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[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we are one week away from another great decision from the Bank of Canada. We will discuss what to expect. TD Securities Robert Both joins us.
MoneyTalk's Anthony Okolie is going to help look at trends in US auto sales and in today's WebBroker education segment, Caitlin Cormier is when it shows how you can keep up-to-date on key economic events using the platform. So here's how you get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to our guest of the day, let's get you an update on the markets.
We have some green on the screen. We are 56 points to the positive in Toronto, the TSX Composite Index up about one quarter of a percent. Among some notable movers today include some energy names, we are using Baytex as an example. You have West Texas intermediate crude at $85.77 on my screen, continues to push higher recently due to geopolitical risk and other factors. Baytex is up about 1% today.
Indigo being taken private at $2.50 per share, that has the stock on the move higher to the tune of about 22%.
South of the border, after some down sessions to start the second quarter, we have modest green on the screen, 50 points for the S&P 500, a little better than one quarter of a percent.
I want to check in on the tech heavy NASDAQ, how is it fair against the broader market? Up more than half a percent. Intel is not adding to that topline strength today on Wall Street, they're pulling back about 7% today. More about them later in the show, but making chips in the United States is an expensive proposition. And that's your market update.
A strong run of economic data in the US has some investors questioning the timing of rate cuts south of the border but how does the Canadian economy stack up and what could that mean for the path of interest rates in this country? Joining us now to discuss is Robert Both, Senior macro strategist with TD Securities.
>> Always a pleasure to be back.
>> It's always about interest rates but for good reason. We are concerned what the central banks are getting up to this year.
We had expectations. The BOC will have a bunch of economic reports under its arm but luckily we can look at them as well.
What are you seeing?
>> I think from a very high level, with the data has told us over the last two or three months is that rate hikes are continuing to work.
Since the last BOC meeting in March, we have received more data on inflation and wages, that speaks to underlying inflation pressures continuing to moderate. Core inflation measures in the month of February were just sitting above the Bank of Canada's target range of about 3.123.2 percent.
Those are the trim mean and the weighted median that they tend to put a little more weight on.
If you look at the last two months, wage growth as well, we have seen some material slowdowns there.
The labour markets are slowly moving towards more balanced conditions so even though we have continued to add jobs, the faster rate of population growth and faster rate of labour force growth is helping to bring that unemployment rate a little bit higher which should take some pressure off wage growth going forward as well.
At the same time, there are some things that are moving in the opposite direction.
The last month or two of GDP growth does not look like it's coming in any stronger which might be cause for concern. The housing market as well as showing some signs of life over December and January into February. That is something the bank is going to be discussing in April. But I think from a high level, they can sit back here and say rate hikes are still working.
We just need to give them a little more time to get to where they want to go.
>> Reaching patients, we are getting up from the Fed and our central bank as well.
This week, we got the BOC's Business Outlook Survey, their own research. What did it tell us and what do you think the BOC will think it means for future policy decisions?
>> This is a pretty important report from the Bank of Canada. We don't have a ton of private-sector surveys that give a strong pulse on business conditions but that quarterly Business Outlook Survey does do a nice job of capturing the broader sentiment level across the median and giving more insight into things like labour shortages, hiring conditions, investment intentions. It's really quite broad reaching. Now, what that Q1 Business Outlook Survey did tell us was that at a high level, firms are a little less downbeat than they were in the fourth quarter, so there are fewer firms that are planning or anticipating a recession or a severe downturn over the coming year. You look at those labour indicators, those are starting to turn a little more positive as well, hiring intentions have moved off their lot. On the flipside, investment intentions fell quite sharply. That is a concern, especially given the productivity headwinds that we have seen over the last couple of years. On a more dovish note as well, there were more companies that do expect inflation to return to the Bank of Canada's target range over the next couple of years.
The one wrinkle to all of this is that the Bank of Canada also surveys consumers and their inflation expectations didn't see nearly as much progress over the first quarter so consumer inflation expectations are still well above those pre-COVID levels. The Bank of Canada surveys are telling them that those stickier shelter prices, high food inflation, this is all making it more difficult for inflation expectations to normalize and that also is going to make it a little more challenging to get inflation all the way back to target even though we have come a long way over the last 12 months.
>> Let's talk about the challenges because the expectations among consumers are one thing but I guess if you're there is that if these are our expectations for the future path of inflation, we start to change our behaviour in ways that will make it as you said tough for the Bank of Canada to get to where they want to go.
>> Right.
Even though headlight inflation is down to 2.8%, it's inside that one to 3% range, a lot of Canadians are still struggling with the higher cost of living. That did show up in the Business Outlook Survey as well.
Firms were mentioning how even though they expect output prices to fall, that higher cost of living is keeping wage pressures a little stronger and that wage growth is another obstacle to a sustained return to the 2% inflation rate.
So that is going to be something that they continue to monitor going forward. As we are seeing some signs in the economy, as you said, that the high cost of borrowing intentionally is slowing things down, some mixed signals. When the bank puts it together, they are preaching patients.
When you preach patient, what does it actually mean, the big question we get is, one of the rate cuts coming?
>> I think if you were to just focus solely on the inflation picture, you have seen headline inflation fallback and that one to 3% range. You have seen core inflation slow as well on a three month annualized basis which gives you a bit of an indication of where core inflation is trending. Those three month rates are already much closer to 2%. The real difficult part for the Bank of Canada is they have not seen that normalization on the expectations front and more recently as well, we are starting to see more evidence of GDP growth strengthening into 2024 as well.
So we got the January GDP figures at the end of last week. Though showed the economy expanding by 0.6% month over month. That was the largest single market expansion in a years time and with new projections as well, Statistics Canada is looking for a 0.4% increase in February.
That is a bit of a shift for the near-term growth outlook. The Bank of Canada was anticipating something much considerably weaker in its January monetary policy report. They had Q1 growth at 0.5%.
If that February estimate is realized, that would put Q1 tracking closer to 3% annualized. Now we are in a dynamic where we are no longer adding to excess supply.
We might be moving closer to getting back to neutral, we are moving back into excess demand. There is a little bit of uncertainty as to whether we can sustain these recent discolorations in CEPI of these signs of renewed growth momentum are not a one-off, if they are a sign that perhaps momentum is a little stronger than we had anticipated.
>> Lots of things for us to weigh as investors and lots of things for the Bank of Canada to weigh as well. We will get to your questions about the economy and interest rates for Robert Both in just a moment. And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Let's get back to the shares of Intel, clearly in the spotlight today.
They are down about 7% right now. The chip maker says its manufacturing business posted an operating loss of $7 billion last year.
That builds on the more than $5 billion loss in 2022.
It is the first time that Intel has broken their figures for chip manufacturing or foundry business. You can see right now that it is an extensive proposition. The Americans are focusing on more domestic to production, the CHIPS Act.
