Sam Chai

[music] >> Hello, I'm Anthony Okolie and four 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'll take you through what's moving the markets and answer your questions about investing.

Coming up on today show, we will discuss what's next for the Fed as chair Powell signalled that rates may be higher for longer withTD Asset Management's Sam Chai.

And in today's WebBroker education segment, Bryan Rogers will show us how to set up and customize watchlist, broker.

And 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 our Guest of the day, let's get you an update on the markets. We will start here in Canada where the TSX opened in positive territory on some rate cut optimism following positive comments from the Bank of Canada Gov. Tiff Macklem. We saw a rise in technology stocks, that's providing a bit of a boost to the index.

Right now, the S&P TSX composite index is up a modest 58.4.3 percent.

Taking a look at some of the big movers today, Maple Leaf Foods, shares are a bit under pressure in early trading despite the company posting a profit of nearly $52 million last quarter compared to a loss a year earlier.

The company's revenue fell year-over-year amid weakness in its prepared foods operating unit. Right now, the stock is under pressure, down to the tune of nearly 4%.

Turning to some other big movers, shares of BCE are also trading in the red. The Canadian telecom giant reported Q1 profit and operating revenue that fell compared to a year ago, a bit higher compensation and other costs related mainly to job cuts.

The stock is down to the tune of 2.5%.

Turning south of the border, Wall Street also open slightly higher after the Fed decided to hold rates steady and also eased some fears about potential rate hikes, despite few signs of cooling inflation. After the Fed decision that out of the way, attention moves back to the slew of earnings reports through the day.

The S&P 500 is trading a modestly higher, a .5%.

Take a look at the tech heavy NASDAQ index, it's trading in positive territory after some positive tech earnings today.

The index is up 115.4.7 percent.

As I mentioned, some of the companies posted strong results. We heard from Qualcomm and Qualcomm shares are trading higher after the chipmaker reported better-than-expected adjusted profits as well as strong revenue guidance.

Shareholders seem to be rewarding the stock. It is up just over 9%.

Another big mover in the US is Carvana.

Shares of Carvana also spiking after the US car retailer posted record first-quarter profits. The stock is up more than 33% at this stage.

And that is your market update.

The US Federal Reserve has held rates steady and also signalled that it may be some time before they make a cut.

Joining us now to discuss is Sam Chai, VP for active fixed income portfolio management at TD Asset Management. Thanks for joining us today.

>> Happy to be here. Doubt what was through the Fed's decision and what we heard from chair Powell.

>> Sure. So yesterday, the Fed decided to hold the policy rate unchanged. They have also announced a partial tapering of their quantitative tightening program. That has largely conformed to both market expectations and hours because we know that since the last FOMC meeting, US inflation has had upside.

In fact, for three months in a row, core PCE inflation has priced to the upside and that really warranted a rethinking of the policy path and a reset of forward guidance. But at the same time, we know from recent Fed communications as well that they have been saying that the policy is well-positioned and it is restrictive.

So it's reasonable then that the Fed decided to basically hold the policy rate at the current level, but just for longer, for as long as needed, until we see further disinflation progress.

Looking forward, the forward guidance that the Fed gave remains relatively unchanged.

They need to have greater confidence in the disinflation progress before commencing a rate cut.

But given the lack of disinflation progress in the first quarter, they just believed that it may take a bit longer than previously expected for that confidence to be attained which points to potentially a first cut in the later second half of this year.

>> Inflation was a key message. Another key message was the Fed's balance sheet.

There were some changes to that.

What has changed and what impact will that have?

>> So just a quick recap on the current quantitive tightening program that the Fed has, currently, the Fed allows up to 60 billion per month of United States treasury securities to mature and run off the balance sheet. Roughly, 35 billion per month max of agency debt or agency maturities to run off its balance sheet.

And the goal is basically to radically reduce the balance sheet and tighten market liquidity which complements their current restrictive status on monetary policy rate funds as well. Yesterday's decision basically has reduced to that Of allowed runoff of US federal securities from 60 billion to 25 billion per month.

In other words, the Fed essentially is providing 35 billion less supply to investors which marginally should be helping lower the term premium in the US rates market.

I wouldn't say it was a surprise to the market because we already know that even in the prior FOMC meeting, there had already been discussion about potential tapering of the QT program.

It's really that the size of the tapering is slightly larger than what the market expected. The market expected to go from 60 billion to 30 billion but it's a bit lower to 25 billion.

