Robert Pemberton

[music] Hello I'm Greg Bonnell and welcome to MoneyTalk Live which is 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 we'll take you through it's moving the markets and answer your questions about investing. Coming up on today show we will discuss what to expect from today's rate does discussion with TD Asset Management's Head of Fixed Income Robert Pemberton. And in today's WebBroker education segment, Bryan Rogers will take us through how you can make fixed income investments using the platform. And here's I can get in touch with us. Just email moneytalklive@td.com or fill out that viewer response box right here in WebBroker. Before all that let's get you an update on the market action. Some green on the screen ahead of the big event at 2 PM. The expectation is a 75 basis points and of course all those words so carefully parsed afterward. The TSX pretty moderate. A little shy of a court of a percent. Were seeing a little bit of money moving the tech space today. A pretty rough ride as of late. We have Lightspeed Commerce right now in Toronto just shy of 45 bucks a share, up a little more than 4%. … South of the border, let's check on that broader read of the American market, the S&P 500, less than two hours away from all being revealed by the US Federal Reserve. And again, it's modest. A little shy of 19 points, about half a percent. , The tech heavy NASDAQ, let's see that's comparing to the broader market. Right now up about half a percent as well. It's the waiting. Right? Pretty tense one. And in the cosmetics business, some people getting excited about the space, Coty. And that's your market update We are of course just a couple of hours away from a highly anticipated US Federal Reserve rate decision and while the consensus is for another supersized tight, it's Jerome Powell's commentary that will be key for us. Joining us now for more on what may play out as Robert Pemberton, Head of Fixed Income at TD Asset Management. Great to have you back with us. The clock is ticking, I'm getting excited what you think will here at 2 PM? >> I'm hopeful we will get 75 basis points. I know after the CPI numbers last week the market was starting to price and at 100 basis points rate hike. In my view, if the Federal Reserve went 100 basis points today would signal to the market that they are behind the curve and afraid and trying to move things forward and I don't think it would do a lot for their credibility. So we are really focused on saying that 75 basis point hike. I think it will be consistent with what they are trying to achieve and would also signal to the market that they are on pace and what they've been providing from feedback to the market over the past several months really is where we are going to continue to go. >> Is that the key for them? To say "listen, we know inflation is running far too high and we have to get it under control. We are not worried. We know we can get it under control." Aggressive action but at the same time you won't see us sweat. You know? >> I think that's what they want to portray. Which is why I don't think we've seen any in between meetings hikes. Because simply again it gives the appearance that they are too far behind the curve and they need to be very reactive. They front hand loaded a lot of rate hike so far. We are going to see 75 in my opinion at 2 o'clock today. And then really what this will all boil down to is, as you pointed out, is the script. Does Chairman Powell stick to it? Or does he do any ad-libbing? Given what we've seen since the Jackson Hole meeting, where, for the first time ever, a Fed Chairman spoke for less than 10 minutes, so his total speech was eight minutes and basically said "we are hiking rates and rededicate them higher for longer." I think the market needs to take that into consideration as we look at where we go from here after we get this rate hike behind us. >> It didn't feel like in Jackson Hole there was a lot of freelance. I felt the same way. Watching the speech. It was very "here's what I've come to say, now I'm walking away." No freelancing. >> What the market will really look for today is number one, what does the prepared remarks say? And how well does he stick to the script? As he goes into Q&A. Where we have seen in June, July, the idea of a pivot really came from some of the commentary out of the Q&A portion of his post meeting presser and we are really hopeful today that he just sticks to the script, pulls the two minute speech, reads it off the podium and if anything comes up, he just goes back to the same messaging. > There is been so many times in the past were you watch that minute by minute trade and you see something happen and you're trying to think of what he just said? What did Janet Yellen just say? To affect that move. That seems to be the real danger area. That's always the thing. You get the announcement, you see the market reaction, he gives his carefully prepared statement but that's where things can get Harry if he doesn't play it well. >> I think that's where volatility may arise this afternoon and that piece. Investors should remember that this too shall pass and what comes out of it, I think investors need to recognize, that