to remain high for a while? When you think that BOC will start cutting rates again? Which argument the fat off the top. BOC a different path? >> I would say what we heard from the governor would reinforce the idea that the Canadian central bank is going to be focused on getting inflation back down to target. The Bank of Canada only has one mandate. Priced ability. The Fed has two. Inflation, price stability and full employment. So they have a tug-of-war in their mandate. Where is the Bank of Canada's mandate is really focused on inflation and price stability. So I perceive that the central bank will continue its rate hikes. I presently expect 75 in September for the Bank of Canada. And I expect them to continue hiking into that 3 1/2 to 4% rate to get inflation down. When they start cutting, I perceive that at this stage, they are more likely to get to that 3.5 to 4% range and then sit there for a while as we watched it work through the system. This idea that you get, let's make him a number, 3.5% and then you start moving in 25 basis point increments lower, it provides an illusion of accuracy to what central banks are doing. There's a time lag between rate hikes take effect in the economy and as such there and want to see that play through. my thinking right now as we will see the Canadian central bank work to maintain rates for a higher period of time. >> We first started getting to this cycle that we were accustomed to and were not expecting. One theory that got thrown out there was "well, Canadian households are so important to the economy, the housing market… They can't maintain this position for a very long time." The Bank of Canada seems to have swept any concerns of the housing market aside. Saying "listen, as you said, we have a mandate. Housing is going to do what housing is going to do." >> To a certain extent that's true but we also know the housing market will plan to the decrease in demand. As so much of the employment sector is focused on that as well. To a certain extent, as you rightly pointed out, there's a lot of financial leverage in the financial market or in the household market as a result of exposure to mortgages and the outcome there. One of the things that I think the Bank of Canada is really focused on though is or rather in conjunction with, is the housing market labour. The labour markets continue to be strong and wage growth continues to be strong. One of the things that I believe central banks globally are really concerned about is the idea of inflation expectations morphing into an inflation mentality. Which then, leads to the potential for the rage price spirals which we witnessed in the 1970s and it ended up being very bad for our economy so I think central banks are going to really want to stick to their data with respect for getting inflation down to target as well as focusing on that. Longer-term, if you have a stable inflationary environment, economies grow better and employment is also stronger. So, it allows for better business planning it, it allows for better household planning, decision-making can be made better if you know that a dollar today is going to purchase plus or minus what a dollar tomorrow will purchase. > All right. You said the word dollar. That brings us to our next question from the audience. What is your outlook for the Canadian dollar in all this? >> Well, certainly over the past year or year and 1/2, we see the Canadian dollar lag. The US dollar. But relative to a broad mix of currencies, the Canadian dollar is actually done very well. So we continue to see strength from the Canadian dollar versus a broader basket. But we also think that at present, the Canadian dollar is likely going to have a modest appreciation relative to the US dollar, simply on the basis of how much the flight to safety bid to the US dollar has carried it. Now, most of the known unknowns are playing out in the marketplace. They can be priced and certainly quite a bit of it is taking place. The other aspect is, with so many central banks now raising rates and raising rates aggressively, one of the drivers of the currency is interest rate differentials between economies. That differential means the US dollar is not as likely to benefit from that rate differential. From a strength perspective. Many central banks are looking at the strength of their currency and the strength of the US dollar and how did they manage that risk? Because with their currency lower than the US currency, they are importing inflation. So there is certainly a little bit of marketalism going on. >> Here's another question, what is your take on GICs right now? They were returning much but the yields are looking a little more attractive I guess, now they have recently. > Certainly they have risen. Some providers are providing what I consider to be higher yields than others. One of the things that I always think about though, is what you get with the GIC? Well, first and foremost, we know that you've got no potential for capital gains. So you know that whatever your rate is is what you're gonna get. You have very limited liquidity without paying fees for it. This is also a challenge for investors. And high level, when thinking about it, if you sell assets today, particularly from your broader portfolio, to buy a GIC, you're guaranteeing yourself that you've locked in the losses. The losses that have occurred a year to date in those assets. With the pricing we are seeing the market place today, going forward, we think whether it be a bond fund or an equity fund, they have the potential to do far better than a GIC wood. Over the near to medium term. >> Right now if I go on Webbroker, you're talking a range from 1 to 5 years. Lower to higher and of the four handle. Inflation of this country running at 7 1/2%. >> Which means your real return is negative. > Indeed all right. We'll get back to your questions with Robert Penderton on fixed income. A reminder of course that you can get in touch with us anytime. Always do your research before making your investments. You can send us a question right now by emailing us@moneytalklive@td. com or you can use the question box right below the screen here on Webbroker. Just writing your question and hit send. A little more than halfway through the lunchtime trading our on Bay Street and Wall Street. We'll look at the market here at home starting with the TSX index. Hundred and five points. Half a percent of the down set on the