>> The message wasn't a surprise, just the size of the reduction.

>> Slightly dovish.

>> Slightly dovish. So hard for longer with the message and we are beginning to see cracks in the US labour market from these elevated rates. Is that correct?

>> I would characterize it more as we are seeing better demand and supply rebalancing in the US labour market. Why do I say that? Because when you look at the US unemployment rate, it stays around 3.8% which already there for a few months which is near historical low. If you look at the past three months of monthly job gains, it averaged over 250 K per month.

By any means, it's quite healthy as well.

But on the other hand, if you look at other leading indicators including the JOLTS number, that was released yesterday in the US, we see a consistent decline of job openings in the US since 2022.

>> There seems to be some tightening there.

>> For sure. That job opening Is coming down. If you look at job openings versus the unlimited ratio, that has also be coming down gradually. The picture really paints overall is that it's a very tight labour market but the tightness is starting to gradually alleviate, so it's more the supply demand coming into better balance. Tomorrow, we will get to the feds, the April monthly job print again for the US. We will see that going into Q2. Do we see continued solidity in the labour market or do we start to see maybe some moderation and job trends?

>> What are you expecting on the inflation front going forward, given this backdrop?

>> I want to take this one sentence from Powell which he mentioned yesterday which is one or two month of upside inflation price does not attract me but when we have seen like three monthly upside in the PCE inflation print, I think it's prudent to take a signal from there. And the signal could be that the disinflation progress is likely to be bumpy and perhaps the last mile is stickier than effective. Our base case right now is we continue to see that because of the restrictive level of policy rates right now, we expect that there could be some potential more recovery on the supply side and at the same time, we could see a bit more moderation on the demand side as well, looking at some of the soft data in the US is coming in a bit weaker now.

The implication is that we could see a bit more slow down in the inflation momentum in the second half of this year.

That being said, uncertainty is obviously very high, as I mentioned earlier, the disinflation process is likely to be bumpy so we will be continually updating our inflation forecast trajectories as well as our understanding of what's the key drivers driving those inflation pressures as we get more data.

>> So given that environment, what might the path of interest rates look like?

I mean, are we still expecting a cut or cut from the Fed this year?

>> I would summarize by saying that the next likely move from the Fed will continue to be a cut.

I see two primary paths where the economic scenario could manifest into allowing the Fed to deliver a cut. The first one being that we get a few consecutive months of good disinflation prints that allow the Fed to really attain this greater level of confidence, hence cutting. The second half is that we have a significant deterioration in the labour market or economic activity data relative to expectations so that's really changes the balance of the risk consideration of the Fed's mandate which could lead to a cut.

Admittedly, neither path is currently in sight given the current data. That's why it makes sense for the Fed to prefer to hold rates higher for longer until we see more data evidence. But in the meantime, I will also point out that, yes, there is a narrow path to a potential hike as well but that path is considerably narrower than the other two paths and for that to occur, we likely to see a re-acceleration of Q2 inflation, even more than Q1, and possibly because of a negative supply shock.

And if that manifests, then the Fed could deliver a hike but for us, the probability of that scenario is low.

Overall, if we look at the upside versus downside surprise, downside risk to our rates forecast, I would be inclined to say that the risks are tilted towards more cuts being priced into the US market over the next 12 months, especially when you consider that there just now over one cut being priced in the US market by the end of this year.

And it's interesting you pointed out that it's quite a contrast to the beginning of the year. We had 627 cuts priced in from the Fed. So the downside upside risk has really shifted there.

>> Great insights, great way to kick out the discussion. We will get to your questions about fixed income for Sam Chai in just a moment.

And a reminder that you can get in touch with us any time.

Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.

Now, here's an update on the top stories in the business world today and the look at how the markets are trading.

Air Canada reported a loss of $81 million in the first quarter, down from a profit of $4 million in the same quarter last year.

The country's biggest airline said operating expenses increased as an added more see capacity during the quarter.

Higher labour costs and maintenance expenses also weighed on profit margins.

The airline company said it plans to expand its capacity in the second quarter and at least Boeing 737 Max Jets to its fleet, which are expected to begin flying next year. Take a look at the stock, there's quite a bit of pressure after the news. The stock is down just over 8%.

Meanwhile, oil giant Shell posted a $7.7 billion profit in the first quarter, driven by higher refining margins and strong oil trading.