Intel has been a beneficiary. It will take a while to break even on that foundry business. Let's take a look at Lightspeed Commerce, says it will cut some 280 jobs as it looks to reduce costs across the business. It is up almost 6% right now.
The business founder and CEO says the move will allow the Montréal-based company to invest in other areas of the business. It has also announced it will buy back up to 10% of its shares.
Bond yields are on the rise south of the border amid more signs of resilience in the US labour market. Private payroll data from ADP showed 184,000 jobs were added last month, a much stronger showing than anticipated.
The US 10 year bond yield hit a new high for this year before easing back somewhat.
We have some fed speakers on deck today to that seemed to be preaching that patients when it comes to rate cut expectations. We will see how it all plays out.
A quick check on the markets after a bit of a soft start to the second quarter.
We got some green on the screen. We will be generous, 44.4 1/5 of a percent of the TSX Composite Index and south of the border, for the S&P 500, we are up 12 points, one quarter of a percent.
All right, we are back with Robert Both, we are taking your questions about interest rates on the economy. Let's start getting through them. First when here for you.
What should we expect from the federal budget?
>> We are certainly getting closer. Just yesterday, we received the last of the provincial budgets with Manitoba reporting in the afternoon so looking forward to April 16, we do expect that the government is going to post a deficit around $41 million. That is pretty similar to what was projected in the fall economic statement. It's pretty similar to last year's deficit for 23, 24.
Now, ahead of these budgets, you do typically see a lot of new spending announcements teased. We think that new spending in this budget is going to be relatively modest compared to prior years.
There are a couple of factors behind that.
The first is that the federal government does recognize that the cost of living is a serious concern across Canadian households. They do not want to do anything that is going to materially add to inflation and make the BOC's job more difficult. The second part of it is that we do not expect an election until the fall of 2025 so they should not be seen… >> As a reelection your budget.
>> I think most people would prefer to keep that powder a bit drier and potentially roll out that stimulus next year.
I think from our perspective in the markets perspective, the more interesting part of the budget is really going to boil down to the debt management strategy and the government's borrowing programs for the current fiscal year. Now, we look for government borrowing projections to rise quite sharply.
We expect $238 billion in government of Canada issuance over the coming year, part of that reflects larger refinancing needs, the government is also going to be purchasing, or the government is already purchasing Canada mortgage bonds with some of that issuance as well.
That is going to take place in the context of larger provincial budget deficits and larger provincial borrowing programs as well. As we look forward to 2024 and 2025, it looks like we're going to see a little bit more supply from high quality government and government adjacent issuers then we saw in 2023 and 2024 in the last fiscal year.
>> How does that play out in fixed income markets from an investment point of view?
>> It is a supply demand curve.
So if you are increasing supply, investors will typically require a higher rate of return to absorb that. The Bank of Canada is also going to be, they are expected to be cutting rates over the coming year but that additional government supply is something that can weigh on bond yields further at the curve. Document should provincial budgets there as well and deficit spending in the provinces.
Anything standing out for you from any of the provinces that have tabled their budgets?
>> On the provincial front, we have seen larger budget deficits and we've seen a lot more pressure on the spending side, so both Ontario and Québec came out with larger deficit figures for the coming fiscal year than in the past and both of those provinces are going to embark on a relatively large borrowing program.
Ontario's was a little bit smaller than we anticipated but they are also ramping up T-bill issuance so there total borrowing needs are still quite high and that's also something we will be watching in the federal budget as well.
Bankers acceptance are going away on July 1 as part of the seed were transition so do they try to increase the size of their bill program to absorb some of that demand? We think the bill stock is going to stay relatively stable but we have seen that from some provinces.
>> Interesting stuff. Let's get to another question.
What do you make of the Bank of Canada labelling low productivity as a crisis?
>> Low productivity is certainly a headwind and it's an opportunity as well going forward, but I would certainly reiterate that this is not something that materialized overnight, it's not something that's going to be fixed tomorrow.
Low productivity is something that has weighed on Canadian growth for the last several years. To really change the course there, we are going to need to look at increasing nonresidential investment has a share of total economic activity. You can look at increasing our ND spending across the public and private sector. There is also going to be a natural tailwind to productivity growth from some of the immigration we have seen over the last 2 to 3 years. When you really ramp up immigration programs that quickly, a lot of people are underutilized in the labour market at the start. You may be overqualified for the job you currently have, you might require some skills or language training, certification or recertification to work in a certain industry so as increasingly immigrants become more utilized within Canadian labour markets, more integrated, that is going to also lead to some productivity growth going forward.
>> That's a good segue into the next question.
Someone is wondering will those immigration curves hit the economy?
>> It certainly is going to have an impact on total demand and I think you are going to see it really as soon this fall. We are starting to see some of the announcements about how quotas on international students are being divvied up, a lot of this is still being ironed out the final details but the bigger picture is we are looking at weaker rates of population growth going into 2025 and beyond.
If you look at kind of what his driven population growth over the last few years, in 2023, about 97% of that was immigration and a large part of that was temporary residence and international students.
Those international students levels are going to be relatively stable going forward so they are no longer going to be contributing population growth, temporary residents might actually be declining. We are still waiting for some details but I think everybody is trying to reduce temporary residents to 5% of the population from 6.2, that implies an outright decline over a three-year period.
We are still adding about 500,000 permanent resident admissions over the next two years but you are certainly going to see that rate of growth slow and that is going to feed into less aggregate demand, fewer households consuming goods and services, less government spending but it's also going to hopefully give a little relief to shelter inflation rates, some of those pressures that emerged over the last couple of years.
>> This next thing here it is not a viewer question but Jerome Powell, we talked about said speaker they could draft today, we are getting some comments. He's emphasizing the need for more evidence that inflation is easing before cutting rates. I think another one of the Fed members today was saying maybe we only get one rate couple for the end of this year.
What do you make of this current messaging from the Fed?
>> I think the Fed's current messaging sounds a little bit like the Bank of Canada maybe three months ago. So the bank had been, there had been speculation that the man could begin easing in April to go back a few months. The bank was saying that they needed to see more downward momentum and those core measures because even though headlining core measures of inflation were closer to Target, it looked like we were trending sideways there.
So the US economy has been considerably is stronger than Canada's over 2023. While we saw the economic data to her lower last year, the US has not materially slowed to a below trend pace.
It makes sense that the messaging from the Fed is a little bit more cautious and stressing for more patients.
But we are still going to see a lot of data before we in the market expect the first rate cut so we are looking for the Fed to start easing in June. We don't think there is going to be enough time to see that deceleration by the feds meeting in May. But by June, with a mandate to target full employment as well as stable inflation and a little less concern about highly leveraged households, we think the Fed can maybe ease a little bit more gradually, we think it will cut in June and skip the next meeting before cutting again in September. Even though we have the June star point, it's way to be a little more of an easing into easing if you will.