the Bank of Canada, the Federal Reserve, the Bank of England, the ECB… None of them are done yet and yesterday the Swiss Bank raised rates 100 basis points. We have 15 central bank meetings this week. So there is a lot of monetary policy issues being dealt with. Clearly, the headline ACT! is today. But, we continue to see monetary conditions tightening globally and believe, given where inflation is, we are going to continue to see that play out. > That's an important point for investors right? This is a one-day event for your portfolio. They are not done yet. This will continue on. Once they are eventually done, there will be some hope at least in the Summer market that we will get a cut pretty darn soon. Mission accomplished, they get inflation under control in the economy will start to pull back. Money will return sooner than you think. That seems to have been pushed aside as well too. >> I'd like investors to keep that thought in the forefront of their minds. That the traditional since the great financial crisis idea of the Fed is definitely not even on the stove right now. It's not even on the back burner. The Fed is not interested in that. The best way to describe it is we are in a grown-up market, there will be volatility and central banks are going to ride to the rescue in order to protect asset values at this stage. They really are focused on the inflationary fight and getting that in order. So, the idea of cuts… Coming up relatively quickly, I perceive, the way we are looking at it is that is premature. You know, the Fed Chairman that people try and compare what is going on to give what we saw in the 70s from an inflationary environment perspective. From 1973 to 1978, Arthur Burns was chair of the Federal Reserve and every time the effect seemed to get rather the Fed seem to get inflation under control, he would cut rates and inflation would take off again. It became a seesaw battle. Finally Voelker took over and he had a couple of tailwinds as well. Reaganism, Thatcher… Tax cuts. Tax rates and the 70s meant a significant allocation of capital so Burns had to face that. But Voelker really did stick to it and for those of us in the policy world who really pay attention to every word that comes out of these players mouths, Chairman Powell has used "keep at it" in his speeches a couple of times since Jackson Hole. "Keep at it" is the title of Paul Voelker's biography. >> So sending a pretty clear message to those people. He said "history has taught us not to give up too quickly" but I didn't know about the "keypad" that's cool. >> That's the Arthur Burns and Paul Voelker battle in the history lessons. >> An exciting afternoon. An exciting show ahead of us. Because as Robert Pemberton just told us, this is not about one afternoon. This is long term, our concerns with the portfolio. We will get to your questions about fixed income for Robert Pemberton in just a moment and a reminder that you can get in touch with us any time by emailing moneytalklive@td.com. And now it's get you updated on some top stories in the business world today and a look at how markets are trading. Shares of TECK Ressources are in the spotlight today. And under some pressure. That is the miner cuts its sales forecast for steelmaking coal because of an equipment failure. TECK Ressources says there was a structural failure with the conveyor belt and one of its facilities in British Columbia. It warns the repairs could take up to two months and impact 1.5 million tons of gold production. The CEO of General Mills says inflation has more consumers eating at home and that's helping sales for the packaged food maker. General Mills is raising its full year forecast after handing in an earnings beat for its most recent quarter. While the company has raised prices across its product line, CEO Jeff Har-Mening says consumers view eating at home as more cost-efficient of an option. And he expects shoppers to become even more price-sensitive into next year. Walmart is announcing plans to hire far fewer workers for the upcoming holiday season than it did last year. The retail giant says it will bring on 40,000 workers over that key sale. Far less then the more than 150,000 people in brought in by the 2021 holiday season. Retailers have been grappling with bloated inventories as shoppers shift their priorities in the face of soaring inflation. And here's how the benchmark index in Canada's trading.… The S&P 500 again, some modest upside the head of the Fed. 20 points on the table. A little more than half a percent. All right. We are back with Robert Pemberton head of fixed income at TD Asset Management taking your questions about fixed income. What are you expecting from the Bank of Canada? Is there any chance they can decouple from the Fed going forward? >> I perceive that the Bank of Canada will continue to hike rates. Clearly inflation in Canada while moderating. We saw positive outcome on that front in the CPI data recently here. But we are still a long way from the bank's target range. And as a reminder, the Bank of Canada has arranged for inflation between one and 3%. So we need to make good progress on getting towards that. They don't have the same target of two that the