The British oil company also announced a $3.5 billion share buyback program.

While the first-quarter earnings significantly topped forecasts, the results were down roughly 20% from the same period a year ago, reflecting a broader energy industry trend that has seen revenues hit by tumbling gas prices.

Meanwhile, take a look at the share price, shareholders are seeming to be pretty positive about the earnings news. The stock is trading in the green, it's up just over 1.5%.

Finally, Peloton CEO Barry McCarthy is stepping down after a little more than two years in the role.

The connected fitness company is replacing the CEO after a continued slide in the stock during his tenure.

The company also announced it is laying off 15% of its staff, and plans to continue closing retail showrooms in an effort to cut costs by $200 million. In the meantime, Peloton appointed to interim co-CEOs while it seeks a permanent replacement. The stock is down about 13% on the news.

And here's how the main benchmark index in Canada is trading, it is still up a modest 81 points or .4%. Taking a look at the US where earnings news continues to roll in, again, we did hear from the Fed which held rate steady. The S&P 500 is up nearly 21 points, we will call that .4% gain right now.

Alright, we are back with Sam Chai taking your questions about fixed income. We will get to the first question here.

Are the Bank of Canada and the Fed on a divergent path when it comes to interest rates? We've heard a lot about this because we are seeing a divergence in the performance of Canada's economy and the economy in the United States.

>> I think it's quite possible and the key driver to CAD is diverging inflation friends that we have senior today. When you look at it from a Canada perspective, we have actually seen three months of downside surprises in core inflation metrics.

If you look at core trends or core median inflation which is two of the Bank of Canada sabermetrics, the measure is actually below 1.5%.

And if you now turned to the west side, the core PCE measure, the Fed's favourite metric, has actually surprised consistently to the upside. The three month annualized figure is roughly 3.7%, that's more than double what we have seen in Canada.

And that really tells that the Bank of Canada is that much more closer to be able to start with an easing bias is policy decision-making.

At the same time, when we turn to the labour market as well, in Canada, our unemployment rate has consistently risen over past months to know 6.1% compared to the US which has stayed around 3.8%, and it's been low for several months. So that's a divergent trend as well.

Even Gov. Macklem himself acknowledge that it's likely that the Canadian economy is still operating in excess capacity.

And so given that macro view, our base case is that it seems likely that the Bank of Canada could deliver the first cut possibly this summer, maybe even as early as June but that would be highly dependent on the April inflation data that we get a few weeks down the road.

One of the other things to think about is how much can the BOC and the Fed's policy divergence can be and the answer is that, yes, there is likely a limit to that but when we look at recent decades, what's the max divergence?

That's been a max of 100 beeps, meaning that it's not unreasonable for us to expect we have maybe one or even to Bank of Canada rate cuts before the Fed at this point. Obviously, there is a risk to this view as well and the risk is really that Canadian inflation could be accelerate as well and there are two primary risk factors. One being that the April inflation print will likely incorporate the carbon taxes well and opposes a slight upside risk to headline inflation. The other thing is that in general, we do expect there's a correlation between the Canadian dynamic versus the US so perhaps there is some catch-up for Canadian inflation to do but it could also be the other way around. That case materializes, it's possible for the BOC to potentially delay its first cut after July.

>> Is Canada isolated in terms of the divergence between inflation in the US versus Canada, is that something that we are seeing in Europe or other countries?

>> Actually, we are and for instance, for the European Central Bank, exactly widely expected that the ECB will be able to deliver their first cut in June as well and that's because generally we are seeing more disinflation progress in Europe as well and the growth backdrop has been generally weaker. So Canada is not alone.

As we move into summer, I would expect that we can see a bit more divergence with potentially ECB being one of the first to move and moving the Fed or the root reserve Bank of Australia could be contemplating a cutting cycle later.

>> We will get to the next question.

10 year US treasury yield looks like it may crack 5%. You think it will and if so, what could the impact be?

>> Our base case is that because of the level of restrictive notice of monetary policy in the US, alongside the expectation of some further supply chain recovery and also signs that we are seeing a bit more moderation on the demand side, we do see a bit more disinflation progress in the second half of this year and that could lead to the Fed to ultimately delivering a cut later in the second half of this year and so with that view, we don't expect the 10 year U.S. Treasury range to reach about 5%. That being said, there is obviously the risk that we could see a further re-acceleration of core inflation. To quantify a bit more, if we see core PCE metric printing say 0.4 to 0.5% for a few more months, then what that would lead to is by Q3, the Fed may conclude that, especially if labour market activity remains very strong, though the current policy stance is not sufficiently restrictive or not as restrictive as believed to be and then the hiking buys could restore and it's possible the feds deliver more than one hike and so in that scenario, I think it is quite possible that US 10 year rates could go above 5% but to us, the likelihood of that scenario is low.

