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[music] >>Hello I'm Greg Bonnell and 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 will only see here. We'll take you through with moving the markets and answer questions about investing.
Coming up on today show, will discuss what's hotter than expected US inflation report means for next week's Fed rate decision with TD Asset Management Scott Colbourne joining us. MoneyTalk's Anthony Okolie will have a look at the latest results of the TD Direct Investing Index and what it's telling us about how retail investors reviewing the market right now.
And in today's education segment, Jason Hnatyk will take us through some different types of graphs you can find on the advanced dashboard.
Here's how you can get in touch with us.
Just email moneytalklive@td.com or Phil at the viewer response box under the video player on WebBroker.
Before we get to our guest of the day let's get an update on the markets with the TSX Composite Index right here at home.
I think we have some green of the screen today. A 58 points to the upside. A modest, I will call it 1/3 of a percent. Or a court of a percent. Somewhere in between.
Some of the most actively traded names on the TSX of the sour including Air Canada, not to the upside, down about 2%.
Hearing some rumblings particularly south of the border from the airline industry about rising fuel costs and labour costs. The bottom line seems to be pulling the wider group down today and Air Canada with it.
B2Gold, checking on that right now not quite as firm as it was early in the session but for bucks and $0.21 it's still about half a percent. South of the border, of course that US inflation report, a little tick hotter than expected. Markets seem to be taking it all in stride. Your bed broader read of the US market, the S&P 500 up about 1/4% and will check in on the tech heavy NASDAQ and see how it's pacing against the broader market.
A little bit firmer.
Up almost shy of 1/2 a percent. Did want to show you American Airlines though they are one of the names actually did come today warning about this fuel costs and labour costs hitting the bottom line you can see that stock right now at 13 1/2 bucks down to about 4%.
And that's your market update.
US inflation pushed higher in August on the back of higher gasoline prices and it comes one week ahead of the next federal rate decision from the US Federal Reserve. Joining us now to discuss at all is Scott Colbourne, Managing Director head of Active Fixed Income a TD Asset Management. Great to have you on this show Scott.
>> Great to be here.
>> Interesting with the market reaction with the currency trade etc. we did get that tick higher and inflation but at this moment it seems that the market is take it in stride.
How do you think the markets are interpreting the numbers?
>> Surprising, a little upside. But at the end of the day as you know, the market reaction is been pretty benign and I think from the point of view of next week's Fed meeting, they basically have telegraphed that they are on hold into next week's meeting.
So it's not really much of a surprise to the market. I would say the broad trends of inflation are consistently moving in the right direction when you look at three month annualized core inflation down about 2.4%. Six months a little higher 3.7.
So I think when you think about central bankers and what they've said here in terms of policy, we've got a long way in terms of inflation. We've got a long way in monetary policy.
You know, the next sort of, last mile if you will, between where inflation is right now and hopefully by certain mid-next year, end of next year, it's a longer road to travel. But, you know, the direction is in place and so, from a market surprise point of view, I don't think there's much in today's data with small interpretations of this way and that way. The broad trend is in place and it's consistent with policymakers on what they are saying.
>> Of course the central-bank is and is nervous that only one line straight down to two.
That would be a bumpy road. Bank of Canada warning about the same thing.
We know it doesn't take an economist or a big thinker to say "hey I'm paying more" when I flip my car all the time. This seems to be pushing the headline further higher and could push even higher in Canada.
With the states and in months to come.
>> You have some risks but I think central banks can be patient here.
You can let some of the noise and some of the choppiness, whether energy prices, play out. They are going to be on hold here and watch the labour developments on both in Canada and in the United States. Obviously potential strikes in the US coming up so there's a lot for them to be patient and let the data play out here. There's no need for, you know, to Excel accelerate the aggressive policy because we've had a lot of that. They front voted on and it's been the rapid tightening cycle. Let's let the legs play out, the monetary policy legs play out and see how things evolve over the next 3 to 6 months.