Federal Reserve has. The Bank of Canada only has one mandate. Price stability. So they probably have a little bit more flexibility in how they think about this and what it means. From an economic slowing perspective, I think we are already starting to see that in the Canadian economy. Certainly in the housing market. That's a good indicator with 20% decreases across the country and really, you know, the wave rolled out during COVID in house prices particularly in suburban regions grew materially. Now the wave is rolling back quickly. Those suburban areas are feeling the pain on that front. So the linkage of the consumer and can lead to interest rates, I think, makes the Canadian economy a little more interest rate sensitive than the US. I still think the Bank of Canada goes to at least 4%, 4 1/4%. Before they start to think about what the longer term rate environment looks like. Perceived as well that they will stay there for a while. We won't get that quick correction or repricing of risk with interest rates dropping quickly. >> Some pundits have made the argument that because of the excesses in the housing market that the Bank of Canada will have its hand forced and cutting rates. But is that more of that "don't worry the central bank will come to the rescue if you get in trouble?" >> I think that's the case. I don't think they will run to the rescue at this stage. One of the things that I don't think a lot of people are talking about yet, we are starting to see in Europe… Is a fiscal stimulus. That is playing into consumers hands to help them through this inflationary period. When governments spend money on consumer-based outcomes putting cash back in consumers pockets, that itself is inflationary. So the banks may have to be more aggressive or keep interest rates higher for longer in order to offset the inflationary impulse that is coming from fiscal stimulus to help consumers with the inflation that the central bank is trying to fight. >> All right. That's the situation wherein. Another question here about our currency. The Canadian dollar is been weak against the US dollar. Will that trend continue? I think I saw 74 handle, 66 on my screen. >> For the foreseeable future as the Federal Reserve continues to be very hawkish in the way they talk about interest rates and the need to hike and fight inflation, believe that the US dollar will continue to maintain a strong bid. But as interest rate differentials normalized and the hiking cycle comes to an end, the hiking cycle, not the cutting cycle… Hiking cycle comes to an end will probably see the Canadian dollar quickly start to normalize and as a reminder to investors, the Canadian dollar is done very well against a basket of currencies other than the US dollar. So this is really been a big dollar issue over the course of this year. > Okay. Another question. More about the bond space here. "What is the outlook for corporate bonds in times like these?" >> In the corporate bond market at times like these you really want to make sure that what you're investing in, you've done your due diligence on. TD Asset Management has one of the largest credit research groups in the country focused entirely on ensuring we understand those risks. As the market exists today, we are not comfortable with high yield. From a valuation perspective, doubling the markets pricing the economic slowing that is coming. In that and in the investment grade space, there are some pockets of opportunity. But again, high quality companies that are going to be able to weather the storm as opposed to those companies which might find their really challenged from a free cash flow perspective when we are looking at that, those are the key metrics. High yield to us right now, is really the area where the idiosyncratic risk is most apparent. >> Let's dive a bit deeper into that. People can get enticed by that number. There's a reason why yields are high. But it's a risk. >> Exactly. The whole idea in an environment where we see a great deal of volatility in an inflection point economically is if you are not compensated appropriately to take risk, don't take it. And in the high-yield market right now, there is a large number of companies who, through the COVID period, and during the period where central banks had interest rates low for a long period of time, were able to garner capital which, in more normal economic times or environments would not have occurred. So there are a number of companies out there who were bankrupt and just don't know it yet. And that's going to be one of their biggest challenges. Right now in the high-yield space… Looks attractive over will be been in the recent past. However that means that there's going to be approximately, what the markets are pricing, is approximately a 4% default rate and a 45% recovery rate. Any bank about to be bankrupt I'm pretty sure is not worth that. In a 45% default rate in an economic slowing environment where we have a high probability of a recession is not appropriate compensation for risk so we really think that you need to see credit spreads in the high-yield space 750, 800 basis points before it starts to make sense again. Given the economic environment we think we are