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[theme 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 going to discuss whether this inflation report that landed this morning opens the door for another rate cut in September. Robert Both joins us from TD Securities. TD Wealth Nicole Ewing is going to give us an update on the new proposed changes to bare trust rules. And in today's education segment, Hiren Amin is going to show some of the different chart tools available on Advanced Dashboard.
So here's how you can 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 all that and our guest of the day, let's get you an update on the markets.
A bit of a pause in the rally on both Bay and Wall Street. Nothing too dramatic.
Down about 97 Points in Toronto, a little less than half a percent. We are seeing West Texas intermediate at about $74 per barrel, holding steady today but quite a big drawdown over the last several sessions that is being felt in the big energy names. I could've chosen any of the oil and gas metres. Cenovus will be our example of what's happening in the space today. I $25.67, your down about 3.5%.
Some progress being seen as hopeful and on the Middle East peace talks but there is worry about Asian demand as well so that's been weighing on the price of crude. Want to check in on Lundin.
Not a dramatic move in gold today but Lundin is up about 1%.
We had our holiday long Monday when the US market sold off quite dramatically. It's been quite a bounce back from that are now a pause, down about seven points or about 1/10 of a percent. The tech heavy NASDAQ, let's check in there. It's pre-much tracking up.
A little bit weaker than the broader market. 56 points to the downside or about one third of a percent.
One area of strength at least earlier when I was taking a look was Palo Alto Networks out with their latest earnings. We will tell you more later in the show but clearly the street is please. You're at $372 and change per share, up more than 8%, and that's your market update.
Canadian headline inflation cooling to 2.5% in July, this is the lowest level in more than three years. Despite open the door for another Bank of Canada rate cut as early as September? 20 etc. discusses Robert Both, Senior macro strategist with TD Securities.
Great to have the with us.
>> Thank you. It's great to be back on the program.
>> 2.5%, getting closer to to you, the market seems to like this report. Let's go through the inflation report first. Were there any surprises in there for you? We have been tracking lower.
>> Headline CPI was in line with where we thought it was going to be, with where the market thought it was going to be, but I think the details were a little bit softer than we expected.
What I'm referring to is that the Bank of Canada's preferred measure is of core inflation. Those printed at about 2.55% on average. One of them sitting at 2.4, one of them sitting at 2.7, but that was 1/10 the lower than where we and the market saw them and that means that those three-month rates of core inflation that the BOC likes to look at as a gauge of where inflation is trending, that looks a little bit softer than we had anticipated.
So overall, this is very positive news. If we look at what your of that improvement from last month, it is a lot of those cyclical components that you would expect come under a little bit more pressure for higher rates, discretionary components like motor vehicles, hotels, airfares, large household appliances.
Those are all the components that are dragging inflation lower on a year-over-year basis and that's likely to give the Bank of Canada a little bit more confident so we are on track to get to the 2% target.
>> And we have talked about in terms of that headline inflation number, when you strip out the shelter cost, I think we are down to like 1.2% inflation if you strip out shelter and that's one of the things that the Bank of Canada has been asked repeatedly about, does that matter to them?
>> Right. X shelter is running at 1.2. It was about 1.3 last month, so not a huge change there.
But shelter costs are also starting to see a little more progress as well.
If you look at that headline index, it improved more than the X shelter so we are seeing that evidence of deceleration in things like rents. We are certainly seeing it in mortgage interest costs and as that gap between shelter and everything else grows smaller, it's going to be a lot easier to get all the way from 2.5 back down to 2.0.
>> So as we talk about those things, the Bank of Canada is taking a look at this report, they have an announcement two or three weeks from now, early September, what does it mean for them?
I feel after the two cuts we got the summer, there was some hesitation in the market, will they are what they in September. Does this change the story?
>> What I think the bank is good to be looking at in support as they are going to be looking at that kind of early signs of progress on shelter prices. They are going to be looking at that modest performance across the bank's preferred measures of core inflation. I think those two stories are going to tell them that some of these concerns around inflation proving a little more persistent, things like shelter and core services help keeping inflation elevated into next year, some of those concerns might be fading away a little bit so the market didn't necessarily need to see that much evidence. We were already priced for a 25 Basis Point Cut in September heading into this report, but I think this report will give the bank a little more conviction that that path is still intact and we do believe this report is going to give the bank a green light to ease rates again in September.
>> If they do ease again in September, we will have three cuts under our belt. What does the rest of the year look like for the Bank of Canada?
>> We think we are going to get 1 More Cut in September and then 1 More Cut in October, so that would be four in a row for 100 basis points of easing, but we do still think there is going to be a pause this year so we are looking for that pause to, in December, we thought it was going to be in September previously. Even with the progress we have seen in today's CPI report, the case for another rate cut isn't necessarily as large of a slamdunk as the market might be implying. You can look at things like wage growth still being a little elevated. There is certainly hearts of the services basket that are still seeing those pressures and inflation expectations have been somewhat mixed over the last few quarters as well so the Bank of Canada does seem to be putting a lot more weight on excess capacity that we are seeing in labour markets, that should make it easier to look through some of these and more persistent underlying price pressures. But overall, it is coming into the 2% target is coming into view. We are marking new ground today and we do think that is going to support rate cuts in September and October.
>> Anxiety might be too strong a word but do think there any lingering concerns that the Bank of Canada, thinking of the conversations we had earlier this year leading into those two rate cuts, your thinking another one in September, but they do not want to get this wrong.
When inflation first showed up, central bank said it was transitory. We would work our way through it. Do you think their anxieties are easing that they might be making the wrong call?
>> I think their anxieties are shifting, perhaps.
>> There is always something to be worried about.
>> When we saw the first two rate cuts, it was still not a foregone conclusion that the bank is going to continue easing all the way until we got to neutral. We have been through. It's the spring where you have seen those inflation pressures materialize quite sharply, core inflation saw a series of strong month over month advances from March all the way into May and wage growth has remained strong so I think even as that first Bank of Canada cut materialize, that there were questions that they may be forced to hike again. I think any question about inflation we accelerating from here is certainly taking on less importance and the banks deliberations going forward and I think those discussions are more likely to shift into 2025 to whether or not we are actually going to be able to stop a neutral and whether or not the bank is going to perhaps look at going through neutral if inflation does appear on track to undershoot the 2% target, which is not our base case.
>> Longer term, we are talking about getting back to neutral rates, where we are no longer trying to tamp down the economy, team inflation, not trying to reinvigorate it to catch up to slow growth. Where does the bank think neutral is, where do we think neutral is?
>> The bank thinks neutral is at 2.75%. So as you look into 2025 and 2026 right now, markets are placing some risk that we end up going below neutral. If you look at where the end of the cutting cycle is price, is closer to about 2.5%. We think neutral is going to be three. The bank upgraded from 2.5 to 2.75% in April last year. We do think they will upgrade it again in April of next year. But neutral is unobservable so I guess we will know we are there once we're there.
>> Once we actually reach the destination, we can say, here it is, we finally found it.
>> Exactly.
>> Fascinating stuff and a great start to the show. We are going to get your questions about the economy for Robert Both in just a moment's time. You can get in touch with us at any time. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker. Coming up later in the show, TD Wealth Nicole Ewing is going to give us an update to proposed changes to bare trust rules.
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.
Lows is cutting its full-year sales forecast as conscious consumers put off do-it-yourself home runners. Well those did beat earnings excitations for its most recent quarter, sales came in weaker than expected. Some caution going forward.