> Even if they are on pause or on hold and stay there, they have warned us in repeatedly that they are going to stay at an elevated level for a while.
Is that, we don't know their minds but is that the long term plan? Or is that something what you need to tell the market to keep achieving this downward path for inflation?
>> There is so much uncertainty right now.
Everybody is in sort of this data dependent mode right?
Broadly speaking, when you look at the markets, the fixed income markets, there are three broad drivers right now. Growth, inflation and liquidity.
The inflation story is, you know, on the right path.
If you look at today's market reaction, the markets are really not reacting to inflation anymore. The narrative is been put into the market that the central bankers have told us to be patient and they will keep things here for a while until further improvement on inflation. They are really focused on the growth, the labour, the wages and see how that develops.
Obviously, we've seen a lot of surprise on that side this Summer right? Between mid July and August, we had a backup in rates of 50 basis points. Personally I think that responded to a gross shock in the US and obviously, there is a lot more supply in the market both corporate and government. So you know, I think the central bankers are content to say "we are going to watch particularly on the labour development, the growth of an up of employment and how growth plays out.
" Over the next little while. We will keep things here on hold for as long as possible.
They do pencil in, the Fed has penciled in a cut next year. So we will see how things evolve.
We have another Summer of economic projections next week released to see where they think things evolve and they also said they think they will have another hike in the markets. Or at least the option to hike into the end of the year.
So very data dependent.
I think government policy government Gov.
Powell said look "we are navigating by our star under a cloudy sky.
" I think it really speaks volumes to how we are navigating here. Very data dependent.
We think the trend is in place and it's a little stickier than we expected.
>> When it comes to what they've been trying to do all along, including the economy, they said they warned us that there would be some pain here and like you said, the labour market is been resilient on the consumer might slow down a little bit but still spending.
It seems now that when you put all that together maybe you get the soft landing, maybe no landing. Maybe you do all this and get inflation under control of we will walk away without too many wounds to bandage.
He cannot happen?
>> I'm always a bit of a sceptic. I've been doing this for a while. You know, it's different this time. There is not been many soft landings.
It's a really hard objective. I mean, think of what we've gone through. We went through a pandemic shock and the monetary fiscal policy response has been off the charts.
To think that, you know, monetary policies can land the supertanker on that soft landing, given the massive stimulus that we've had, I'm a little bit of a sceptic.
I don't believe that we are going to get there. I'm still in the mild recession. But prove me wrong.
It is a really tough thing to navigate.
So if monetary policy is on hold, I think we will see the legs play out in 2024. I'm in mild case.
Because I think both corporate and households went into the pandemic in much better shape than they have been in the past. So it's more of a mild recession in the monetary policy will bite. Fiscal policy will ultimately stop being a tailwind.
>> Take all that and I think of what it means for the fixed income market. Obviously we are seeing yield that we have not seen in a long time.
Some people thought we would be cutting by now and that would be something else for bond prices. How do you see all playing out?
>> You know, I think ultimately we will see one or two cuts next year at some point in the US. I think that's my base case over the scenario.
At minimum, what your to see his inflation continuing to move down. Market sort of expecting inflation to be, you know, 2.5 to 2.6%, headline inflation sort of June to September of next year.
If the Fed doesn't recalibrate interest rates, what you have is real rates continuing to move up.
That is a tightening.
Continuing to tighten into you know, a downward trajectory and inflation.
So I think the Fed can recalibrate modestly.
Still behave with higher for longer and still be disciplined here.
But I think it's a very attractive level but to be adding some fixed income to your portfolios.
Active yields are very attractive for historically so I think it's still appositive.
>> We will get your questions about fixed income with Scott Colbourne in just moments time.
A reminder that you can get in touch with us any time by emailing MoneyTalk Live ATD.com or Phil at the viewer response box under the video player and WebBroker.
Right now let's get you updated on some of the top stories in the world of business and take a look at how the markets are trading.
Cash-strapped households are searching for bargains drove sales and profit higher at Dollarama. The discount retailer says demand for food and cleaning supplies help power of more than 15% rise in same-store sales. A key metric for the industry.