>> Right now their comments… Doesn't seem to be rattling the bond or equity markets.
We will keep an eye on that and see what else Chairman Powell has to say in the next little while.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Robert Both on the economy and interest rates and just moments time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
We have been talking about big economic events. Why? They can sometimes move the markets and if you want to keep on top of what's going on, WebBroker can help.
Joining us now is Caitlin Cormier, client education instructor with TD Direct Investing. Always great to see you. Let's talk about investors finding different perspectives on economic events from TD here on the platform.
>> Absolutely. Lots of key dates coming up and important as investors have a resource to go in and not only hear about events that are coming up but to help make meaning. Watching the show is a great part of that but it's nice to have other resources to use as well inheres in different perspectives. What I'm going to show you today is where you can find informational WebBroker. So what we are going to do is you're going to operate in under our research. We are going to the markets overview and reports. Research, markets, reports. Once we get here, we are going to scroll down a little ways and look at the right hand side. We will see TD economics. When we go ahead and click on that, it will bring up a separate website here, TD economics. It is a full, title WebBroker website and we are going to click and go there now.
Once we are here, we are going to see an overview of commentaries, latest research and updated publications.
We heard about the Manitoba budget coming out yesterday so we can see that here, some previous, talking at the federal budget, GDP, BOC alike. A lot of the stuff we have been talking about today are here within this particular area within TD Economics so lots to make meaning of. You can also filter the top between Canada, US and global.
Not just sticking to our local economy.
And we can also see that there are other categories here, forecast, financial markets, the economy. Let's just say that if we wanted to see specifically government finance and policy, we can click and see all of the articles that have come out recently, lots of budgets here, information about all those provincial budgets out of Camaro. Really, there is a lot of information here. You can filter down specific to what you are looking for but just another resource to make meaning out of some of the information coming up.
>> A lot of great resources there about things that have happened. What about things that are yet to happen, the upcoming events in the market?
>> Yeah, absolutely.
If we go into WebBroker and click on the research button, under markets, there is a tab called events.
Not absolutely everything is on here.
It does tend to focus more on those types of events that are specific to companies.
For example, we see today's calendar of events. In Canada, it is showing the highlights.
We can see earnings announcements, dividends, splits or rate changes.
Not as much heavy on the economic events but you can certainly go in and click the calendar and kind of jump to a future date and see what information might be able to show up for you.
There also is a US. A log meal. There is also the US side of things.
If you wanted to click there, you can actually see the upcoming US events as well so one more time, we will go to events here… This little flag up here in the top right-hand side, we've got the little US flag… It doesn't want to do it for me today but that is where you would be able to find more information. One last thing I will shout out is that we are on YouTube. TD Direct Investing is on YouTube.
We have a QR code that we can share with the audience that you couldn't use if you want to follow us on YouTube. We have lots of content on there as well, lots of timely content that stuff happening in the market.
Definitely a good place to keep up on information about education.
>> Interesting staff. The technology God made you jump through a few hoops today but you pulled it off gracefully. Thanks for that.
>> Thanks, Greg.
>> 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.
Before we get back to your questions on the economy for Robert Both, a reminder of how you get in touch with us.
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.
All right, we are back with Robert Both, take your questions about the economy and interest rates.
Let's get to the next one here.
Do you see any economic impact from the carbon tax?
>> So fiscal policy is always going to have an economic impact, but you know that impact is going to depend on whether we are talking about the status quo or recent calls to pause or eliminate the carbon tax altogether.
Now, in terms of the status quo, the $15 increase to the carbon tax we saw on April 1, that's not something that's going to have any impact on year-over-year rates of inflation just because we saw a similar $15 increase on April 1 of last year.
Gasoline prices, other fuel prices are rising between March and April, that consistency between years keeps the level of inflation roughly unchanged so from the Bank of Canada's perspective, carbon taxes are not necessarily making their job any more difficult. To the extent that pausing or unwinding some of the carbon tax may have a downward affect on inflation, it would be a one-time impact, it would have far less impact on measures of core inflation that strip out most of the more volatile components on a month over month basis. Every tax also has a purpose, right?
So we look at the carbon tax but we may be sometimes lose sight of the benefits of it. If you are just looking to ease higher cost of living, there are a number of fiscal measures you could look at to do so, certainly sales taxes affect a far larger number of people than a carbon tax, but any easing of those fiscal measures or any fiscal stimulus is also going to put more income in pockets and it's going to lift demand in the context of inflation already being too high, that is not something the Bank of Canada necessarily wants to see so that is sort of why we think that there is not going to be too much new spending in the budget. That is why we don't really expect much in terms of tax cuts.
And I think that is why the carbon tax is unlikely to go anywhere anytime soon.
>> A lot of pieces to the puzzle.
Let's get to another question. What is the state of the housing market? We heard about the slowdown but now it's springtime.
>> Yeah, it certainly springtime, and that means the housing market is going to be high on everybody's radar. At 2022 was a very difficult year for the housing market.
If you just look at the number of home transactions, there were about 445,000 last year, that was actually the lowest since 2009, adjusted for the increased population, it's the lowest since about 2000 so we are coming off a period of extremely weak housing activity.
And we are starting to see some recovery and 2024, both in December and January, you saw a rather large increase in existing home sales. That did coincide with a decline in mortgage rates, salutes or financial conditions are certainly playing a part and I think those higher sales transactions haven't actually had much of an impact on prices yet but they have helped to take some of that supply off the resale market and as we head into this period of seasonal housing demand, that does potentially put a little more fuel for prices if we do see demand common stronger-than-expected or financial conditions are a bit looser than they are today over the next couple of months, that could put a little more fire under housing and could push prices a little higher. In terms of forecasts, our colleagues at TD Economics are looking for annual price gains of about 1.2% across Canada.
That is for the year as a whole. It is going to look a little higher on a Q4 basis and about 4% in 2025 as well.
We are looking for a return to a positive price trajectory but we don't expect to see a return to those extremely large price increases that we saw during the early phase of the pandemic.
>> This next question feels hand in hand with talking about the housing market.
Housing is expensive, the cost of living is expensive, are you concerned about household debt levels?
>> I think we are always concerned about household debt levels in Canada but the level of concern is really going to depend on when the Bank of Canada is in a position to cut rates. We have known for some time that mortgage renewals are having a significant impact on household finances. We know that those mortgage renewals are going to grow more painful, be a more painful adjustment for some and 2025 as well. So in terms of the downside risks from those household vulnerabilities from those elevated debt levels, I think I'm looking at a scenario where the Bank of Canada is forced to keep interest rates a little bit higher into next year.
We think the Bank of Canada can start easing in July of this year and we think by the end of this year, they will get there overnight rate down to 4%.
But as you mentioned, the Fed is talking about patients, the Bank of Canada has been talking about patients for some time, and we are starting to see those signs a renewed growth momentum as well.