A warning from lows follows Home Depot's warning to investors last week that it expects a weaker second half of the year as people don't feel quite as good about putting in a new kitchen or bathroom given the economic backdrop. Lows is at $241 per share, down a little shy 1%.
Lots more trolls for Boeing today. The playmaker has pause testing on it 77X aircraft after finding problems in a component between the engines and the plane's wings. The aircraft was originally scheduled to enter service in 2020.
Boeing is, of course, already facing questions about its quality control after a bit our blowout on a 737 Max light earlier this year.
That door and the plugs blew out. On that news, Boeing is down 4.5%.
Let's check in on shares of Palo Alto Networks. We showed you off the top of the show. It clearly in the spotlight, up more than 9%. The cybersecurity firm beat the streets expectations for the most recent quarter.
It's providing a solid earnings forecast on strong demand for cybersecurity products. I don't know about you, but lately on my phone, text messages, it's nonstop barrage of hey, call me, let's talk about your job. Hey, do I have the right person? Report, delete.
Report, delete.
Let's check in on the markets.
On the TSX Composite Index, we are down a little shy of half a percent. The S&P 500 also pausing on that strong rally we have all that sell off two weeks ago.
Right now it's down five points, little shy of 1/10 of a percent.
We are back with Robert Both, take your questions about the economy and interest rates. First one here for you.
Divergence, this has been a big theme, we have two cuts under our belt but the Fed has yet to move. Are you accepting more divergence between the BOC and fed?
>> Divergence has been a extremely topical subject during the summer.
You and I have discussed it on a few occasions. But I think we are getting very close to the peak level of divergence between Canada and the US now.
The Bank of Canada is currently operating at 100 basis points behind the upward bound it fed rate. After September's cut if there is one, that would be 125 points below the Fed which is something we have not seen since well before the financial crisis.
Any discussion of a prolonged period or extreme divergence, most of that has been put to rest by the turn we have seen in the US economy. We are seeing inflation progress in the US, we are seeing signs of strain in labour markets and with the Fed's dual mandate, that has given them a little more confidence to pencil in a more aggressive easing cycle in the US so we do things that divergence is probably going to peak after that September BOC decision and the Bank of Canada and fat are going to be operating at a 100 to 125 basis points apart through the end of this year before we see more convergence between the two in 2025.
>> If we are trying to get into the Fed's thinking, when he saw that selloff two weeks ago, it was pretty dramatic and short-lived. We have come back, the American markets, from the lows of that but there are people out there, pundits calling for 50 basis points down from the Fed in September, look at what's going on right now. We have had some data since then that has tamped that down but we are going to hear from Jerome Powell. It's Jackson Hole time.
People in Canada say the summer is coming to an end when the CNE starts. I feel like in the finance community, we know the summer is coming to an end when Jackson Hole starts.
>> All the central bankers are waiting to break out their tweed blazers and there is a lot of focus on this Jackson Hole symposium as perhaps the last chance for Chairman Powell to frame his message around the potential for 50 basis point cut. Historically, Jackson Hole has been a little bit more of a dry conference. You tend to see a lot of academics there, there tends to be a lot more lectures and deep dives into the academic subject material but we have seen these larger pronouncements come from the Fed it Jackson Hole in the past. I think that has driven some of the expectation that Powell could use his platform to change his message. We think markets are probably going to be disappointed there.
We think the Fed, like other central banks, they love nothing more than to retain option L and he and with the September Fed decision at least a few more weeks out, we are going to get more data on payrolls, we are going to get another report on PCE inflation and the Fed is not want to tie his hands behind its back so we do things that it's going to remain a little more ambiguous and anyone looking for definitive signal on a 50 basis point cut is probably going to be disappointed.
>> We will be watching out for that later in the week. Another audience question just came in. With rate cuts in Canada looking almost certain, why has the Canadian dollar been driven up in the last couple of days? What's happening with the currency?
>> I think any discussion of the loonie ties in nicely to the discussion about CAD a US divergence. We are penciling in more and more rate cuts in Canada. That is also occurring on the other side of the border.
As we see markets price and more aggressive easing cycles in the US, that's providing a little bit of support to CAD on the margins. It's notable, the loonie did not really move after his CPI and the US dollar but it traded at lower against other D10 currencies as well. We have seen that pressure on you 10 crosses and looking ahead, we do expect a little more weakness to materialize in the near term.
The market is still price for the risk of a 50 basis point cut in the next few Fed decisions so if the Fed does not follow through on that risk, in September, you will see some of that get price back out.
That is something that would bring some strength back to the US dollar. We are also getting closer to the US election in November. That uncertainty, especially during the transition period, if there is any sort of ambiguity around the election results, that's also something that can drive a flight to safety so longer-term, we think CAD is pretty well near its fair value at current levels but we think we are going to see a bit of a pullback into year end. We are looking for CAD to bottom out at around $0.71 US. It is currently sitting at about 73.
So that trough does look a little bit higher in light of the easing that's been priced into the US but we do still think there is some downside in the near term.
>> We talk about CAD and the US dollar and the interplay here at the central banks.
We have also talked about the fact that, when the divergent story was more front and centre, how much weakness in the Canadian dollar with the Bank of Canada tolerate. Are we passed that conversation?
>> I think we are. The conversation is also certainly higher on the BOC's radar when they are looking at upside risks to inflation, that was the case three, four months ago. Headline inflation was still getting close to that 2% level but certainly the risk of persistence in upside risk were taking on greater importance in the bank's deliberations.
Now that we have seen more progress on inflation and especially since we have seen more evidence of deterioration in the labour markets, more slack hitting the labour market, those risks are looking a little more balanced from the BOC's perspective and it means we don't have to be as concerned with CAD depreciation as they potentially were three or four months ago.
>> Interesting stuff and thank you and the audience for sending that question in on the currency.
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 interest rates and the economy in just a moment's time. A reminder that coming up, TD Wealth Nicole Ewing is going to give us an update on proposed changes to bare trust rules. You don't want to miss that.
Up next, we are getting to our education segment.
Today's education segment, we are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing.
Hiren Amin, Senior client education instructor with TD Direct Investing joins us now and hearing, you're going to show some of the chart tools available.
>> Indeed I am! Great to be back. We are talking about advanced dashboard and specifically looking at the charting package that we have on here. I've got a pulled up here. When we dive in. We will show you a little bit about how you can customize this platform and make it your own, especially for those of us who are more technically minded when we do our research.
You can see that I've got the SPY loaded up, which is the S&P 500 ETF that tracks the S&P 500.
Most technical analyst want to set this up correctly. There are couple of ways you can access them.
Here you are going to get a preselected menu card if you want of different time frames.
You can see currently we are highlighted on the five minute mark. Let's say I wanted to go to the daily chart. I can click on the daily and what that essentially means is that, oh, let's go ahead and compress this a bit and expand this out. We have obviously had a bit of SPY movement and you can see the daily candlesticks now for each looking back to about the beginning of the year. Just while we are on that note, once you do kind of set up your timeframe, you do have the ability to also adjust it to the zoom scaling. One thing you can do is head over to the price axis over here and kind of compress it and adjust it and you see the candles enlarging. Same thing on the bottom axis where the month award date is located.
Stretching it out here, you can see the representation of it better. You have a quick access menu down here for the timeframe selection as well. This is just going to give you the period that you want to look at.
Let's say I want to look at six months back where is I have six months of chart action here now showing up for us and this is a weekly candle that we are looking at there.