>> As always, make sure you do your own research before making any investment decisions.

we will get back to your questions or Sam Chai on fixed income in just a moment.

And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.

Now, let's get to today's educational segment.

If you are looking to keep track of a few different stocks, you may consider using the watchlist feature on my broker.

Joining us now to walk us through it is Bryan Rogers, Senior client education instructor with TD Direct Investing.

Bryan, how would I create a watchlist and web broker and how can I customize it?

>> Yeah, yeah, like you said, Anthony, it's a great tool for being able to follow some stocks that you had your ion or some of your current holdings, you can do that in a number of places and web broker but if you just wanted to keep an eye on an index or a particular stock or option or different funds, the watchlist are great tools to do that.

I want to jump over to a broker and show some people the different ways you can edit them. I think it's pretty simple to get started but just to know some tips and tricks is powerful. You can access them in a number of different places. If I go to research, you can see there is the watchlist right there. If you want a little bit of a shortcut way, you can actually go to the top right and you can see there's a quote section, that the section for quick quotes it because I happen to think of something more you hear about a stock on MoneyTalk Live and you want to add that on their really quickly, you can go right to the section. This is a cool section. It looks very similar because you can see there is the watchlist see here as well but I like to show this because there is a distinction. If you go right to watch lists, you go to the same place but it will default to your 10 available watchlist. You have 10 available and web broker that you can edit yourself, you can rename them, you can add up to 10 positions on each. So I recommend you are thinking if you have some stocks you want to look at in different industries you can separate them out. And these lists at the top, you can see the little pen right here. I want to change the name, this is a high tech stocks or maybe you want to change this other one.

That one is crypto and so on. All you have to do is go in and add your symbol here.

For example, if I add apple, I can click on the CDR but it's also giving me the US stock so I can click on their and add that right away.

You can remove them by clicking X over here.

If you wanted to hide that also, you don't wanted to be separated by categories, you can do that as well.

Just down here so you know, you don't only have to add stocks and ETFs. You can see on the drop-down that you can select mutual funds. If you go to mutual fund, you know the symbol is great when you're searching for something, let's am looking for TD, there is a list of mutual funds.

Also, you can copy and paste within web broker if you find an option that you try to follow, you can copy and paste and put that symbol and there you can search for it by the underlying stock. You click options.

And then also the same thing Anthony you can do for indices as well.

Just remember that you can rename those lists and there is a multi list view and maybe will show that in a second but you can look at more than one list at a time as well.

>> I could see the quote tab for following the price but what are the fundamental and tracker tabs used for?

>> Yeah, that's a great question, Anthony.

There's a piece in here that a lot of us miss and I know for a long time that when I first started using web broker I wasn't aware that it was there. The fundamentals is something I think is pretty intuitive.

People realize they are looking for fundamental information on the stock, performance and things like that, but the trackers really cool as well.

Let's jump into web broker again. One of the other things I want to remind people of is the multi list function. You can see through at a time, three watchlist that you created at a time. If you want to go off that you go to the single list view and see a little bit more detail.

I prefer that myself and if we go to what Anthony was talking about under the fundamental style, if I pull up a particular stock or want to look at a particular stock in terms of waters some additional information pieces that I can get outside of the current bid and ask, you can see here you have a last price, change, and that is going to go to market, P/E ratio and I think it's gonna get cut off for some reason but you can hear some estimated, I think this is estimated earnings and then next earnings and so on and you can see previous dividend amounts.

You can get a little bit more detail related to the fundamentals.

Probably my favourite thing on here is if you check this out is the trackers section.

In a way this is a mock trading ability where I can add in any symbol, you can see I have a few symbols, I have TD, Loblaws, Telus, I can add a quantity and I can also add in a price.

These are ones I put in previously, but if I wanted to change this one for Enbridge as an example, what if I bought Enbridge today and I want to follow it for a while and see what he did over the next little bit, I can go to quantity, I can put in a cost, I usually like to do something like today's cost like today's price realistically if I were buying today, and I click on save.