So we are pretty comfortable that this growth rebound is a one-off but if that does turn into something with more legs, the bank is forced to push back the start of their easing cycle or they move to soon perhaps and then are forced to unwind some of that and those mortgage renewals in 2025 become a lot more difficult and the risks to economic activity grow considerably larger.
>> That's something to keep our eyes on going forward. We will get back to your questions were Robert Both on the economy and interest rates in just a moment's time.
As always, make sure you do your own research before making any investment decisions. And a reminder that you 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.
Let's talk auto sales, specifically south of the border. US auto sales cooled modestly in March, affordability challenges are waiting on consumer demand.
Anthony Okolie has been taking a look at a TD Economics report on this and the possible outlook.
>> US auto sales were down 1.3% month over month to about 15 1/2 million annualized units coming in just about 400,000 units below forecast. This pullback comes amidst a pullback in affordability as buyers look for deals and incentives to offset the higher car prices south of the border.
When you look at unadjusted volume sales, it was up more than 4 1/2% above year ago levels. When we break things down by vehicle type, we saw passengers sales up modestly, however, they were still lower versus light truck sales which rose more than 5% year-over-year and not accounted for about 80% of last month's sales, that is slightly higher compared to March 2023.
As it is the first week of April, nearly all major automakers from Tesla to Ford report their production and sales information for the past three years and these new reports give investors an analysis of insights into certain aspects of a company's business and whether investing in EVs is finally paying off as well is what models are selling and popular with consumers. Here's a look at some of the world's top automaker sales report for the first quarter. We will start with GM, where Q1 sales were, they sold 594,000 units, down about 1 1/2% year-over-year do likely to lower fleet deliveries as well is an easy lineup that has been struggling over the past quarter.
EVs for GM were down about 20%, led by weak sales for its Chevrolet bolt series.
But GM did make a 6% gain in retail sales.
That helped it edged out Toyota as a top-selling US carmaker in the first quarter.
Meanwhile, Toyota did report a more than 20% year-over-year jump in the first quarter of US sales and that was really helped by demand for its affordable sedans, SUVs and pickup trucks.
Taking a look at Ford and Stellantis, both companies also posted Q1 sales gains year-over-year with boards EV sales actually surging 86% versus the same.
One year ago.
That was led by strong demand for its hybrids and electric vehicles. In fact, Ford is the second top EV seller in the United States and the growth of its hybrids helped Ford start the year as America's best-selling truck manufacturer, including both pickups and vans.
Finally, the big one was Tesla, which reported a big Q1 delivery missed. That was nearly 9% lower year-over-year and represents its lowest quarterly performance since the third quarter of 2022 and, of course, Tesla has been struggling with a lot of competition, not just from traditional automakers but from some of China's EV makers. It is also struggling with its aging letter. Overall, we are demand for electric vehicles this year.
Overall, sales were down across the industry due to affordability. When you look at the average transaction price, it was 2.2% lower versus one year ago and that is because income growth over the past four years has been lagging the average transaction price and the average monthly payment for financed vehicles in the United States. As a result, US consumer demand was really concentrated in the non-luxury sector of the market which accounted for most of the year-over-year growth for Q1 sales.
>> What's your thoughts about the rest of the year?
>> TD Economics expects that sales will continue to trend upward overcoming quarters as income gains and price moderation improve affordability.
They acknowledge that elevated financing costs will remain a challenge for the rest of the year but as the Fed begins to lower borrowing costs in the second half of the year, it should help improve vehicle for debility. TD Economics believes that this headwind should support sales growth moving into 2025.
>> Interesting site. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
This is the heat map function, taking a view of the market movers. The TSX 60, by Price and volume. The price of gold is up almost benefits 30 bucks per ounce today, breaching $2300 per ounce and so the material stocks are performing. Kinross is up about 2%, Barrick up shy of about 1%.
Looking at the energy space, the uranium places are doing well, chemical up about 3%.
Oil and gas names were also rising with the price of benchmark crude continuing to make gains this week.
South of the border, let's check in on the S&P 100.
This is a more concentrated view on what's happened on Wall Street. Intel, we told you about them earlier on the show, the foundry manufacturing business, big operating losses for the second year in a row. They are down 7 1/2%.
Got a bit of a bid into GE. There is a headline yesterday, split into three different units, finally complete after years of movement in that direction, the big conglomerate into three and GE, whatever is left in that basket, is up about 6%.
We are back now with Robert Both from TD Securities. Let's take another question from the audience. Does it look like Canada is going to avoid a recession that we have been fearing for a while?
>> I think over the near term, yes.
We can safely say that the Canadian economy is not in a recession in the first quarter of this year.
If you go back to January, the Bank of Canada and its monetary policy report was looking for Q4 and Q1 growth at 0.5%. That is about as close as you will see a central bank come to calling for an outright contraction without committing to that.
Now, growth was a little bit stronger-than-expected over the fourth quarter but over the first quarter, as we discussed off the top, we have really seen some acceleration into January and February.
So as I said, I think it is safe to say that we are not in a recession now.
But I think it also warrants mentioning that we saw a similar dynamic layout last year. Certainly in late 2022, early 2023, there was a lot of chatter about are these interest rate hikes having too large an impact, are we heading for a downturn? Saw the Bank of Canada acknowledge that in their January decision saying we are going to conditionally pause rate hikes here.
But that obviously did not turn out to be the case. First quarter growth was very strong last year and that kind of fizzled out midyear. We think that the stronger growth is probably not going to be sustained further into 2024 and even though we don't forecast a recession but rather a return to below trend growth, that risk is certainly going to be with us for a little while longer.
>> We will squeeze in one more question before we let you go. Your outlook for the loonie?
>> Alright! I feel like I have said this one before, but we do look for the Canadian dollar to appreciate over 2024.
Really what is going to drive the turning point in the dollar is the turn in the US economy.
We have heard Jay Powell stressing patience. We have also seen the US economy perform better-than-expected for several quarters now.
It really does seem to be a lot more momentum south of the border than in Canada.
So we are not really going to see that appreciation take hold until it looks like the Federal Reserve is a little bit closer to easing. So we think we're getting there. We expect to see more evidence of softness in payrolls this Friday.
That will be the catalyst for the turn in dollars CAD. By the end of this year, we do think we are going to get 135 presently or $0.74 CAD USD to down to 129 or $0.78 by the end of next year we will be back to 125 or $0.80 in CAD USD.
>> Interesting stuff.
I look forward to the next time.
>> My pleasure.
>> Our thanks to Robert Both, Senior macro strategist at TD Securities. As always, make sure you do your own research before making any investment decisions. stay tuned for tomorrow show. Stephen Biggar, Dir. of financial institutions research at Argus Research will be our Guest taking your questions about financial stocks. You can get a head start with your questions as always. Just email MoneyTalkLive@TD.com. Us all the time we have for the show today. Thanks for watching. We will see you tomorrow.