We also have on offer the different chart style. What I mean by that is you can see we are using the candlestick chart for example a and you can go in here and see a menu of the different ones you can have in there some more exotic ones as well, the hike in Ashy, the Rincon, so you can look at that.
Here's another popular when used amongst traders.
You can set those up on this platform here. The other thing I'm going to go on to, to the customization, is to look at indicators, because that perhaps the most important. Let's go back to handles to make sure everyone can see what we're looking at here. There are over 100 different indicators over here that you can choose from. On this left-hand panel, we have over 50 different drawing tools and I'm just going to them and say one thing. Let's am going to add a moving average which is one of the most run-of-the-mill indicators that a trader would have in there so if we going to moving average into there's a whole host of different ones you can add.
You can add a basic one and if you want to add in multiple times, you can just click on it a second time. What you will notice is over here on the legend bar, I can adjust the styling by clicking on the gear icon over here in choosing a different colour so let's say I want to make this one yellow and change the timeframe to do 50 days is the moving average and select okay.
There we go.
And then we are going to choose the bottom want to go over here and I'm gonna switch this to a different colour, perhaps let's make this one red. Go to the input and changes parameter to a 200 day moving average.
That's the timeframe I'm selected on.
You've got these two moving averages plotted in here. Additionally, one of the neat tools I will show folks is one that I particularly like, if we go into the drawing set over here, you're able to forecast different prices. Let's just say, let me switch my timeframe to a bit of a longer one, let's go to a week out here. Okay.
Now we are going to go back to our timeframe. Let's say I want to measure the price. I can do that. Let's go to this one that says price range. Let's say I want to measure what was the price change from this bottom up until this peak over here?
It's hundred and 56 points at the SPY move, representing a 30% jump from that point onwards. You have these neat tools that you can also add and then finally to sum it all up, you can save this. If you are analysing particular securities, like most readers do, we have our favourites.
You can come into the indicator templates.
Right next indicators are it's as templates, going here and click on save indicator template.
Let's call it August 20 for example. You can choose to have it remember the symbol and you can have it choose to remember the timeframe. If you have a favourite when you want to look at, it will capture all of that in including volume and moving averages and just hit save. Anytime you want to recall that, you can go to templates and see down here, August 20, you can click on that to pull back. That's a quick run through and how you can do some of the basic customization.
>> A lot of powerful tools there for when people are doing the research. What if they're in there, working with the tools, there in the charts, now they want to trade off that information. Can you do that?
>> You absolutely can. This is one of the beauties of the platform. You don't need to move away from your chart screen, you can do everything right here. There's two ways you can execute trades right off of the chart. One you will notice is that I've got the cross here and as I move across the price axis on the bottom, there's a plus sign next to it so I can click on this + and I can pinpoint to this target. Let's just say I want to buy SPY at this level. I can click here and say by and what this will do is open up the floating order ticket and then I can input my parameters and send that to trade off.
The other way that you can also do it is you do have the buy sell menu buttons at the top here located so what this does is let's say for example we go to buy, it's not bringing up anything but it changes my crosses. It might not be much to see but they are in green and this allows me to precisely target the price I just have to drop it at the price, let's say 506, I do a single click and there I've got the order ticket open up there.
He ways to get the orders in and off and it's pretty simple where you can still stay on the charts there.
>> Great stuff as always, thanks for that.
>> My pleasure.
>> Hiren Amin, Senior client education instructor at TD Direct Investing. For more educational resources, check out the learning centre in my broker or use this QR code, which will navigate to TD Direct Investing's Instagram page where there are more informative videos.
Now in a programming no, we had a viewer who notice, thank you for noticing yesterday, what happened with yesterday's broadcast. We unfortunately had some technical issues that prevented us from reading the show to you but if you are interested in seeing our conversation with TD Asset Management's Emin Baghramyan, the guest of yesterday, we were talking about low volatility investing, we still had that conversation even though we can bring it to you live.
Go to what broker or finder on the website, moneytalkgo.com. I'm looking at it right now. The headline is: as market risks linger, is now the time to consider low volatility investment? Click on that and you will see the discussion right there with Emin Baghramyan.
We are back with Robert Both. Next question. How should we be viewing the impact from the US election?
>> The DNC is happening now. There is a focus on the poles and the platforms. Now the candidates are set, we can start to look at what is actually on the table for November. The two largest issues for markets and the Canadian economy we believe are going to be fiscal policy and trading policy for the next ministration.
From a physical perspective, both candidates have shown some willingness to run larger deficits so you can look into 2025 with the risk that bond issuance might need to increase to fund these steps so that is a risk we are watching as we get more details on those platforms. On the trade front, some things look very different between the two so if we do see a Harris administration, we do expect more of a status quo. That does not mean that there will not be little frictions between Canada and the US, we are going through with softwood lumber right now. We have gone through it in the past as well.
With a return to a potential trumpet ministration, that risk becomes much larger and given that the next US administration will need to renew NAFTA by July 1, 2026, there is rather a short timeline to iron out any discrepancies between Canada and the US when it comes to trade policy because those discussions will take on a much greater importance as you get closer to that deadline.
>> When we talk about that size of spending, he said obviously it might be status quo with a Harris and ministration, drum, no one seems to have an appetite to cut back on spending. Longer term, would we think about that in terms of the US market, the US demand for treasuries? It gets complicated.
>> We are probably going to hear more about fiscal sustainability over the next four years. You have certainly seen these issues arise before in the UK during the Liz Truss administration, financial markets responded very harshly to some of their fiscal productions. That ended up speeding up the change in government. I think with the US, there is a lot more institutional backing for it.
It's very difficult to find another reserve currency for global markets. So I think any discussion that this is going to require rapid shifts in the near term before we go off the guardrails, that's not necessarily warranted at this stage.
But I do expect those discussions are going to become louder and louder as we go into the next four years given some of the platforms for larger tax breaks or more social spending. There certainly does need to be some revenue attached are those to bring a little more balance.
>> Interesting stuff. Next question is about I'm assuming were talking about Canada, what is the state of the housing market?
>> The Canadian housing market has gone through pretty quiet summer. We certainly saw a strong start in June, home sales were up 3.7%. We give some of that back in July but prices have not moved much of the last couple of months and coming on the back of the Bank of Canada-- markets were pricing in a risk of the BOC easing well before June so the Summer Sayles haven't been quite as strong as we necessarily expected. We are still waiting to see how central banking easing does get processed by the mortgage market. We have actually seen the five year bond yields rallied by about 60 basis points since the end of June so I think we are going to see mortgage rates improve into the second half of this year. That should bring some improvement in affordability and hopefully provide a bit of a support to sales but we think overall it is going to remain more of a 2025 story when we talk about any large recovery.
So we, our colleagues in TD Economics are forecasting for existing home sales to rise by 4.2% for 2024 as a whole. We-- they do look for much larger double-digit gains in 2025 and really it will be 2025 that we actually start to see that return to more balanced markets, put a little more upward pressure on prices.
>> We know to you when it comes to supporting demand in the housing market, we have had robust population growth in this country from immigration. There has been obviously some headlines recently about the temporary foreign worker program, the student program, there might be some cutbacks there.
How would that affect the housing market?
>> Immigration is a key wildcard not just for Canadian housing but for the Canadian economy as you look and 2025, 2026 and beyond. Right now, there are about two 800000 Nonpermanent Residents in Canada.
The government's target, 6.8% of the population, the government wants to get that down to 5.0% by the end of 2026 so three years after these targets were announced.