Now, it's going to follow this and do it in a portfolio of YouTube.

There's the market value of all the stocks on this particular list.

There is book cost, was invented previously, and I'm up to $1288, up 3.3%.

It's a great way where you can enter these and test out a theory that you've gone from technical analysis or from a fundamental perspective you want to test something up but you don't want to buy anything and you just want to see how that strategy may work out.

>> Bryan, great information as always.

Thanks very much.

>> Alright, thanks, Anthony.

>> Our thanks to Bryan Rogers, Senior client education instructor with TD Direct Investing.

For more educational resources, you can check at the educational centre on what broker or use this QR code to navigate to TD Direct Investing's YouTube page where there are more informative videos.

Okay, we are back with Sam Chai taking your questions about fixed income. We will get the next few her question.

This is on US debt. Will the US is growing debt load increasing cost of servicing that debt have any impact on Fed rate policy in the near to medium term? Any impact on treasury issuances and bond market?

>> So over the past years, we have seen a continued increase in the US debt to GDP ratio. Right now, it's roughly just over 120%.

I would say that this is not a near-term concern for the market because for one, the US GDP growth is very strong and secondly, the debt servicing costs right now is still actually not very significant because the average maturity debt in the US is roughly 5 to 7 years so it would take a few more years for all this debt to reset to the current high interest rate costs. Over the long term, of course, the fiscal trajectory is not sustainable and as the year progresses, we will see the total interest cost being increasingly dominant in the asset percentage of the total fiscal deficit. If that continues, the possible application for the U.S.

Treasury would be more issuance and also hired term premia for the U.S. Treasury securities, which is why over the long term, I think it would be important to closely watch congresses spending plan regarding fiscal expectations because that will be a key factor in engaging macro stability in the US.

>> We will turn to the next question now which is on Japan. Your thoughts on Japan from an investing perspective?

>> Given the monetary policy with the bank of Japan has it off it, even despite how the central bank has been hiking since 2022, that together was a pickup in domestic activity, so that supports this underlying inflation momentum there. And then finally plus the imported inflation costs as a function of just rising commodity prices as well as, as we all know, sustained appreciation of the yen.

So all of those factors work together to ultimately allow the wage growth in Japan to actually continuously pickup over past years and this year, for the spring negotiation, we have seen base pay rate hike to be the highest in multi-decades and what that allows, enables is the Bank of Japan to gain confidence in domestic underlying inflation momentum and not is a sustainable meeting of the Bank of Japan's 2% inflation target finally in sight which is why we saw the Bank of Japan removing the negative interest policy and delivering the first hike in decades.

And so we are now seeing this divergence between Bank of Japan policy and policy stance versus the rest of most of the developed central banks. I would also add that for the Bank of Japan, because of the current inflation momentum in Japan is still relatively mild and the bank of Japan is seeing limited upside risk to inflation moving upward, they did signal that they you want to deliver a gradual and measured and data dependent hiking cycle.

But despite that, because of the monetary policy divergence, our expectation is that a Japanese government bond will likely be an under performer among its peers because of the diverging rates path.

But when we come to the yen side, and one of the questions that gets asked a lot is one does the sustained yen depreciation trend get reversed?

Despite the Bank of Japan removing the negative interest rate policy in March, we did not see this reversal in the trend and to understand why is very simple. One just needs to look at the policy rate divergence still between the Fed as well is the Bank of Japan in terms of total overnight policy rate differential for the two-year rate differential.

One will see that the cost of yen is extremely punitive of roughly 5%, especially in a global macro backdrop of still okay growth worldwide, particularly in the US. It would be very challenging for the yen to sustainably appreciate and to see a sustainable reversal of the yen trend I believe there needs to be one of two catalysts. One being that the US starts to see a resumption of disinflation progress. That will allow the Fed to start to consider the cutting cycle. Or the Bank of Japan signalling a hiking cycle. But without either, it would be challenging for the yen to sustainably appreciate.

The Ministry of Finance has likely intervened in the market in the past few days just to rein in the strength of dollar yen but that will more likely serve as a setting for where yen, how Lowe the yen can depreciate to but it's unlikely to turn the trend.

>> That's a great perspective.

Next question. Is the risk of stagflation back on the table?

What are your thoughts?

>> I think stagflation by definition likely has to come from the supply side, negative supply shock.

But the data indicators are not pointing to renewed supply shock evident in the US.