[music]
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we are one week away from another great decision from the Bank of Canada. We will discuss what to expect. TD Securities Robert Both joins us.
MoneyTalk's Anthony Okolie is going to help look at trends in US auto sales and in today's WebBroker education segment, Caitlin Cormier is when it shows how you can keep up-to-date on key economic events using the platform. So here's how you get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to our guest of the day, let's get you an update on the markets.
We have some green on the screen. We are 56 points to the positive in Toronto, the TSX Composite Index up about one quarter of a percent. Among some notable movers today include some energy names, we are using Baytex as an example. You have West Texas intermediate crude at $85.77 on my screen, continues to push higher recently due to geopolitical risk and other factors. Baytex is up about 1% today.
Indigo being taken private at $2.50 per share, that has the stock on the move higher to the tune of about 22%.
South of the border, after some down sessions to start the second quarter, we have modest green on the screen, 50 points for the S&P 500, a little better than one quarter of a percent.
I want to check in on the tech heavy NASDAQ, how is it fair against the broader market? Up more than half a percent. Intel is not adding to that topline strength today on Wall Street, they're pulling back about 7% today. More about them later in the show, but making chips in the United States is an expensive proposition. And that's your market update.
A strong run of economic data in the US has some investors questioning the timing of rate cuts south of the border but how does the Canadian economy stack up and what could that mean for the path of interest rates in this country? Joining us now to discuss is Robert Both, Senior macro strategist with TD Securities.
>> Always a pleasure to be back.
>> It's always about interest rates but for good reason. We are concerned what the central banks are getting up to this year.
We had expectations. The BOC will have a bunch of economic reports under its arm but luckily we can look at them as well.
What are you seeing?
>> I think from a very high level, with the data has told us over the last two or three months is that rate hikes are continuing to work.
Since the last BOC meeting in March, we have received more data on inflation and wages, that speaks to underlying inflation pressures continuing to moderate. Core inflation measures in the month of February were just sitting above the Bank of Canada's target range of about 3.123.2 percent.
Those are the trim mean and the weighted median that they tend to put a little more weight on.
If you look at the last two months, wage growth as well, we have seen some material slowdowns there.
The labour markets are slowly moving towards more balanced conditions so even though we have continued to add jobs, the faster rate of population growth and faster rate of labour force growth is helping to bring that unemployment rate a little bit higher which should take some pressure off wage growth going forward as well.
At the same time, there are some things that are moving in the opposite direction.
The last month or two of GDP growth does not look like it's coming in any stronger which might be cause for concern. The housing market as well as showing some signs of life over December and January into February. That is something the bank is going to be discussing in April. But I think from a high level, they can sit back here and say rate hikes are still working.
We just need to give them a little more time to get to where they want to go.
>> Reaching patients, we are getting up from the Fed and our central bank as well.
This week, we got the BOC's Business Outlook Survey, their own research. What did it tell us and what do you think the BOC will think it means for future policy decisions?
>> This is a pretty important report from the Bank of Canada. We don't have a ton of private-sector surveys that give a strong pulse on business conditions but that quarterly Business Outlook Survey does do a nice job of capturing the broader sentiment level across the median and giving more insight into things like labour shortages, hiring conditions, investment intentions. It's really quite broad reaching. Now, what that Q1 Business Outlook Survey did tell us was that at a high level, firms are a little less downbeat than they were in the fourth quarter, so there are fewer firms that are planning or anticipating a recession or a severe downturn over the coming year. You look at those labour indicators, those are starting to turn a little more positive as well, hiring intentions have moved off their lot. On the flipside, investment intentions fell quite sharply. That is a concern, especially given the productivity headwinds that we have seen over the last couple of years. On a more dovish note as well, there were more companies that do expect inflation to return to the Bank of Canada's target range over the next couple of years.
The one wrinkle to all of this is that the Bank of Canada also surveys consumers and their inflation expectations didn't see nearly as much progress over the first quarter so consumer inflation expectations are still well above those pre-COVID levels. The Bank of Canada surveys are telling them that those stickier shelter prices, high food inflation, this is all making it more difficult for inflation expectations to normalize and that also is going to make it a little more challenging to get inflation all the way back to target even though we have come a long way over the last 12 months.
>> Let's talk about the challenges because the expectations among consumers are one thing but I guess if you're there is that if these are our expectations for the future path of inflation, we start to change our behaviour in ways that will make it as you said tough for the Bank of Canada to get to where they want to go.
>> Right.
Even though headlight inflation is down to 2.8%, it's inside that one to 3% range, a lot of Canadians are still struggling with the higher cost of living. That did show up in the Business Outlook Survey as well.
Firms were mentioning how even though they expect output prices to fall, that higher cost of living is keeping wage pressures a little stronger and that wage growth is another obstacle to a sustained return to the 2% inflation rate.
So that is going to be something that they continue to monitor going forward. As we are seeing some signs in the economy, as you said, that the high cost of borrowing intentionally is slowing things down, some mixed signals. When the bank puts it together, they are preaching patients.
When you preach patient, what does it actually mean, the big question we get is, one of the rate cuts coming?
>> I think if you were to just focus solely on the inflation picture, you have seen headline inflation fallback and that one to 3% range. You have seen core inflation slow as well on a three month annualized basis which gives you a bit of an indication of where core inflation is trending. Those three month rates are already much closer to 2%. The real difficult part for the Bank of Canada is they have not seen that normalization on the expectations front and more recently as well, we are starting to see more evidence of GDP growth strengthening into 2024 as well.
So we got the January GDP figures at the end of last week. Though showed the economy expanding by 0.6% month over month. That was the largest single market expansion in a years time and with new projections as well, Statistics Canada is looking for a 0.4% increase in February.
That is a bit of a shift for the near-term growth outlook. The Bank of Canada was anticipating something much considerably weaker in its January monetary policy report. They had Q1 growth at 0.5%.
If that February estimate is realized, that would put Q1 tracking closer to 3% annualized. Now we are in a dynamic where we are no longer adding to excess supply.
We might be moving closer to getting back to neutral, we are moving back into excess demand. There is a little bit of uncertainty as to whether we can sustain these recent discolorations in CEPI of these signs of renewed growth momentum are not a one-off, if they are a sign that perhaps momentum is a little stronger than we had anticipated.
>> Lots of things for us to weigh as investors and lots of things for the Bank of Canada to weigh as well. We will get to your questions about the economy and interest rates for Robert Both in just a moment. And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Let's get back to the shares of Intel, clearly in the spotlight today.
They are down about 7% right now. The chip maker says its manufacturing business posted an operating loss of $7 billion last year.
That builds on the more than $5 billion loss in 2022.
It is the first time that Intel has broken their figures for chip manufacturing or foundry business. You can see right now that it is an extensive proposition. The Americans are focusing on more domestic to production, the CHIPS Act.