We are now almost 6 months in and we have not seen many more details so by the time those details are introduced by the fall, it is a rather short period to bring these policies into effect. To actually achieve the government's target, you would need to see outflows about 300,000 nonpermanent residents each year. We are only absorbing about 500,000 permanent resident so essentially you are talking about a scenario where population growth slows very, very sharply and that is going to have knock on effects to housing, that is going to exert a large drag on total demand in the economy, it's also presenting a bit of a supply shock because it's easy to envision a scenario where that type of emigration and would actually lead to skill shortages in a lot of industries, so that is a key risk to the nearer term outlook as we get into 2025.
We do expect some details in the fall but the Bank of Canada hasn't necessarily been waiting for those details. Their last monetary policy support express some scepticism on the government's targets and they are actually not using them internally so it is possible that we see those targets watered down in the fall.
>> Interesting stuff. We will get back to your questions for 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 can get in touch with us at any time.
Do you have a question about investing or what's driving the markets?
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People who hold joint accounts with their parents or children might breathe a little easier following proposed changes to rules around bare trust's. Nicole Ewing, Dir. of tax and estate planning a TD Wealth joins us now to dig into the changes. Nicole, people may have seen the headlines about no filing obligations for this tax year, important, but there's a lot more going on, isn't there!
>> There is. We have the extension of the exemption from filing bare trust's into 2024 as well. 2023 exempt, 2024 exempt.
But we are also seeing changes to the broader rules that will be applicable for the 2025 tax year and onward. We have seen a change to the definition of what a deemed trust is and it includes an express trust or an express trust includes a situation where an individual is on title, legal owner, there are beneficial owners and then the legal owners acting as an agent for that individual so that has been clarified a little bit that you are going to have these bare trust's that are going to be caught. Currently we have a $50,000 exemption with some narrow definitions of what that could include, so cash, certain other types of investments but if you had GICs, for example, that $50,000 exemption would not apply. That is being expanded, both the amount and the type of assets. So going forward, we will have a limit of $250,000 under which you don't need to file so $250,000, including cash, GICs, personal use property as long as all of the trustees are related to the beneficiaries so if we have trustees related to beneficiaries, we are not going to need to have a filing going forward after 2025. There is another exemption for $250,000 where everything is in cash, but that's more of a lawyer's interest account.
>> When I think back to the spring and the conversations you and I had on this, there was a lot of confusion out there as to the bare trust rules and what it actually meant for re-people trying to figure it out.
I think about aging parents and people who have joint account with them to help pay the bills, parents you might be joint homeowners with children. I think a lot of these people are wondering, what's going on? What if these proposed changes mean for them?
>> This is very good news.
Essentially, we have much more narrow circumstances in which people will need to file.
If we are heading the $250,000 and a parent is on with their child, those in trust account or joint account, you are not going to need to file. Period.
You don't need to file.
Going into December 31, 2025 and onward, there will also be an exemption for those arrangements where principal residence is in play. If the parent is on title for their child or the child is on title for their parent, provided that those trustees and beneficiaries are related and that property could qualify as a printable residence, you will also not need to make a filing for that situation. But that's 2025 and onward.
>> When I think that 2025 coming up a lot in the conversation, next spring we will be thinking about the year 2024 tax year, is the same for the next year.
Old people be talking about?
>> You to determine whether or not you need to file. There filing requirements for trusts and bare trust and if you don't meet one of those exemptions, you will need to file. In 2026, you would be thinking about your 2025 tax filing obligations and you will need to determine whether or not you have a filing obligation.
>> Very intriguing stuff here, a lot of people had a lot of questions, you answered a lot of them quite nicely.
Draft legislation, proposed changes and individual circumstances can be unique. So you should talk to someone?
>> Out slowly. This is very complex legislation that regular folks are not in a great position to decipher. This makes it clearer but there's a way to be circumstances where you need to professional advice, particularly when there are other issues at play.
Getting professional advice is very important.
>> Always great to get your insights.
Thanks for this.
>> My pleasure.
>> Nicole Ewing, director of tax and estate planning at TD Wealth.
Let's say you updated on the markets. We are back in Advanced Dashboard, looking at the map function. Let's scan to the TSX 60 by price and volume. We are seeing a pause in the rally on both they and Wall Street's.
We have seen a pretty considerable pullback in the price of American benchmark crude in the last several days.
There are two forces at play. There was optimism about peace talks being brokered by the US in the Middle East and also concerns about Chinese demand so that's been weighing on crude prices for several days. It's been waiting on the energy trade. Cenovus is down 3%, CNQ and Suncor both down more than 2%. So about gold holding nicely above $2500 per ounce. It is playing through for Barrick which is up to the tune of about 1%. South of the border, we have had a pretty solid bounce back from the sell off two weeks ago on Wall Street.
We are back with Robert Both.
Should we be worried about a recession and will Canada hit one for the United States?
>> I would certainly expect that we are going to hear more chatter about recession but I feel quite confident that we are not in a recession now.
We are going to get Q2 GDP data next week.
We are exact that data is going to show annualized growth of around 2%.
We are coming off a similar 1.7% growth rate in the first quarter of this year so in terms of meeting the technical definition, we are quite a ways off of that but we did narrowly escape a recession for the second half of last year, both Q3 and Q4, so there was no GDP growth and if you look at what's happening in labour markets, you are certainly seeing more evidence of excess supply, those pockets of slack starting to build up so even though that total unemployment rate was not higher in July, we were still at about 6.4%, you did have an offsetting decline in the labour force participation rate. If you look at the share of Canadians that are employed, that has been grinding steadily lower for some time now and those more vulnerable pockets of the labour market, so younger workers, recent immigrants, minorities, those are all seeing much more pressure so the use unemployment rate actually spiked quite sharply in July, it's now at 14%.
So you are certainly seeing that show up in labour markets but in terms of meeting the technical definition of two quarters of negative output, we are certainly not there and the Bank of Canada is looking for Q3 growth of around 2.8% so they seem to have quite a bit of confidence that we are not entering when either. We do think growth could be a little bit weaker over the second half of this year but we don't expect that we will actually enter one.
>> We are out of time for questions.
Before I let you go, let's go back to the publisher. When I say we have a VOC rate decision in September, we are two weeks and a day away from that decision.
What you expect in?
>> We are looking for the bank to cut the rate by another 25 basis points.
Our view has been that the bank would cut in back-to-back bursts and allow a little bit more time to assess how those rate cuts are feeding through the economy. If you listen to the banks message over the last few weeks, if you look at what's happening in labour markets, the progress we have seen in CPI, I think it speaks to a little less urgency to you pause in between meetings or in between cuts. The bank is certainly starting to put more weight on downside risks. We are seeing three-month core inflation continue to grind lower and we are seeing new lows and headline inflation as well so I think there's a little more willingness to look through those more hawkish indicators like wage growth and shorter-term inflation expectations, but we don't expect rate cuts are going to be on autopilot. We think they can go twice or what we do look for them to pause once they hit 4% in December. By December.
>> Always great insight.
Appreciate you joining us.
>> My pleasure.
>> Our thanks Robert Both, Senior macro strategist with TD Securities.
Always be sure to do your own research before you make any investment decisions.
If we did not have time to get to your question today, we will aim to get it into future shows.
Stay tuned for tomorrow show, we will have Jeff Evans, VP, Dir. and portfolio manager at TD Asset Management who want to take your questions about real estate and infrastructure stocks.
You can get a head start with those questions.