nose. Technology in the mining stocks and some consumer goods are weighing into the downside. Financials are not doing us any favours either. Let's check on one of those big tech names in Toronto. Feeling some downward pressure. Shopify with 48 bucks and 78 cents a share. South of the border, down to the tune about 35 points for the S&P 500. Here's what's going on the market when it comes to Wall Street. Again it's the mining stocks. Some consumer names in a big week in real to name south of the border. A bit of a mix back there. Tech and industrial also on the downside. Let's check in on the tech heavy NASDAQ and see how it's hearing. A little more pressure on the downside,… A 1 1/2% in the space. Let's check in on Target. We talked on the top of the show but how they been doing some aggressive discounting to clear off some excess inventory. They did hit the profit line pretty hard before the court or not the company itself says that will put them on track for a better you're going forward. Right now to hundred 75 bucks and change, down almost 3% on Target's shares. We are back now with Robert Pemberton Head of Fixed Income at TD Asset Management. Let's impact your questions. Here's one we just got a couple minutes ago off the platform. What is the rate of return investors should be targeting realistically? >> Thinking on fixed income going forward from where we are today, investors should realistically be targeting mid-single digit returns over the next 3 to 5 years. >> Mid-single digit returns over the next 3 to 5 years. Okay so in a balanced portfolio, we are told traditionally that from a range of five… Normal time so we are sort of in that range right now. >> Exactly. >> I think some people lost faith in the balance portfolio this year. We got pretty badly stung in our equity portfolios. "My God, look at my bond portfolio." Still a strong argument for that kind of diversification? >> Diversification be on 60-40 to take on real assets and infrastructure. Diversifying cash flow strengths and the economic risks within their portfolio. So for those who can take advantage of it, I think that makes a lot of sense. Within the fixed income landscape, you're talking about the correlation between fixed income and equity returns in the first half of this year. It may not be the best way to frame it. But if investors choke a penny or a government bond with a 1.2% yield, and thought they were going to earn four or 5%, that's going to be a real challenge. Today we are, we can absolutely see how that can happen. And within an equity and fixed income portfolio, with fixed income having moved higher in yield as central banks really like to address inflation, they are now a far better place to provide that diversification because they actually have income. Which is what you're looking for with fixed income for folios. >> Great stuff. Let's get one of the question of the platform. What longer-term risk should investors be aware of? How long is your list? Ha ha. >> Ha ha. As you know fixed income people tend to be they were sceptical where things are going and what they look like. So Arlis tends to be pretty long. One of the things that I think is important for investors to really think about is what are some of the slow moving trends that will impact their long-term horizons. Not things that will impact over the next quarter or next year but over the next five, 10 or 50 years over their fuller investment horizon. First and foremost as demographics. How that is changing. What the implications are with that. Certainly, I would say, with what we are seeing from off friend, non-shoring near shoring, how does the globalization trend longer-term impact the outcomes that we are seeing head with the food security issues, with the fuel security issues, things along those lines, how do economies really take into account that? What all those tend to lead to his longer-term higher inflationary pressures so what does that mean for central bank action longer-term? To me, it means arena see interest rates probably in the 2.5 to 4% range from central banks longer. The final one that a lot of people are not talking about at this stage in their investment portfolio is climate change. So, 2050 being the charter for getting us to read to be, well, when we look at long-term investments, they are to have investment horizons beyond that date. So thinking about what the inflations are there is something that we really look at when investing in client assets. Deconstructing how much is inflation embedded in and how much is growth embedded in an average credit risk is embedded in it, liquidity… How those play out. So soprano some of the major issues that we think about and clearly with overseeing going on in Russia, the Ukraine and potentially some of the challenges in Taiwan and China, we think there's good to be a shift towards defence spending which means governments to connect to make tough choices on what else they do. >> Interesting stuff. We have time for one more question off the platform. When it comes to fixed income, are there any interesting opportunities outside of North America? Should we be looking on the planet? >> In my mind, I think it's a great question. Because it does highlight how many opportunities do exist and where and how to take them. And again, the conversation we had earlier around high-yield bonds, this is the global marketplace that is run with substantial idiosyncratic risk. So looking at that from an emerging-market perspective, from a development market perspective, where you want to be involved, how do you want to be involved, where the opportunities? And what is it look like when you bring it back to Canadian dollars? I will point in time, you can bring emerging markets back to Canadian dollars get the same yield as a triple B telecom in Canada. I know which risk I would rather take in that environment. Today we move beyond that in opportunities exist in a wide array of the markets. And we are taking advantage of those in our portfolios. >> Fascinating stuff. Really appreciate you being here today. >> Great to be here. Thank so much for having me. >> Rob Pemberton, Head of Fixed Income at TD Asset Management. Staking tomorrow, we will have Kera Van Valen taking your questions about income stocks. We go live every day at high noon. Just email us at MoneyTalk Live to get those questions in. That's all we have time for today. Thanks for joining us and we'll see you tomorrow. [music]