going into. >> Okay. That's the kind of talk that will perhaps scare off fixed income investors at least in the near future and midterm. But back to the beginning when we were talking about this question, it comes down to being in this space, it it means there is risk as we get further into the space. > Correct and the idea of quality and investing in an environment like this is really what's driving how we think about that opportunity. It continues to be our focus. We are in our portfolios from what our historical positioning would be. And that's really because of the economic uncertainty that is ahead and that whole idea that you need to be compensated appropriately for the risk you're taking. Fixed income for investors, should be there sleep well factor. I know the first six month of this year were a little challenging because we have not seen an environment like that since 1973. But where we are today, certainly from a prudent perspective, we really see opportunity and we are getting ready but we are just not there yet. >> It's always about timing right? As always at home, make sure you do your own research before making investment decisions. We will get back to your questions for Robert Pemberton in just a moment's time. A reminder that you can email us anytime@moneytalklive@td.com. Now let's get to our educational segment of the day. A good portion of self-directed investors have placed their own stock trades in the past but some may have shied away from fixed income. Joining us now to show you how to make fixed income investments on the platform is Bryan Rogers, senior education instructor at TD Direct Investing. Bryan welcome back to the program. Walk us through this step about buying a bond on the platform. >> Thank you.I want to let the audience know what a bond is. people think of it as and I owe you. Where you get a certain return over a certain period of time as well. After that, bonds will trade in the secondary market in the same way that stocks do. So if we jump into WebBroker, I just want to take a look. This will just be a basic run-through of how you would place a trade on the WebBroker platform. You can go here and start off on the trading tab and you will go to fixed income. Select that. That will give you the ability to go to the home tab. you can click on whatever type of investment. Agency bonds… Canada bonds… Here's an example of a corporate bond because I know it's something you guys were just talking about right now. You're going to be able to see these are a quick hit. A number of listed bonds available. We will talk about it a little bit later. You can filter some of them. You can also just select and find something you like. Let's say you research the company of and have done your due diligence. You can select a bond and you will see there's a coupon in the yield and all that information you will need. Select the one you're looking for. Click on "buy". Then continue to enter your information. The info on the quantity you have to buy us a minimum. It will show you if it's at a discount or not. Because rates have risen quite a bit. You might have a lot of discount bonds available. This will show your effective yield or your yield to maturity. So all that information is kind of basically here. If you click on this link it will give you a page with a ton of information. Put in your numbers. Let's say put in 5000 is the quantity. Then I click on "recalculate". That will show me my total. This is something we will probably cover in another actual segment where we talk about the interest. Often times if you are the buying the bond from someone else you are compensating for what they lost. … Interest payments it will give you that information. Then click on next. There you go, you have placed your bond trade. >> Alright. So you know how to place a bond trade. Our investors taking the look through the platform can they filter through certain criteria when they're taking a look at all those listed bonds? >> Yeah if you jump back to where I was looking, one way to do this is if you are happy and looking what's available there on this quick list, you can actually filter by any of these Collins. So if you're looking at… Robert was saying to stay away from that high-yield stuff because there will be a lot of risk. You want to make sure you understand your risk reward relationship. But you can filter by yield and you can see some of these companies you may be have not heard of. Or maybe don't want to go to for risk perspective. But you can filter and go from there. Also use your keyboard and go to the right and you can see other categories. Let me scroll over here a bit further. If we can get all the way over to the side. There is going to be ratings. So there is a risk rating and you can filter that as well if you click on the top and filter by risk rating. Then you can have an idea of what kind of risk you're getting into there. Aside from that great, you can go to the very top and go over here and scroll over to the left again. You can do an actual search. If you go to the "fixed income" search. You can enter an issuer's name or a yield to maturity range that you are looking for. You can do an advanced search as well. If you