Intel has been a beneficiary. It will take a while to break even on that foundry business. Let's take a look at Lightspeed Commerce, says it will cut some 280 jobs as it looks to reduce costs across the business. It is up almost 6% right now.
The business founder and CEO says the move will allow the Montréal-based company to invest in other areas of the business. It has also announced it will buy back up to 10% of its shares.
Bond yields are on the rise south of the border amid more signs of resilience in the US labour market. Private payroll data from ADP showed 184,000 jobs were added last month, a much stronger showing than anticipated.
The US 10 year bond yield hit a new high for this year before easing back somewhat.
We have some fed speakers on deck today to that seemed to be preaching that patients when it comes to rate cut expectations. We will see how it all plays out.
A quick check on the markets after a bit of a soft start to the second quarter.
We got some green on the screen. We will be generous, 44.4 1/5 of a percent of the TSX Composite Index and south of the border, for the S&P 500, we are up 12 points, one quarter of a percent.
All right, we are back with Robert Both, we are taking your questions about interest rates on the economy. Let's start getting through them. First when here for you.
What should we expect from the federal budget?
>> We are certainly getting closer. Just yesterday, we received the last of the provincial budgets with Manitoba reporting in the afternoon so looking forward to April 16, we do expect that the government is going to post a deficit around $41 million. That is pretty similar to what was projected in the fall economic statement. It's pretty similar to last year's deficit for 23, 24.
Now, ahead of these budgets, you do typically see a lot of new spending announcements teased. We think that new spending in this budget is going to be relatively modest compared to prior years.
There are a couple of factors behind that.
The first is that the federal government does recognize that the cost of living is a serious concern across Canadian households. They do not want to do anything that is going to materially add to inflation and make the BOC's job more difficult. The second part of it is that we do not expect an election until the fall of 2025 so they should not be seen… >> As a reelection your budget.
>> I think most people would prefer to keep that powder a bit drier and potentially roll out that stimulus next year.
I think from our perspective in the markets perspective, the more interesting part of the budget is really going to boil down to the debt management strategy and the government's borrowing programs for the current fiscal year. Now, we look for government borrowing projections to rise quite sharply.
We expect $238 billion in government of Canada issuance over the coming year, part of that reflects larger refinancing needs, the government is also going to be purchasing, or the government is already purchasing Canada mortgage bonds with some of that issuance as well.
That is going to take place in the context of larger provincial budget deficits and larger provincial borrowing programs as well. As we look forward to 2024 and 2025, it looks like we're going to see a little bit more supply from high quality government and government adjacent issuers then we saw in 2023 and 2024 in the last fiscal year.
>> How does that play out in fixed income markets from an investment point of view?
>> It is a supply demand curve.
So if you are increasing supply, investors will typically require a higher rate of return to absorb that. The Bank of Canada is also going to be, they are expected to be cutting rates over the coming year but that additional government supply is something that can weigh on bond yields further at the curve. Document should provincial budgets there as well and deficit spending in the provinces.
Anything standing out for you from any of the provinces that have tabled their budgets?
>> On the provincial front, we have seen larger budget deficits and we've seen a lot more pressure on the spending side, so both Ontario and Québec came out with larger deficit figures for the coming fiscal year than in the past and both of those provinces are going to embark on a relatively large borrowing program.
Ontario's was a little bit smaller than we anticipated but they are also ramping up T-bill issuance so there total borrowing needs are still quite high and that's also something we will be watching in the federal budget as well.
Bankers acceptance are going away on July 1 as part of the seed were transition so do they try to increase the size of their bill program to absorb some of that demand? We think the bill stock is going to stay relatively stable but we have seen that from some provinces.
>> Interesting stuff. Let's get to another question.
What do you make of the Bank of Canada labelling low productivity as a crisis?
>> Low productivity is certainly a headwind and it's an opportunity as well going forward, but I would certainly reiterate that this is not something that materialized overnight, it's not something that's going to be fixed tomorrow.
Low productivity is something that has weighed on Canadian growth for the last several years. To really change the course there, we are going to need to look at increasing nonresidential investment has a share of total economic activity. You can look at increasing our ND spending across the public and private sector. There is also going to be a natural tailwind to productivity growth from some of the immigration we have seen over the last 2 to 3 years. When you really ramp up immigration programs that quickly, a lot of people are underutilized in the labour market at the start. You may be overqualified for the job you currently have, you might require some skills or language training, certification or recertification to work in a certain industry so as increasingly immigrants become more utilized within Canadian labour markets, more integrated, that is going to also lead to some productivity growth going forward.
>> That's a good segue into the next question.
Someone is wondering will those immigration curves hit the economy?
>> It certainly is going to have an impact on total demand and I think you are going to see it really as soon this fall. We are starting to see some of the announcements about how quotas on international students are being divvied up, a lot of this is still being ironed out the final details but the bigger picture is we are looking at weaker rates of population growth going into 2025 and beyond.
If you look at kind of what his driven population growth over the last few years, in 2023, about 97% of that was immigration and a large part of that was temporary residence and international students.
Those international students levels are going to be relatively stable going forward so they are no longer going to be contributing population growth, temporary residents might actually be declining. We are still waiting for some details but I think everybody is trying to reduce temporary residents to 5% of the population from 6.2, that implies an outright decline over a three-year period.
We are still adding about 500,000 permanent resident admissions over the next two years but you are certainly going to see that rate of growth slow and that is going to feed into less aggregate demand, fewer households consuming goods and services, less government spending but it's also going to hopefully give a little relief to shelter inflation rates, some of those pressures that emerged over the last couple of years.
>> This next thing here it is not a viewer question but Jerome Powell, we talked about said speaker they could draft today, we are getting some comments. He's emphasizing the need for more evidence that inflation is easing before cutting rates. I think another one of the Fed members today was saying maybe we only get one rate couple for the end of this year.
What do you make of this current messaging from the Fed?
>> I think the Fed's current messaging sounds a little bit like the Bank of Canada maybe three months ago. So the bank had been, there had been speculation that the man could begin easing in April to go back a few months. The bank was saying that they needed to see more downward momentum and those core measures because even though headlining core measures of inflation were closer to Target, it looked like we were trending sideways there.
So the US economy has been considerably is stronger than Canada's over 2023. While we saw the economic data to her lower last year, the US has not materially slowed to a below trend pace.
It makes sense that the messaging from the Fed is a little bit more cautious and stressing for more patients.
But we are still going to see a lot of data before we in the market expect the first rate cut so we are looking for the Fed to start easing in June. We don't think there is going to be enough time to see that deceleration by the feds meeting in May. But by June, with a mandate to target full employment as well as stable inflation and a little less concern about highly leveraged households, we think the Fed can maybe ease a little bit more gradually, we think it will cut in June and skip the next meeting before cutting again in September. Even though we have the June star point, it's way to be a little more of an easing into easing if you will.