Just email MoneyTalkLive@TD.com.
That's all the time we have for the show today. Thanks for watching and we will see you tomorrow.
[theme 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 going to discuss whether this inflation report that landed this morning opens the door for another rate cut in September. Robert Both joins us from TD Securities. TD Wealth Nicole Ewing is going to give us an update on the new proposed changes to bare trust rules. And in today's education segment, Hiren Amin is going to show some of the different chart tools available on Advanced Dashboard.
So here's how you can 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 all that and our guest of the day, let's get you an update on the markets.
A bit of a pause in the rally on both Bay and Wall Street. Nothing too dramatic.
Down about 97 Points in Toronto, a little less than half a percent. We are seeing West Texas intermediate at about $74 per barrel, holding steady today but quite a big drawdown over the last several sessions that is being felt in the big energy names. I could've chosen any of the oil and gas metres. Cenovus will be our example of what's happening in the space today. I $25.67, your down about 3.5%.
Some progress being seen as hopeful and on the Middle East peace talks but there is worry about Asian demand as well so that's been weighing on the price of crude. Want to check in on Lundin.
Not a dramatic move in gold today but Lundin is up about 1%.
We had our holiday long Monday when the US market sold off quite dramatically. It's been quite a bounce back from that are now a pause, down about seven points or about 1/10 of a percent. The tech heavy NASDAQ, let's check in there. It's pre-much tracking up.
A little bit weaker than the broader market. 56 points to the downside or about one third of a percent.
One area of strength at least earlier when I was taking a look was Palo Alto Networks out with their latest earnings. We will tell you more later in the show but clearly the street is please. You're at $372 and change per share, up more than 8%, and that's your market update.
Canadian headline inflation cooling to 2.5% in July, this is the lowest level in more than three years. Despite open the door for another Bank of Canada rate cut as early as September? 20 etc. discusses Robert Both, Senior macro strategist with TD Securities.
Great to have the with us.
>> Thank you. It's great to be back on the program.
>> 2.5%, getting closer to to you, the market seems to like this report. Let's go through the inflation report first. Were there any surprises in there for you? We have been tracking lower.
>> Headline CPI was in line with where we thought it was going to be, with where the market thought it was going to be, but I think the details were a little bit softer than we expected.
What I'm referring to is that the Bank of Canada's preferred measure is of core inflation. Those printed at about 2.55% on average. One of them sitting at 2.4, one of them sitting at 2.7, but that was 1/10 the lower than where we and the market saw them and that means that those three-month rates of core inflation that the BOC likes to look at as a gauge of where inflation is trending, that looks a little bit softer than we had anticipated.
So overall, this is very positive news. If we look at what your of that improvement from last month, it is a lot of those cyclical components that you would expect come under a little bit more pressure for higher rates, discretionary components like motor vehicles, hotels, airfares, large household appliances.
Those are all the components that are dragging inflation lower on a year-over-year basis and that's likely to give the Bank of Canada a little bit more confident so we are on track to get to the 2% target.
>> And we have talked about in terms of that headline inflation number, when you strip out the shelter cost, I think we are down to like 1.2% inflation if you strip out shelter and that's one of the things that the Bank of Canada has been asked repeatedly about, does that matter to them?
>> Right. X shelter is running at 1.2. It was about 1.3 last month, so not a huge change there.
But shelter costs are also starting to see a little more progress as well.
If you look at that headline index, it improved more than the X shelter so we are seeing that evidence of deceleration in things like rents. We are certainly seeing it in mortgage interest costs and as that gap between shelter and everything else grows smaller, it's going to be a lot easier to get all the way from 2.5 back down to 2.0.
>> So as we talk about those things, the Bank of Canada is taking a look at this report, they have an announcement two or three weeks from now, early September, what does it mean for them?
I feel after the two cuts we got the summer, there was some hesitation in the market, will they are what they in September. Does this change the story?
>> What I think the bank is good to be looking at in support as they are going to be looking at that kind of early signs of progress on shelter prices. They are going to be looking at that modest performance across the bank's preferred measures of core inflation. I think those two stories are going to tell them that some of these concerns around inflation proving a little more persistent, things like shelter and core services help keeping inflation elevated into next year, some of those concerns might be fading away a little bit so the market didn't necessarily need to see that much evidence. We were already priced for a 25 Basis Point Cut in September heading into this report, but I think this report will give the bank a little more conviction that that path is still intact and we do believe this report is going to give the bank a green light to ease rates again in September.
>> If they do ease again in September, we will have three cuts under our belt. What does the rest of the year look like for the Bank of Canada?
>> We think we are going to get 1 More Cut in September and then 1 More Cut in October, so that would be four in a row for 100 basis points of easing, but we do still think there is going to be a pause this year so we are looking for that pause to, in December, we thought it was going to be in September previously. Even with the progress we have seen in today's CPI report, the case for another rate cut isn't necessarily as large of a slamdunk as the market might be implying. You can look at things like wage growth still being a little elevated. There is certainly hearts of the services basket that are still seeing those pressures and inflation expectations have been somewhat mixed over the last few quarters as well so the Bank of Canada does seem to be putting a lot more weight on excess capacity that we are seeing in labour markets, that should make it easier to look through some of these and more persistent underlying price pressures. But overall, it is coming into the 2% target is coming into view. We are marking new ground today and we do think that is going to support rate cuts in September and October.
>> Anxiety might be too strong a word but do think there any lingering concerns that the Bank of Canada, thinking of the conversations we had earlier this year leading into those two rate cuts, your thinking another one in September, but they do not want to get this wrong.
When inflation first showed up, central bank said it was transitory. We would work our way through it. Do you think their anxieties are easing that they might be making the wrong call?
>> I think their anxieties are shifting, perhaps.
>> There is always something to be worried about.
>> When we saw the first two rate cuts, it was still not a foregone conclusion that the bank is going to continue easing all the way until we got to neutral. We have been through. It's the spring where you have seen those inflation pressures materialize quite sharply, core inflation saw a series of strong month over month advances from March all the way into May and wage growth has remained strong so I think even as that first Bank of Canada cut materialize, that there were questions that they may be forced to hike again. I think any question about inflation we accelerating from here is certainly taking on less importance and the banks deliberations going forward and I think those discussions are more likely to shift into 2025 to whether or not we are actually going to be able to stop a neutral and whether or not the bank is going to perhaps look at going through neutral if inflation does appear on track to undershoot the 2% target, which is not our base case.
>> Longer term, we are talking about getting back to neutral rates, where we are no longer trying to tamp down the economy, team inflation, not trying to reinvigorate it to catch up to slow growth. Where does the bank think neutral is, where do we think neutral is?
>> The bank thinks neutral is at 2.75%. So as you look into 2025 and 2026 right now, markets are placing some risk that we end up going below neutral. If you look at where the end of the cutting cycle is price, is closer to about 2.5%. We think neutral is going to be three. The bank upgraded from 2.5 to 2.75% in April last year. We do think they will upgrade it again in April of next year. But neutral is unobservable so I guess we will know we are there once we're there.
>> Once we actually reach the destination, we can say, here it is, we finally found it.
>> Exactly.
>> Fascinating stuff and a great start to the show. We are going to get your questions about the economy for Robert Both in just a moment's time. You can get in touch with us at any time. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker. Coming up later in the show, TD Wealth Nicole Ewing is going to give us an update to proposed changes to bare trust rules.
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.