click here. It will usually come up. I don't know what's happening on my page today. You can do that advanced search. Then basically, just remember that your due diligence is important to understand and know what you're looking at. Because really, knowing is half the battle on that. >> Most definitely knowledge. Thanks for that brine. >> All right. Thanks a lot Greg. >> Our thanks to Bryan Rogers, Senior 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 Robert Pemberton, a reminder of how you can get in touch with us. There are two ways you can get in touch with us. You can email us any time by emailing moneytalklive@td. com or use the question box right below the screen right here in WebBroker. We'll see if one of our guests can get you the answer right here at MoneyTalk Live. Okay we are back with Robert Pemberton taking your questions about fixed income. So let's get to them. We have a lot of questions coming in on the platform. Everyone wants to know, has the market even started pricing in quantitative easing yet? I guess the market is a forward-looking instrument. >> Absolutely and there is no pricing… As many know the Federal Reserve got up to about $9 trillion. They are now at a $95 billion a month runoff. That is 1 $1.2 trillion a year. Estimates of the reserves required for the financial system or somewhere in the neighbourhood of 4 1/2 to $5 trillion. So $1.2 trillion a year off of a $9 trillion balance sheet will take 3 1/2 or four years for them to run their balance sheet down and there is no even discussion about the central banks coming back in and being buyers of Securities. Which, to me means, that sovereign yields really are going to readjust. Because central banks in their bond buying programs were indiscriminate in pricing. They were just buyers. Where is investors are now the buyer of last resort. We are going to be far more discriminating in pricing out what is coming down the pike and what it looks like from a market perspective. >> In the question they didn't mean the easing them and tightening. Obviously you and your team are all over the quantitive tightening. What will be going forward. Is the average investor paying attention to that part of it? Paying so much attention to the rate hikes but there is a balance sheet to try to run off. >> Yes and investors can take some comfort with the runoff. The expectations right now are that the full runoff that they are looking to achieve will be equivalent to 50 to 75 basis points of metal tightening. Over that period of runoff. So it will be a slow, gradual process. I know that the central banks both in Canada and in the United States wanted to be as exciting as product watching paint dry. So far that's been the case. There is some technical things within the market structure that we really look at to see how that's playing out in right now, there are no red flags from negative impact to markets as a result of that. >> Another question from our viewer. Rates are going up everywhere. But is inflation still really but rather inflation is still really high. Does that suggest something bigger economically may be happening here? >> I think given Chairman Powell, kudos in July for admitting they don't understand it. They don't know where it comes from and they don't… They are curious as to how they will solve it. Monetary policy is a pretty blunt instrument in terms of what it can do to economy. So in thinking about bigger issues, I think it's interesting to divide the world up in different areas of challenges. Clearly Europe is significantly challenged by the Ukraine conflict and what that means both in energy and food security perspective. But it has effects as well. So steel production can get shut in because you can't fuel it efficiently. Fertilizer doesn't get made so you can have better crop yields going forward. So Europe is likely in a recession already. The UK, as an adjunct to that is in worse shape. North America is clearly an economic slowing interest rates going up. So we are likely to see some form of recession here. And Asia is really being impacted by the zero COVID policy in China. And that has impacts regionally. So there are different things impacting it. This is about the global environment what's happening. In manufacturing, we are starting to see, as pointed out in your introduction, some inventory overhangs that need to be cleared. But that's in the good sector. Plus or minus goods are 30% of the economy,'s 70% are services and where we are seeing the more persistent pieces of inflation is in that services side of things… That's where I think we are going to continue to see the central banks on a rate raising path in order to try and dampen demand for those services. >> Another question out there. A lot of big issues. What does the labour market look like if the central banks are committed on their rate path? >> I think we will see challenges for some in the labour market. Clearly with the labour market is tight as it is, in order to bring down some of that wage inflation, some of that demand for labour… You're going to need some demand destruction in the economy which will have a negative impact on labour. The central bank as well as the Fed have