>> Right now their comments… Doesn't seem to be rattling the bond or equity markets.
We will keep an eye on that and see what else Chairman Powell has to say in the next little while.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Robert Both on the economy and interest rates and just moments time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
We have been talking about big economic events. Why? They can sometimes move the markets and if you want to keep on top of what's going on, WebBroker can help.
Joining us now is Caitlin Cormier, client education instructor with TD Direct Investing. Always great to see you. Let's talk about investors finding different perspectives on economic events from TD here on the platform.
>> Absolutely. Lots of key dates coming up and important as investors have a resource to go in and not only hear about events that are coming up but to help make meaning. Watching the show is a great part of that but it's nice to have other resources to use as well inheres in different perspectives. What I'm going to show you today is where you can find informational WebBroker. So what we are going to do is you're going to operate in under our research. We are going to the markets overview and reports. Research, markets, reports. Once we get here, we are going to scroll down a little ways and look at the right hand side. We will see TD economics. When we go ahead and click on that, it will bring up a separate website here, TD economics. It is a full, title WebBroker website and we are going to click and go there now.
Once we are here, we are going to see an overview of commentaries, latest research and updated publications.
We heard about the Manitoba budget coming out yesterday so we can see that here, some previous, talking at the federal budget, GDP, BOC alike. A lot of the stuff we have been talking about today are here within this particular area within TD Economics so lots to make meaning of. You can also filter the top between Canada, US and global.
Not just sticking to our local economy.
And we can also see that there are other categories here, forecast, financial markets, the economy. Let's just say that if we wanted to see specifically government finance and policy, we can click and see all of the articles that have come out recently, lots of budgets here, information about all those provincial budgets out of Camaro. Really, there is a lot of information here. You can filter down specific to what you are looking for but just another resource to make meaning out of some of the information coming up.
>> A lot of great resources there about things that have happened. What about things that are yet to happen, the upcoming events in the market?
>> Yeah, absolutely.
If we go into WebBroker and click on the research button, under markets, there is a tab called events.
Not absolutely everything is on here.
It does tend to focus more on those types of events that are specific to companies.
For example, we see today's calendar of events. In Canada, it is showing the highlights.
We can see earnings announcements, dividends, splits or rate changes.
Not as much heavy on the economic events but you can certainly go in and click the calendar and kind of jump to a future date and see what information might be able to show up for you.
There also is a US. A log meal. There is also the US side of things.
If you wanted to click there, you can actually see the upcoming US events as well so one more time, we will go to events here… This little flag up here in the top right-hand side, we've got the little US flag… It doesn't want to do it for me today but that is where you would be able to find more information. One last thing I will shout out is that we are on YouTube. TD Direct Investing is on YouTube.
We have a QR code that we can share with the audience that you couldn't use if you want to follow us on YouTube. We have lots of content on there as well, lots of timely content that stuff happening in the market.
Definitely a good place to keep up on information about education.
>> Interesting staff. The technology God made you jump through a few hoops today but you pulled it off gracefully. Thanks for that.
>> Thanks, Greg.
>> 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.
Before we get back to your questions on the economy for Robert Both, a reminder of how you get in touch with us.
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.
All right, we are back with Robert Both, take your questions about the economy and interest rates.
Let's get to the next one here.
Do you see any economic impact from the carbon tax?
>> So fiscal policy is always going to have an economic impact, but you know that impact is going to depend on whether we are talking about the status quo or recent calls to pause or eliminate the carbon tax altogether.
Now, in terms of the status quo, the $15 increase to the carbon tax we saw on April 1, that's not something that's going to have any impact on year-over-year rates of inflation just because we saw a similar $15 increase on April 1 of last year.
Gasoline prices, other fuel prices are rising between March and April, that consistency between years keeps the level of inflation roughly unchanged so from the Bank of Canada's perspective, carbon taxes are not necessarily making their job any more difficult. To the extent that pausing or unwinding some of the carbon tax may have a downward affect on inflation, it would be a one-time impact, it would have far less impact on measures of core inflation that strip out most of the more volatile components on a month over month basis. Every tax also has a purpose, right?
So we look at the carbon tax but we may be sometimes lose sight of the benefits of it. If you are just looking to ease higher cost of living, there are a number of fiscal measures you could look at to do so, certainly sales taxes affect a far larger number of people than a carbon tax, but any easing of those fiscal measures or any fiscal stimulus is also going to put more income in pockets and it's going to lift demand in the context of inflation already being too high, that is not something the Bank of Canada necessarily wants to see so that is sort of why we think that there is not going to be too much new spending in the budget. That is why we don't really expect much in terms of tax cuts.
And I think that is why the carbon tax is unlikely to go anywhere anytime soon.
>> A lot of pieces to the puzzle.
Let's get to another question. What is the state of the housing market? We heard about the slowdown but now it's springtime.
>> Yeah, it certainly springtime, and that means the housing market is going to be high on everybody's radar. At 2022 was a very difficult year for the housing market.
If you just look at the number of home transactions, there were about 445,000 last year, that was actually the lowest since 2009, adjusted for the increased population, it's the lowest since about 2000 so we are coming off a period of extremely weak housing activity.
And we are starting to see some recovery and 2024, both in December and January, you saw a rather large increase in existing home sales. That did coincide with a decline in mortgage rates, salutes or financial conditions are certainly playing a part and I think those higher sales transactions haven't actually had much of an impact on prices yet but they have helped to take some of that supply off the resale market and as we head into this period of seasonal housing demand, that does potentially put a little more fuel for prices if we do see demand common stronger-than-expected or financial conditions are a bit looser than they are today over the next couple of months, that could put a little more fire under housing and could push prices a little higher. In terms of forecasts, our colleagues at TD Economics are looking for annual price gains of about 1.2% across Canada.
That is for the year as a whole. It is going to look a little higher on a Q4 basis and about 4% in 2025 as well.
We are looking for a return to a positive price trajectory but we don't expect to see a return to those extremely large price increases that we saw during the early phase of the pandemic.
>> This next question feels hand in hand with talking about the housing market.
Housing is expensive, the cost of living is expensive, are you concerned about household debt levels?
>> I think we are always concerned about household debt levels in Canada but the level of concern is really going to depend on when the Bank of Canada is in a position to cut rates. We have known for some time that mortgage renewals are having a significant impact on household finances. We know that those mortgage renewals are going to grow more painful, be a more painful adjustment for some and 2025 as well. So in terms of the downside risks from those household vulnerabilities from those elevated debt levels, I think I'm looking at a scenario where the Bank of Canada is forced to keep interest rates a little bit higher into next year.
We think the Bank of Canada can start easing in July of this year and we think by the end of this year, they will get there overnight rate down to 4%.
But as you mentioned, the Fed is talking about patients, the Bank of Canada has been talking about patients for some time, and we are starting to see those signs a renewed growth momentum as well.