Lows is cutting its full-year sales forecast as conscious consumers put off do-it-yourself home runners. Well those did beat earnings excitations for its most recent quarter, sales came in weaker than expected. Some caution going forward.
A warning from lows follows Home Depot's warning to investors last week that it expects a weaker second half of the year as people don't feel quite as good about putting in a new kitchen or bathroom given the economic backdrop. Lows is at $241 per share, down a little shy 1%.
Lots more trolls for Boeing today. The playmaker has pause testing on it 77X aircraft after finding problems in a component between the engines and the plane's wings. The aircraft was originally scheduled to enter service in 2020.
Boeing is, of course, already facing questions about its quality control after a bit our blowout on a 737 Max light earlier this year.
That door and the plugs blew out. On that news, Boeing is down 4.5%.
Let's check in on shares of Palo Alto Networks. We showed you off the top of the show. It clearly in the spotlight, up more than 9%. The cybersecurity firm beat the streets expectations for the most recent quarter.
It's providing a solid earnings forecast on strong demand for cybersecurity products. I don't know about you, but lately on my phone, text messages, it's nonstop barrage of hey, call me, let's talk about your job. Hey, do I have the right person? Report, delete.
Report, delete.
Let's check in on the markets.
On the TSX Composite Index, we are down a little shy of half a percent. The S&P 500 also pausing on that strong rally we have all that sell off two weeks ago.
Right now it's down five points, little shy of 1/10 of a percent.
We are back with Robert Both, take your questions about the economy and interest rates. First one here for you.
Divergence, this has been a big theme, we have two cuts under our belt but the Fed has yet to move. Are you accepting more divergence between the BOC and fed?
>> Divergence has been a extremely topical subject during the summer.
You and I have discussed it on a few occasions. But I think we are getting very close to the peak level of divergence between Canada and the US now.
The Bank of Canada is currently operating at 100 basis points behind the upward bound it fed rate. After September's cut if there is one, that would be 125 points below the Fed which is something we have not seen since well before the financial crisis.
Any discussion of a prolonged period or extreme divergence, most of that has been put to rest by the turn we have seen in the US economy. We are seeing inflation progress in the US, we are seeing signs of strain in labour markets and with the Fed's dual mandate, that has given them a little more confidence to pencil in a more aggressive easing cycle in the US so we do things that divergence is probably going to peak after that September BOC decision and the Bank of Canada and fat are going to be operating at a 100 to 125 basis points apart through the end of this year before we see more convergence between the two in 2025.
>> If we are trying to get into the Fed's thinking, when he saw that selloff two weeks ago, it was pretty dramatic and short-lived. We have come back, the American markets, from the lows of that but there are people out there, pundits calling for 50 basis points down from the Fed in September, look at what's going on right now. We have had some data since then that has tamped that down but we are going to hear from Jerome Powell. It's Jackson Hole time.
People in Canada say the summer is coming to an end when the CNE starts. I feel like in the finance community, we know the summer is coming to an end when Jackson Hole starts.
>> All the central bankers are waiting to break out their tweed blazers and there is a lot of focus on this Jackson Hole symposium as perhaps the last chance for Chairman Powell to frame his message around the potential for 50 basis point cut. Historically, Jackson Hole has been a little bit more of a dry conference. You tend to see a lot of academics there, there tends to be a lot more lectures and deep dives into the academic subject material but we have seen these larger pronouncements come from the Fed it Jackson Hole in the past. I think that has driven some of the expectation that Powell could use his platform to change his message. We think markets are probably going to be disappointed there.
We think the Fed, like other central banks, they love nothing more than to retain option L and he and with the September Fed decision at least a few more weeks out, we are going to get more data on payrolls, we are going to get another report on PCE inflation and the Fed is not want to tie his hands behind its back so we do things that it's going to remain a little more ambiguous and anyone looking for definitive signal on a 50 basis point cut is probably going to be disappointed.
>> We will be watching out for that later in the week. Another audience question just came in. With rate cuts in Canada looking almost certain, why has the Canadian dollar been driven up in the last couple of days? What's happening with the currency?
>> I think any discussion of the loonie ties in nicely to the discussion about CAD a US divergence. We are penciling in more and more rate cuts in Canada. That is also occurring on the other side of the border.
As we see markets price and more aggressive easing cycles in the US, that's providing a little bit of support to CAD on the margins. It's notable, the loonie did not really move after his CPI and the US dollar but it traded at lower against other D10 currencies as well. We have seen that pressure on you 10 crosses and looking ahead, we do expect a little more weakness to materialize in the near term.
The market is still price for the risk of a 50 basis point cut in the next few Fed decisions so if the Fed does not follow through on that risk, in September, you will see some of that get price back out.
That is something that would bring some strength back to the US dollar. We are also getting closer to the US election in November. That uncertainty, especially during the transition period, if there is any sort of ambiguity around the election results, that's also something that can drive a flight to safety so longer-term, we think CAD is pretty well near its fair value at current levels but we think we are going to see a bit of a pullback into year end. We are looking for CAD to bottom out at around $0.71 US. It is currently sitting at about 73.
So that trough does look a little bit higher in light of the easing that's been priced into the US but we do still think there is some downside in the near term.
>> We talk about CAD and the US dollar and the interplay here at the central banks.
We have also talked about the fact that, when the divergent story was more front and centre, how much weakness in the Canadian dollar with the Bank of Canada tolerate. Are we passed that conversation?
>> I think we are. The conversation is also certainly higher on the BOC's radar when they are looking at upside risks to inflation, that was the case three, four months ago. Headline inflation was still getting close to that 2% level but certainly the risk of persistence in upside risk were taking on greater importance in the bank's deliberations.
Now that we have seen more progress on inflation and especially since we have seen more evidence of deterioration in the labour markets, more slack hitting the labour market, those risks are looking a little more balanced from the BOC's perspective and it means we don't have to be as concerned with CAD depreciation as they potentially were three or four months ago.
>> Interesting stuff and thank you and the audience for sending that question in on the currency.
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 interest rates and the economy in just a moment's time. A reminder that coming up, TD Wealth Nicole Ewing is going to give us an update on proposed changes to bare trust rules. You don't want to miss that.
Up next, we are getting to our education segment.
Today's education segment, we are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing.
Hiren Amin, Senior client education instructor with TD Direct Investing joins us now and hearing, you're going to show some of the chart tools available.
>> Indeed I am! Great to be back. We are talking about advanced dashboard and specifically looking at the charting package that we have on here. I've got a pulled up here. When we dive in. We will show you a little bit about how you can customize this platform and make it your own, especially for those of us who are more technically minded when we do our research.
You can see that I've got the SPY loaded up, which is the S&P 500 ETF that tracks the S&P 500.
Most technical analyst want to set this up correctly. There are couple of ways you can access them.
Here you are going to get a preselected menu card if you want of different time frames.
You can see currently we are highlighted on the five minute mark. Let's say I wanted to go to the daily chart. I can click on the daily and what that essentially means is that, oh, let's go ahead and compress this a bit and expand this out. We have obviously had a bit of SPY movement and you can see the daily candlesticks now for each looking back to about the beginning of the year. Just while we are on that note, once you do kind of set up your timeframe, you do have the ability to also adjust it to the zoom scaling. One thing you can do is head over to the price axis over here and kind of compress it and adjust it and you see the candles enlarging. Same thing on the bottom axis where the month award date is located.
Stretching it out here, you can see the representation of it better. You have a quick access menu down here for the timeframe selection as well. This is just going to give you the period that you want to look at.