For example, if one looks at the New York Fed supply chain pressure index, one will see that the reason the index has been really range bound so not signalling additional supply chain pressure despite the tension we have seen over the past months, and another thing one will see is that we have really seen a meaningful normalization of that supply chain pressure since 2022 and what it really speaks to is that the peak supply chain pressure we have seen during the COVID period has less of a material impact now and we are unlikely to go back to that period.

De-globalization could be a long term shock to supply chain but given the gradual process, it is unlikely to materialize in meaningful stagflation shock in the near term that will have a meaningful near-term implication for the US rates market.

>> Okay, we will get back to your questions for Sam Chai on fixed income in just a moment.

As always, make sure you do your own research before making any investment decisions.

and a reminder that you can get in touch with us at any time.

>> Do you have a question about investing or what's driving the markets?

Our guests are eager to hear what's on your mind, so send us your questions.

There are two ways you can get in touch with us.

You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.

We'll see if one of our guests can get you the answer right here at MoneyTalk Live.

[music] >> We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.

We are looking at the heat map function here which gives you a view of the market movers on the TSX 60 by both price and volume and will take a look at the top left of the screen and look at some of the energy names. We are seeing some energy stocks getting some bids. We have seen oil prices rebounding from three days of losses. Cenovus is up slightly, the company did beat profit estimates on the production booth. We are also seeing some green for Enbridge as well as a few other names. Let's take a look at the technology sector. At the bottom, BCE is take up a lot of real estate here, we are seeing selling pressure on BCE year. The telecom giant reported a first quarter profit and overall revenue that does not measure up to data from one year ago.

We will look at the S&P 100 where we are seeing a lot of earnings music come in.

Apple is getting a bit. It will be reporting its profits after the end of the show. Qualcomm is getting some strong bids. Qualcomm shares are trading higher on better-than-expected profits and strong guidance going forward.

I mentioned other names, Nvidia is also seeing a bid. To the left, under healthcare, it's sort of a mixed bag.

Pfizer is still riding high, the Pharma company recently reported some pretty strong first-quarter earnings.

They also raise the full-year outlook. To the right of that, CBS, a US drugstore chain is seeing some selling pressure. It missed on first-quarter earnings and slashed its outlook.

We are back with Sam Chai from TD Asset Management. What is delivered GIC rates and have they peaked?

>> So when we think about GIC rates, particularly short of GICs, there is a strong correlation to short-term interest rates. Particularly when we look at Canada and when thinking about where we are in the monetary policy phase, given the strong disinflation progress we have seen over the past months and signs of weakening of our labour market, our expectation is that the Bank of Canada can deliver their first cut sometime possibly the summer and if that economic is materializes, they are likely having already seen peak of GIC rates. The risk there obviously is a re-acceleration of Canadian inflation, perhaps of Canadian inflation has more cash up to do with our neighbours down south where they have a bit more of sticky inflation, if that's the case, what's possible is that the rate cuts priced in over the next 12 months can get pushed back even further or in the unlikely scenario that we see a restoration of the hiking bias, in that scenario, the GIC rate may go slightly higher but to us, that's a low probability scenario.

>> That's all the time we have for questions but before we go, let circle back to the open chat. What should investors be expecting from the Fed going forward?

>> So our base case is that the said will be highly data dependent. They will be watching the data very closely and until we see sufficient disinflation progress on the core PCE front, we are likely going to see it remain on hold. Our base case scenario sees that the Fed is likely going to deliver a cut sometime later in the second half of this year.

I will qualify that the risk to that view to be that overall risk slowly towards the Fed might deliver slightly more cuts over the next 12 months versus what is currently priced into the market.

And just to recap, there is currently just one rate cut priced into the US market by the end of this year.

The key risk we are watching again is whether we see a true re-acceleration of inflation possibly because of further negative supply shock and that would be a case that may ultimately have the Fed deemed that the current policy is not sufficiently restrictive. It's a risk we will be watching.

>> Thanks very much for joining us.

>> Thank you very much.

>> Our thanks to Sam Chai, VP, active fixed income, portfolio management, TD Asset Management. As always, make sure you do your own research before making any investment decisions.

we will be back tomorrow with an update on the market. On Monday show, James Marple, Senior economist with TD will be taking your questions about the economy and interest rates.

And a reminder that you can get a head start.

Just email MoneyTalkLive@TD.com.

That's all for our show today. Take care.

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