Dollarama is also boosting its full-year sales forecast to nearly double its earlier guidance for investors.
Right now we will call it at 4%. American Airlines is joining a chorus of US carriers warning that rising costs will hit the bottom line.
The airline says higher jet fuel prices and a new labour deal with pilots will dramatically reduce earnings-per-share's for the all-important Summer quarter.
Southwest Airlines and Alaska Airlines cut their earnings forecast earlier this month. American Airlines down a little more than 4%.
Taking a look at shares of Madura are on the rise today. The drugmaker is reporting positive results for a flu vaccine that has late stage trials currently.
Stocking up a 3 1/2%. Separately, the US Centre for disease control and prevention is recommending ages six and older get an updated covert shot.
We've got some green on the screen today.
36 points, a little shy of 1/5 of a percent. South of the border, as investors a digest US inflation report, taking hotter than expected but markets seem to be getting a pass at least for now. The S&P 500 up a court of a percent, the bond market is pretty comp located today. Back with Scott Colbourne now taking your questions about fixed income.
Here's the big one.
One might central banks begin cutting?
Talking about what the Fed might be up to. Let's start here at home with the Bank of Canada.
>> I'll start with what's priced into the market as a certain starting point for discussion.
Basically there is no more hikes priced in in Canada or the US. Maybe more of a 50, 50 call by the end of the year in the US. Nothing in Canada. Sometime in the second half of next year there is a possibility of rate cuts in the US. Maybe one, maybe two. Nothing in Canada.
So, using that as a starting point, I would say there is more of a likelihood the candidate will cut before the US. Why? I think when you look globally right now, how monetary policy is playing out, obviously, you know, the US has been this exceptionally resilient economy.
But when you look outside of the US, Canada, Europe, UK, China… All these economies are slowing and have slowed a lot.
So I think it's hard for the US to sort of buck that trend forever. So I think Canada, the trend is to slower growth.
I think the interest rates are biting on the consumer.
A little bit more levered here to the households.
And I think there is more of a likelihood that the Bank of Canada might have to cut the second half of next year.
>> That's an interesting argument in the sense that we do know that we have household debt at higher levels.
More heavily indebted nation we are. The fact that that should really start to squeeze us at some point is, as you servicing the debt we have against having some money to put into the economy… Has taken longer than we thought it may have?
>> Everything about this cycle has taken longer.
Honestly, I've been surprised. When you go back to how policymakers respond, you know, when we look back and missed calls and that type of stuff, there was physical response of the monetary policy response were off the charts.
It has caused this cycle to be somewhat different and you know, the timing has been off. But ultimately, it does bite monetary policy. It does and the legs do play out.
Maybe we don't get the same rate cycle that we've had historically. Given a variety of reasons, the higher debt loads… You know, maybe less globalization.
Green inflation, all these types of issues and structurally higher inflation.
But the bottom line, I do think you'll get a bit of a rate hike or a rate cut sorry.
Starting to play out sometime in the beginning or second half of next year.
>> Of course some people hoping for an aggressive cutting of rates that takes us down. I don't see anyone saying we will get back to her used to be because those are emergency rates.
Taking us down dramatically in a short period of time.
B is a case of being careful what you wish for?
Something wrong the economy.
>> You have to think of the probit of the probabilities. My scenario which is a mild recession which leads the Fed, given where inflation is, to begin the cutting but if you do have something more of a hard landing, and you absolutely have to handicap that, maybe things do bite a lot more in 2024. Yeah.
You can get a lot more movement in interest rates.
Particularly in the long end of the yield curve.
>> Let's get to another question here now. This one is pondering the idea that if rates actually stayed high, for longer, like the central banks keep telling us they will, what areas of the market could benefit?
>> Well I think the simplest thing is you are being paid to way.
So there is a lot of opportunity at the front of the end of the yield curve. The decision I think investors have to make is do you want duration or not want duration?