Let's say I want to look at six months back where is I have six months of chart action here now showing up for us and this is a weekly candle that we are looking at there.
We also have on offer the different chart style. What I mean by that is you can see we are using the candlestick chart for example a and you can go in here and see a menu of the different ones you can have in there some more exotic ones as well, the hike in Ashy, the Rincon, so you can look at that.
Here's another popular when used amongst traders.
You can set those up on this platform here. The other thing I'm going to go on to, to the customization, is to look at indicators, because that perhaps the most important. Let's go back to handles to make sure everyone can see what we're looking at here. There are over 100 different indicators over here that you can choose from. On this left-hand panel, we have over 50 different drawing tools and I'm just going to them and say one thing. Let's am going to add a moving average which is one of the most run-of-the-mill indicators that a trader would have in there so if we going to moving average into there's a whole host of different ones you can add.
You can add a basic one and if you want to add in multiple times, you can just click on it a second time. What you will notice is over here on the legend bar, I can adjust the styling by clicking on the gear icon over here in choosing a different colour so let's say I want to make this one yellow and change the timeframe to do 50 days is the moving average and select okay.
There we go.
And then we are going to choose the bottom want to go over here and I'm gonna switch this to a different colour, perhaps let's make this one red. Go to the input and changes parameter to a 200 day moving average.
That's the timeframe I'm selected on.
You've got these two moving averages plotted in here. Additionally, one of the neat tools I will show folks is one that I particularly like, if we go into the drawing set over here, you're able to forecast different prices. Let's just say, let me switch my timeframe to a bit of a longer one, let's go to a week out here. Okay.
Now we are going to go back to our timeframe. Let's say I want to measure the price. I can do that. Let's go to this one that says price range. Let's say I want to measure what was the price change from this bottom up until this peak over here?
It's hundred and 56 points at the SPY move, representing a 30% jump from that point onwards. You have these neat tools that you can also add and then finally to sum it all up, you can save this. If you are analysing particular securities, like most readers do, we have our favourites.
You can come into the indicator templates.
Right next indicators are it's as templates, going here and click on save indicator template.
Let's call it August 20 for example. You can choose to have it remember the symbol and you can have it choose to remember the timeframe. If you have a favourite when you want to look at, it will capture all of that in including volume and moving averages and just hit save. Anytime you want to recall that, you can go to templates and see down here, August 20, you can click on that to pull back. That's a quick run through and how you can do some of the basic customization.
>> A lot of powerful tools there for when people are doing the research. What if they're in there, working with the tools, there in the charts, now they want to trade off that information. Can you do that?
>> You absolutely can. This is one of the beauties of the platform. You don't need to move away from your chart screen, you can do everything right here. There's two ways you can execute trades right off of the chart. One you will notice is that I've got the cross here and as I move across the price axis on the bottom, there's a plus sign next to it so I can click on this + and I can pinpoint to this target. Let's just say I want to buy SPY at this level. I can click here and say by and what this will do is open up the floating order ticket and then I can input my parameters and send that to trade off.
The other way that you can also do it is you do have the buy sell menu buttons at the top here located so what this does is let's say for example we go to buy, it's not bringing up anything but it changes my crosses. It might not be much to see but they are in green and this allows me to precisely target the price I just have to drop it at the price, let's say 506, I do a single click and there I've got the order ticket open up there.
He ways to get the orders in and off and it's pretty simple where you can still stay on the charts there.
>> Great stuff as always, thanks for that.
>> My pleasure.
>> Hiren Amin, Senior client education instructor at TD Direct Investing. For more educational resources, check out the learning centre in my broker or use this QR code, which will navigate to TD Direct Investing's Instagram page where there are more informative videos.
Now in a programming no, we had a viewer who notice, thank you for noticing yesterday, what happened with yesterday's broadcast. We unfortunately had some technical issues that prevented us from reading the show to you but if you are interested in seeing our conversation with TD Asset Management's Emin Baghramyan, the guest of yesterday, we were talking about low volatility investing, we still had that conversation even though we can bring it to you live.
Go to what broker or finder on the website, moneytalkgo.com. I'm looking at it right now. The headline is: as market risks linger, is now the time to consider low volatility investment? Click on that and you will see the discussion right there with Emin Baghramyan.
We are back with Robert Both. Next question. How should we be viewing the impact from the US election?
>> The DNC is happening now. There is a focus on the poles and the platforms. Now the candidates are set, we can start to look at what is actually on the table for November. The two largest issues for markets and the Canadian economy we believe are going to be fiscal policy and trading policy for the next ministration.
From a physical perspective, both candidates have shown some willingness to run larger deficits so you can look into 2025 with the risk that bond issuance might need to increase to fund these steps so that is a risk we are watching as we get more details on those platforms. On the trade front, some things look very different between the two so if we do see a Harris administration, we do expect more of a status quo. That does not mean that there will not be little frictions between Canada and the US, we are going through with softwood lumber right now. We have gone through it in the past as well.
With a return to a potential trumpet ministration, that risk becomes much larger and given that the next US administration will need to renew NAFTA by July 1, 2026, there is rather a short timeline to iron out any discrepancies between Canada and the US when it comes to trade policy because those discussions will take on a much greater importance as you get closer to that deadline.
>> When we talk about that size of spending, he said obviously it might be status quo with a Harris and ministration, drum, no one seems to have an appetite to cut back on spending. Longer term, would we think about that in terms of the US market, the US demand for treasuries? It gets complicated.
>> We are probably going to hear more about fiscal sustainability over the next four years. You have certainly seen these issues arise before in the UK during the Liz Truss administration, financial markets responded very harshly to some of their fiscal productions. That ended up speeding up the change in government. I think with the US, there is a lot more institutional backing for it.
It's very difficult to find another reserve currency for global markets. So I think any discussion that this is going to require rapid shifts in the near term before we go off the guardrails, that's not necessarily warranted at this stage.
But I do expect those discussions are going to become louder and louder as we go into the next four years given some of the platforms for larger tax breaks or more social spending. There certainly does need to be some revenue attached are those to bring a little more balance.
>> Interesting stuff. Next question is about I'm assuming were talking about Canada, what is the state of the housing market?
>> The Canadian housing market has gone through pretty quiet summer. We certainly saw a strong start in June, home sales were up 3.7%. We give some of that back in July but prices have not moved much of the last couple of months and coming on the back of the Bank of Canada-- markets were pricing in a risk of the BOC easing well before June so the Summer Sayles haven't been quite as strong as we necessarily expected. We are still waiting to see how central banking easing does get processed by the mortgage market. We have actually seen the five year bond yields rallied by about 60 basis points since the end of June so I think we are going to see mortgage rates improve into the second half of this year. That should bring some improvement in affordability and hopefully provide a bit of a support to sales but we think overall it is going to remain more of a 2025 story when we talk about any large recovery.
So we, our colleagues in TD Economics are forecasting for existing home sales to rise by 4.2% for 2024 as a whole. We-- they do look for much larger double-digit gains in 2025 and really it will be 2025 that we actually start to see that return to more balanced markets, put a little more upward pressure on prices.
>> We know to you when it comes to supporting demand in the housing market, we have had robust population growth in this country from immigration. There has been obviously some headlines recently about the temporary foreign worker program, the student program, there might be some cutbacks there.
How would that affect the housing market?
>> Immigration is a key wildcard not just for Canadian housing but for the Canadian economy as you look and 2025, 2026 and beyond. Right now, there are about two 800000 Nonpermanent Residents in Canada.