indicated they reckon they recognize that that is a potential lawsuit of their policies. But also a healthy one in reallocating labour to more productive parts of the economy. So I know that sounds academic in its outcome but it is going to be necessary in order to number one, bring down inflationary expectations and number two, really the wage price spiral potential. So we will see increases in unemployment and that will hurt. Certainly the central banks are aware of that. I think their goal is to try and do it in such a way that you don't see substantial increases in unemployment. But there will be some. >> Some pain ahead. We have been warned indeed. We will get back to your questions for Robert Pemberton 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 any time. Our guests are eager to hear what's on your mind so send us your questions. There are two ways to get in touch with us. You can send us an email any time at moneytalklive@td.com or you could use the question box right below the screen here on WebBroker. Just writing your question and hit send. We'll see if one of our guests can get answers you need right here at MoneyTalk Live. Sky high inflation, soaring interest rates and a softening housing market have all had an impact on provincial economies this year. TD economics has released a new report with their predictions for what it might be going forward. Letting us know for Maurice MoneyTalk Live's Anthony Okolie. Anthony. >> Further dimmed, a weekly backdrop as well as their upgrade of inflation and great forecasts they believe that the full effects of these headwinds are expected to appear in 2023 for many of their provinces. Now in the board, I brought some of the key highlights. Of course housing is still an important issue. We will start with BC. TD economics has built a steeper downgrade to BC's real GDP growth in 2023. Versus the country overall. The downgraded prospects for exports like lumber the midweek US forecasts. BC households are also among the most indented in Canada. Pointing to an outside vulnerability to costs. BCs average home prices have dropped since the February peak and are expected to drop further in 2023. Meanwhile, Ontario is the epicenter of the Canadian housing market with average prices and sales down significantly since the peak in February. Now the chart that I brought along, this shows the height linkage with the broader economy. Highs among all the provinces. It also illustrates why TD economics expects X Ontario's economic growth to slow sharply in the coming quarters. By comparison, Québec is in a much better situation of the housing front versus BC or Ontario and that's because households in Québec carry less debt and they've also seen their debt expand by lesser amount during the pandemic. Québec residents also have less of their assets tied up in real estate, she lay shielding their household balance sheets from falling prices. Overall TD economics still sees more downside for housing markets but expects Ontario, BC and parts of the Atlantic region to fill the most pain. Greg? >> The housing market is a big driver of the economy but perhaps a little more sensitive to commodity prices. We saw a run-up of some commodities pretty dramatic this year. What is TD saying about that? > Commodities in provinces like Saskatchewan and Alberta have certainly benefited from higher commodity prices. Alberta and Saskatchewan are expected to see a huge surplus because of those higher prices. Now TD economics notes that we have seen a pullback in the commodity prices over the past couple of months. And that could weigh on those economies but despite that, TD economics still expects that the provinces will record real GDP growth that will outpace Canada's national GDP growth through 2023 and 2024. >> Great stuff as always. Anthony thanks for that. >> My pleasure. > MoneyTalk Live's Anthony Okolie. Much in the market action now. I'm not a big fan of countdowns but this is a big one at 2 PM Eastern time. The Fed making that decision emerging from the two-day policy meeting. we told you at the top of the show about TECK Ressources having some machinery problems. Weighing on the stocks today. They will impact their steelmaking coal production. Equinox Gold at four bucks and $0.63. Up a little more than 4%. South of the border, the S&P 500, ahead of the Fed, 3882. We'll call that two thirds of a percent. Pretty much mathematically that's what it is. The NASDAQ, up about 1/2 a percent as well. We get that sort of waiting period until we hear from Jerome Powell. And Walmart, we told you about them hiring for the holiday season. Not the same amount of workers as last year. Taking that news in stride. You have Walmart of the hundred and 37 bucks and change up 2.7%. We are back now with TD Asset Management's Robert Pemberton. Let's take some more questions. Thoughts on a recession? How long? How deep? What fixed income performs best in a deeper recession? >> There is a lot. Really requires a well polished crystal ball. The farther out into the future. >> I'm looking forward to it. I usually keep it under the desk. >> We've moved away from the Magic eight ball in a sarcastic nine ball. With respect to the recession, we