If you're concerned about long-term interest rates, for whatever reasons, you are being paid whether it's money market or short-term corporate bonds or even short-term government bonds to invest.
So, you think about five, six, percent short-term investment corporate bonds incredibly attractive.
And you know, could form a very important part of people's portfolios right now. So yeah.
Absolutely attractive but obviously if you're thinking what a portfolio, you know, fixed income plays a diversification or hedging role.
And to handicap a harder landing, that would play an important part of your portfolio. You would see long-term yields come down so I think that will be a positive.
Not to exclude that.
In a way you can almost barbel fixed income.
A lot of short-term corporate's and have some longer government bonds to hedge that risk.
>> What are the risks that investors have to think about if they think of a strategy like that? Is it just a matter of if you're going to do that to be patient?
If you're being paid to wait, that suggests patients to.
>> You get , slow down. Labour growth moderate and slow down, inflation moderated slow down. So the broad trends supportan abilityfrom fixed income. That's your starting point right? We have income meaning you're paid to wait right now. The price gains may or may not come to putting on how the economy evolves and I don't see a lot of substantial upside to yields. I don't see a rapid acceleration of US growth or Canadian growth at this point in time. You know, we broadly see global growth continuing to moderatethe broad trends allowed to… In absence of shock.
>> The emerging markets, how are the emerging markets looking right now?
>> They were the first to hike. A number of them started to cut already. So you know, there… We have been informed I think over the last number of years that it is very country specific.
Buying a broad basket of emerging-market of the debt side has been a real challenge.
You have countries like Turkey, Russia, Argentina… All sort of special situations which have been very disastrous for fixed income holders.
So I think you have to be very specific.
Like a handful of markets.
We've been invested in Brazil this year. South Africa, you know, specific opportunities. So it's very much a "pick and choose" opportunity.
>> Doesn't make it a tougher space to play in for the retailer? I think of what's available to them with ETF and broad basket which includes some of those countries that have not been favourable.
>> I mean it's really difficult for retail investors to invest. ETF's out there but you're getting everything in that exposure.
>> Interesting stuff is always at all make sure you do your own research before making any investment decisions. We will get back to your questions with Scott Colbourne in fixed income in just a moment's time. A reminder of course you can get in touch with us anytime by emailing MoneyTalkLive@td.com.
Now is get to educational segment of the day.
In today's education segment will take another look at two TDs advanced dashboard. A platform designed for advanced traders available through TD Direct Investing.
Jason Hnatyk, Senior Client Education Instructor with TD Direct Investing joins us now to show some of the different chart customization tools available.
Take it away.
>> Great to be here Greg a really excited to show off these capabilities in advanced dashboard is one of the functionalities that sets the tool apart.
We've actually partnered with a third-party company that you can get it go and buy a subscription with an we've been able to get their technology right in the platform so it's available to all advanced dashboard users so let's get in there and take a look. Working a first start by talking about how to make some basic customizations.
As well as chart styles and time frames so we can know the ins and outs of how that's in work.
Within the platform, if you're looking to customize features and in the charts it's no different, you're looking for these little gears that you can see in the top right-hand corner of the chart as well as in the bottom right-hand corner to allow us to make changes to our experience.
First of all, if I go ahead and click on the gear and the top right this will allow us to really personalize the look and feel, the colours… We can change the appearance of the background. We can change the appearance of even the gridlines that your mouse is making. So really the ability to make this a personalized experience. And if we go down and take a look at the bottom right-hand corner gear, I want to focus on the lines and labels. These are opportunities to add additional visual notifications here.
Really trying to get the most out of the picture the range presented with. I like to have the high and low price labels.
Snapping to the right-hand side of the bar and really informed without having to do extra research where that ranges on the timescale of the chart. Let's see, the next thing we will take a look at his adjusting the charts. I'm on… We have read and agreed here as well is solid and hollow candles. If that's for you you can go ahead and follow my lead there. Alternatively there are many other charts available on this package as well.