The government's target, 6.8% of the population, the government wants to get that down to 5.0% by the end of 2026 so three years after these targets were announced.
We are now almost 6 months in and we have not seen many more details so by the time those details are introduced by the fall, it is a rather short period to bring these policies into effect. To actually achieve the government's target, you would need to see outflows about 300,000 nonpermanent residents each year. We are only absorbing about 500,000 permanent resident so essentially you are talking about a scenario where population growth slows very, very sharply and that is going to have knock on effects to housing, that is going to exert a large drag on total demand in the economy, it's also presenting a bit of a supply shock because it's easy to envision a scenario where that type of emigration and would actually lead to skill shortages in a lot of industries, so that is a key risk to the nearer term outlook as we get into 2025.
We do expect some details in the fall but the Bank of Canada hasn't necessarily been waiting for those details. Their last monetary policy support express some scepticism on the government's targets and they are actually not using them internally so it is possible that we see those targets watered down in the fall.
>> Interesting stuff. We will get back to your questions for 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.
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People who hold joint accounts with their parents or children might breathe a little easier following proposed changes to rules around bare trust's. Nicole Ewing, Dir. of tax and estate planning a TD Wealth joins us now to dig into the changes. Nicole, people may have seen the headlines about no filing obligations for this tax year, important, but there's a lot more going on, isn't there!
>> There is. We have the extension of the exemption from filing bare trust's into 2024 as well. 2023 exempt, 2024 exempt.
But we are also seeing changes to the broader rules that will be applicable for the 2025 tax year and onward. We have seen a change to the definition of what a deemed trust is and it includes an express trust or an express trust includes a situation where an individual is on title, legal owner, there are beneficial owners and then the legal owners acting as an agent for that individual so that has been clarified a little bit that you are going to have these bare trust's that are going to be caught. Currently we have a $50,000 exemption with some narrow definitions of what that could include, so cash, certain other types of investments but if you had GICs, for example, that $50,000 exemption would not apply. That is being expanded, both the amount and the type of assets. So going forward, we will have a limit of $250,000 under which you don't need to file so $250,000, including cash, GICs, personal use property as long as all of the trustees are related to the beneficiaries so if we have trustees related to beneficiaries, we are not going to need to have a filing going forward after 2025. There is another exemption for $250,000 where everything is in cash, but that's more of a lawyer's interest account.
>> When I think back to the spring and the conversations you and I had on this, there was a lot of confusion out there as to the bare trust rules and what it actually meant for re-people trying to figure it out.
I think about aging parents and people who have joint account with them to help pay the bills, parents you might be joint homeowners with children. I think a lot of these people are wondering, what's going on? What if these proposed changes mean for them?
>> This is very good news.
Essentially, we have much more narrow circumstances in which people will need to file.
If we are heading the $250,000 and a parent is on with their child, those in trust account or joint account, you are not going to need to file. Period.
You don't need to file.
Going into December 31, 2025 and onward, there will also be an exemption for those arrangements where principal residence is in play. If the parent is on title for their child or the child is on title for their parent, provided that those trustees and beneficiaries are related and that property could qualify as a printable residence, you will also not need to make a filing for that situation. But that's 2025 and onward.
>> When I think that 2025 coming up a lot in the conversation, next spring we will be thinking about the year 2024 tax year, is the same for the next year.
Old people be talking about?
>> You to determine whether or not you need to file. There filing requirements for trusts and bare trust and if you don't meet one of those exemptions, you will need to file. In 2026, you would be thinking about your 2025 tax filing obligations and you will need to determine whether or not you have a filing obligation.
>> Very intriguing stuff here, a lot of people had a lot of questions, you answered a lot of them quite nicely.
Draft legislation, proposed changes and individual circumstances can be unique. So you should talk to someone?
>> Out slowly. This is very complex legislation that regular folks are not in a great position to decipher. This makes it clearer but there's a way to be circumstances where you need to professional advice, particularly when there are other issues at play.
Getting professional advice is very important.
>> Always great to get your insights.
Thanks for this.
>> My pleasure.
>> Nicole Ewing, director of tax and estate planning at TD Wealth.
Let's say you updated on the markets. We are back in Advanced Dashboard, looking at the map function. Let's scan to the TSX 60 by price and volume. We are seeing a pause in the rally on both they and Wall Street's.
We have seen a pretty considerable pullback in the price of American benchmark crude in the last several days.
There are two forces at play. There was optimism about peace talks being brokered by the US in the Middle East and also concerns about Chinese demand so that's been weighing on crude prices for several days. It's been waiting on the energy trade. Cenovus is down 3%, CNQ and Suncor both down more than 2%. So about gold holding nicely above $2500 per ounce. It is playing through for Barrick which is up to the tune of about 1%. South of the border, we have had a pretty solid bounce back from the sell off two weeks ago on Wall Street.
We are back with Robert Both.
Should we be worried about a recession and will Canada hit one for the United States?
>> I would certainly expect that we are going to hear more chatter about recession but I feel quite confident that we are not in a recession now.
We are going to get Q2 GDP data next week.
We are exact that data is going to show annualized growth of around 2%.
We are coming off a similar 1.7% growth rate in the first quarter of this year so in terms of meeting the technical definition, we are quite a ways off of that but we did narrowly escape a recession for the second half of last year, both Q3 and Q4, so there was no GDP growth and if you look at what's happening in labour markets, you are certainly seeing more evidence of excess supply, those pockets of slack starting to build up so even though that total unemployment rate was not higher in July, we were still at about 6.4%, you did have an offsetting decline in the labour force participation rate. If you look at the share of Canadians that are employed, that has been grinding steadily lower for some time now and those more vulnerable pockets of the labour market, so younger workers, recent immigrants, minorities, those are all seeing much more pressure so the use unemployment rate actually spiked quite sharply in July, it's now at 14%.
So you are certainly seeing that show up in labour markets but in terms of meeting the technical definition of two quarters of negative output, we are certainly not there and the Bank of Canada is looking for Q3 growth of around 2.8% so they seem to have quite a bit of confidence that we are not entering when either. We do think growth could be a little bit weaker over the second half of this year but we don't expect that we will actually enter one.
>> We are out of time for questions.
Before I let you go, let's go back to the publisher. When I say we have a VOC rate decision in September, we are two weeks and a day away from that decision.
What you expect in?
>> We are looking for the bank to cut the rate by another 25 basis points.
Our view has been that the bank would cut in back-to-back bursts and allow a little bit more time to assess how those rate cuts are feeding through the economy. If you listen to the banks message over the last few weeks, if you look at what's happening in labour markets, the progress we have seen in CPI, I think it speaks to a little less urgency to you pause in between meetings or in between cuts. The bank is certainly starting to put more weight on downside risks. We are seeing three-month core inflation continue to grind lower and we are seeing new lows and headline inflation as well so I think there's a little more willingness to look through those more hawkish indicators like wage growth and shorter-term inflation expectations, but we don't expect rate cuts are going to be on autopilot. We think they can go twice or what we do look for them to pause once they hit 4% in December. By December.
>> Always great insight.
Appreciate you joining us.
>> My pleasure.
>> Our thanks Robert Both, Senior macro strategist with TD Securities.
Always be sure to do your own research before you make any investment decisions.
If we did not have time to get to your question today, we will aim to get it into future shows.
Stay tuned for tomorrow show, we will have Jeff Evans, VP, Dir. and portfolio manager at TD Asset Management who want to take your questions about real estate and infrastructure stocks.
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