are perceiving that we will head into one. I think it's a very low probability outcome given the current economic environment that we have a soft landing. I think the last time I was on I indicated it would be like landing a C-130 Hercules on a postage stamp. Now the question is depth of reception. Certainly the central banks would like to engineer this so it's a soft recession, a shallow recession. Again to get unemployment up a couple of percentage points, take some pressure off the labour market, dampen demands overall and allow the economy to readjust, reset and then be prepared to move forward again. The idea that the central banks are going to keep rates higher for longer though, does lead to potential for a policy error. Which then forces us into a much deeper recession. There, you would see significant unemployment increases. You would absolutely see business failures as a result of it. We know cats and dogs that living together. Old Testament stuff happening. We really want to make sure as we watch this progress, how the central banks language evolves as we get closer to the end of the hiking cycle. >> I like that Ghostbusters reference. Last part, what fixed income performs best in the recession? Is there a place to hide? >> The real question becomes how the yield curve reacts to central bank activity. The longer end of the yield curve is really looking at where we are going from here. We are already seeing that today. The yield curve in Canada is inverted about 55 basis points from two years to 10 years. The US is also inverted two years to 10 years. That does indicate that we are, in the bond market view, we will see some economic pain ahead. We believe that that is going to continue. A way to think about longer-term maturity Securities is there is a series of short terms. What they are telling you right now is "yes, we are in an inflationary environment but that inflationary environment will pass and we will get back to what we will call productive allocation capital and growth." A right now, if I think about where do you hide? Realistically it's a barbell the strategy as we call it. Long bonds. And you won't short bonds. You draw a line between because that's going to be the most volatile hard marketplace as this seesaw battle between inflation and growth carries out. >> We actually had a separate question. I feel you might've answered it. Two viewers in one question. Let's talk about the US dollar. It's been a safe haven. Any thoughts on deed dollarization? Will another currency rise? >> I don't know if another currency will rise to knock the green out of the spotlight. The openness of the capital markets in the US, the depth of the US capital markets, the US dollar, obviously provides a great deal of liquidity and clearly for countercyclical asset, for a cyclical investors. But we do have the building of a bifurcation of the global economic trading system and really political spheres of influence as China really starts to emerge and provide influence not only in Asia but also in Africa as well. That does lead for the potential of fully… Financial system as well as technology system and other platforms as well. It could rise to take a place of prominence but it's not readily convertible. It's not a deep Capital Market. It's still roughly based on US dollar from a valuation perspective. So I think the US dollar keeps its seniority in the pecking order of currencies for some time to come. >> All right. Lots of questions. People love to pick your brain. Before we let you go, we have a big event coming up in an hour and 15 minutes or so. We have to look beyond the excitement of this afternoon. I get very excited with this stuff. Obviously we have to look longer-term and what this all means going forward for all of us. > Today is not the last fed hike. Certainly we believe that the central bank, whether it be the Bank of Canada, said, Bank of England… They all need to carry on in terms of raising rates. Right now, we believe that both the Bank of Canada and the Federal Reserve need to get overnight rates north of 4%. So there is still room to go. The next question for most investors will be: "what is the pace of the next 75 or 100 basis points? Do we get these large 75 basis point moves or do they slow down and start to look at how it's playing out in the economy?" And I think the big thing for us will be really trying to read the tea leaves through the speech and the commentary this afternoon to get Jerome Powell's thought process on where we go from here. Because the pivot that everyone talked about in the Summer, was the end of the beginning of rate hikes. But we will continue to see it. > Robert, always fascinating to have you on the program to get your thoughts. Thank you so much for joining us. >> Great to be here. Thanks for having me. >> Our thanks to Robert Pemberton, Head of Fixed Income at TD Asset Management. Stay tuned tomorrow, we will have Bill Booth, Co-Chief Investment Officer at Epic Investment Partners will be our guest taking your questions about global equities. And a reminder that you get a head start, just email moneytalklive@td.com. That's all her time for today. Take care and we will see you tomorrow. [music]