Just by going ahead and clicking on the candle icon next to the symbol up of the top left-hand corner. You can see we've got different bars, candles, we have the hike action as well as many other more niche charting packages.
Those will all be available to all users within the platform.
Next thing to show off is how to adjust and look at the time periods and frequencies of your candles.
Whether or not you're a daytrader or swing trade or or someone that looks at may be buying and holding for a long term.
We have the charting opportunities for you. You'll notice the very bottom left-hand corner, there's gonna be some commonly used time frames to look at your chart but if you really like to drill down and get specific, next to where the symbolism the top left-hand corner, you can go ahead and click on this. It shows a D for me because I'm looking at a one day candle but you'll notice this drop-down menu, there is, you know, an overwhelming amount of different selections you can make for yourself.
So I'll leave it up to the viewer to decide what's best for their own experience.
The last thing I want to leave is how do we add indicators to our chart?
Over 100 different indicators in 50+ drawings you can go ahead and make sure that you got the right information to make your trading decisions.
The indicators button is at the top of the page. We go ahead and select that. You can either go ahead and scroll down through the list to find out and look for a new indicator or alternatively you can go ahead and type in the search bar at the top of the screen to really narrow down your search.
I went to go ahead and add in an exponential moving average to the chart.
All we will do in this particular case is click on the name of the study.
You'll notice there is an EMA popping up in the top left-hand side of the chart. I will click this twice just to show you how easy it is to add multiple moving averages to the experience we've got here.
We've got one blue line added onto our candlesticks.
That means both moving averages are having the same period. Let's go ahead and customize one of them. You can customize any study of got a platform by hovering your mouse over the study in question and clicking on that gear icon that I was talking about earlier.
And then from here, you got all sorts of ways to change inputs.
Not just for moving averages. If you've added other studies like… You have the ability to really make sure that you have the right inputs to your own liking.
So we can go ahead and change this length.
We can change the style to make different colours. So it's really going to be the information and the display just the way we want to see it.
>> Alright a lot of great information there to sort of get viewers thinking if they want to start working on those charts.
Customizing them for themselves.
But when you're working the chart, maybe you see so that makes you think "I have to take some sort of trade action off of this" can you trade for those charts in advanced dashboard?
> That's a great quite that's a great question Greg.
The easy answer is yes in the advanced dashboard makes it very a quick process to get that done.
So it's all about speed of execution and all of her getting your trades to the market in an efficient manner.
Let's show you how.
This is how you kill two birds with one stone.
We will create a "buy and sell order the same way we create an alert on platform as well.
Once we create these alerts, there will be visual flags right here in the platform so you will always be kept informed of that information.
If I could directivity's attention to the top right-hand corner. You will see the "buy, sell and alert" buttons are all there.
We go ahead and click on the appropriate action.
Bring our mouse down to whatever price were looking to enter order out and go ahead and click that to then begin the ordering process and then your order ticket will appear on the screen. It's a simple as that. Point and click and you're often ready to go.
>> Great stuff as always Jason really appreciate that.
>> My pleasure.
>> Thanks to Jason Hnatyk, Senior Client Education Instructor TD Direct Investing.
Make sure to check out the learning centre on WebBroker for more educational videos, live interactive master classes and upcoming webinars.
Before we get to our questions with Scott Colbourne, a reminder of how you can get in touch of us.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
>> Okay, we are back with Scott Colbourne taking your questions about fixed income.
Lots coming in of the past couple of minutes.
(Greg reads the question) >> All start off by saying I'm not an expert but I would say that I would make this observation. It's a market that is shrinking in Canada.
Really.
One of the largest issuers in our Canadian banks, the regulator has encouraged them to shift the existing retail oriented preferred shares to a more institutional oriented issue.
it's always been a big part of Canadian investors.
The retail oriented nature is one of the risks and regulators people see and they are encouraging issuers to issue outside of that market so over time it's a shrinking and then will have an impact on liquidity and potential investor base.