So we are pretty comfortable that this growth rebound is a one-off but if that does turn into something with more legs, the bank is forced to push back the start of their easing cycle or they move to soon perhaps and then are forced to unwind some of that and those mortgage renewals in 2025 become a lot more difficult and the risks to economic activity grow considerably larger.
>> That's something to keep our eyes on going forward. We will get back to your questions were Robert Both on the economy and interest rates in just a moment's time.
As always, make sure you do your own research before making any investment decisions. And a reminder that you 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.
Let's talk auto sales, specifically south of the border. US auto sales cooled modestly in March, affordability challenges are waiting on consumer demand.
Anthony Okolie has been taking a look at a TD Economics report on this and the possible outlook.
>> US auto sales were down 1.3% month over month to about 15 1/2 million annualized units coming in just about 400,000 units below forecast. This pullback comes amidst a pullback in affordability as buyers look for deals and incentives to offset the higher car prices south of the border.
When you look at unadjusted volume sales, it was up more than 4 1/2% above year ago levels. When we break things down by vehicle type, we saw passengers sales up modestly, however, they were still lower versus light truck sales which rose more than 5% year-over-year and not accounted for about 80% of last month's sales, that is slightly higher compared to March 2023.
As it is the first week of April, nearly all major automakers from Tesla to Ford report their production and sales information for the past three years and these new reports give investors an analysis of insights into certain aspects of a company's business and whether investing in EVs is finally paying off as well is what models are selling and popular with consumers. Here's a look at some of the world's top automaker sales report for the first quarter. We will start with GM, where Q1 sales were, they sold 594,000 units, down about 1 1/2% year-over-year do likely to lower fleet deliveries as well is an easy lineup that has been struggling over the past quarter.
EVs for GM were down about 20%, led by weak sales for its Chevrolet bolt series.
But GM did make a 6% gain in retail sales.
That helped it edged out Toyota as a top-selling US carmaker in the first quarter.
Meanwhile, Toyota did report a more than 20% year-over-year jump in the first quarter of US sales and that was really helped by demand for its affordable sedans, SUVs and pickup trucks.
Taking a look at Ford and Stellantis, both companies also posted Q1 sales gains year-over-year with boards EV sales actually surging 86% versus the same.
One year ago.
That was led by strong demand for its hybrids and electric vehicles. In fact, Ford is the second top EV seller in the United States and the growth of its hybrids helped Ford start the year as America's best-selling truck manufacturer, including both pickups and vans.
Finally, the big one was Tesla, which reported a big Q1 delivery missed. That was nearly 9% lower year-over-year and represents its lowest quarterly performance since the third quarter of 2022 and, of course, Tesla has been struggling with a lot of competition, not just from traditional automakers but from some of China's EV makers. It is also struggling with its aging letter. Overall, we are demand for electric vehicles this year.
Overall, sales were down across the industry due to affordability. When you look at the average transaction price, it was 2.2% lower versus one year ago and that is because income growth over the past four years has been lagging the average transaction price and the average monthly payment for financed vehicles in the United States. As a result, US consumer demand was really concentrated in the non-luxury sector of the market which accounted for most of the year-over-year growth for Q1 sales.
>> What's your thoughts about the rest of the year?
>> TD Economics expects that sales will continue to trend upward overcoming quarters as income gains and price moderation improve affordability.
They acknowledge that elevated financing costs will remain a challenge for the rest of the year but as the Fed begins to lower borrowing costs in the second half of the year, it should help improve vehicle for debility. TD Economics believes that this headwind should support sales growth moving into 2025.
>> Interesting site. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
This is the heat map function, taking a view of the market movers. The TSX 60, by Price and volume. The price of gold is up almost benefits 30 bucks per ounce today, breaching $2300 per ounce and so the material stocks are performing. Kinross is up about 2%, Barrick up shy of about 1%.
Looking at the energy space, the uranium places are doing well, chemical up about 3%.
Oil and gas names were also rising with the price of benchmark crude continuing to make gains this week.
South of the border, let's check in on the S&P 100.
This is a more concentrated view on what's happened on Wall Street. Intel, we told you about them earlier on the show, the foundry manufacturing business, big operating losses for the second year in a row. They are down 7 1/2%.
Got a bit of a bid into GE. There is a headline yesterday, split into three different units, finally complete after years of movement in that direction, the big conglomerate into three and GE, whatever is left in that basket, is up about 6%.
We are back now with Robert Both from TD Securities. Let's take another question from the audience. Does it look like Canada is going to avoid a recession that we have been fearing for a while?
>> I think over the near term, yes.
We can safely say that the Canadian economy is not in a recession in the first quarter of this year.
If you go back to January, the Bank of Canada and its monetary policy report was looking for Q4 and Q1 growth at 0.5%. That is about as close as you will see a central bank come to calling for an outright contraction without committing to that.
Now, growth was a little bit stronger-than-expected over the fourth quarter but over the first quarter, as we discussed off the top, we have really seen some acceleration into January and February.
So as I said, I think it is safe to say that we are not in a recession now.
But I think it also warrants mentioning that we saw a similar dynamic layout last year. Certainly in late 2022, early 2023, there was a lot of chatter about are these interest rate hikes having too large an impact, are we heading for a downturn? Saw the Bank of Canada acknowledge that in their January decision saying we are going to conditionally pause rate hikes here.
But that obviously did not turn out to be the case. First quarter growth was very strong last year and that kind of fizzled out midyear. We think that the stronger growth is probably not going to be sustained further into 2024 and even though we don't forecast a recession but rather a return to below trend growth, that risk is certainly going to be with us for a little while longer.
>> We will squeeze in one more question before we let you go. Your outlook for the loonie?
>> Alright! I feel like I have said this one before, but we do look for the Canadian dollar to appreciate over 2024.
Really what is going to drive the turning point in the dollar is the turn in the US economy.
We have heard Jay Powell stressing patience. We have also seen the US economy perform better-than-expected for several quarters now.
It really does seem to be a lot more momentum south of the border than in Canada.
So we are not really going to see that appreciation take hold until it looks like the Federal Reserve is a little bit closer to easing. So we think we're getting there. We expect to see more evidence of softness in payrolls this Friday.
That will be the catalyst for the turn in dollars CAD. By the end of this year, we do think we are going to get 135 presently or $0.74 CAD USD to down to 129 or $0.78 by the end of next year we will be back to 125 or $0.80 in CAD USD.
>> Interesting stuff.
I look forward to the next time.
>> My pleasure.
>> Our thanks to Robert Both, Senior macro strategist at TD Securities. As always, make sure you do your own research before making any investment decisions. stay tuned for tomorrow show. Stephen Biggar, Dir. of financial institutions research at Argus Research will be our Guest taking your questions about financial stocks. You can get a head start with your questions as always. Just email MoneyTalkLive@TD.com. Us all the time we have for the show today. Thanks for watching. We will see you tomorrow.
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