So that's the one caveat I have for investors. I focus exclusively on fixed income. The opportunity set and we participate now and that institutional oriented first sharemarket but it's essentially a fixed income market.
Further down the capital structure.
>> Glad we got the question I had no idea.
I'm educated on that one. One here [Greg it reads the question] >> I acknowledge that earlier in our remarks. When you look back on the movement in bond yields in the US, July to August, it was a big upward adjustment. 50 basis points in US tenure rights.
One of the big contributor's is the issuance.
We have seen a huge shock and post.
The announcement by the treasury of how it's going to issue on this large amount.
This large deficit.
So absolutely that's going to weigh on the markets.
The global issuance is a factor.
I acknowledge there are three factors playing in.
The valuation, fixed income versus inflation.
We know that story and of talked about it.
Growth.
We have had upside surprises but we think it will shift to lower and supplies definitely weighing in on the US being a huge issue were fun doing funding it's large deficit and huge initiatives there.
So that absolutely is had an impact on rates.
To the higher side obviously.
>> Is there healthy appetite of the market for that in shoe issuance?
The US, even though some of the rating agencies don't like all the political fighting around the budget.
> In the day at the end of the day there is always price.
It's the most liquid fixed income market and basically it re-prices everything else. So will there be an appetite for it? Yes.
Is it changing and are the dynamics of play? So many different people that invest in US treasuries.
There is foreign governments, there is banks, mutual funds, hedge funds, there is different drivers for each of these appetites but there is a clearing price in higher issuance coming with a higher yield.
>> Let's get another question here. This one is about corporate bonds.
What is your outlook in the corporate space?
> Corporate credit is, broad fundamentals are great.
When you think about the trajectory of the market, we see a lot of upgrades from high yields to investment grade with rising stars. So we actually see a shrinking of the US high-yield market given all these upsides and upgrades if you will.
The broad fundamentals are supportive.
At this point in time.
The valuations are sort of meh for credit but the broader appetite… You throw in yields and even though for me as an investor it's not as attractive as it has been, they will continue to be support or it for issuance next year, we will start ramping up. It's more of an issue in high-yield than it is investment grade.
We talked about a wall of refinancing being more of a high-yield story initially the investment grades, sort of a mixture. There are some trends at play.
Below issuers that can tap into the Capital Markets. If you go into the issuers that don't top, there are, there is an increase in bankruptcies it's been at play in the US.Small business sentiments deteriorating so there is some underlying concern about outlooks but broadly speaking, you know, investment-grade debt is well supported into the end of the year.
>> What I think of a corporate debt I just think about the economic backdrop if you have the harder landing which most of the world including you, doesn't seem to be calling for right now, with that but this space a little more in question?
>> Yeah a hard landing with everything in question and investment-grade high-yield will suffer. Even a mild recession will contribute to a wider spread and that sort of central scenario so some uptick in 2024 expense… Nothing to really be concerned about.
>> We will get back to your questions with Scott Colbourne on fixed income and just moments time. Do your own research before making any investment decisions.
A reminder into of course that you get in touch with us any time.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
The TD Direct Investing index for the month of August has been released. MoneyTalk Live's Anthony Okolie has been going over the numbers and joins us with the details. Anthony.
>> Thanks Greg. The TD index has been released for the month of August in the big take away for the month was that the sentiment for self-directed investors moved into a bearish territory.
Here are the details. First we will start with a look at the overall TD Direct Investing index which measures sentiment in a range from -100 for very bearish to +100 for very bullish.
It came in at -23.
That's down 23 points from last month.
It's also nine points lower than versus August of last year meeting that self-directed investors were not feeling they were feeling more bearish.
When we look at the components which look at the DI I, overall there is increased bearish sentiment month over month a car across the four proxies.
Significantly, the proxy for chasing trends or investors who bought stocks in a rising market, dropped to -9 in August. That's down 14 points month over month.
A few key points that stood out: one, financials have the lowest sentiment of all sectors. While technology remained on top for the six month in a row.
Secondly, baby boomers, those born between 1946 to 1964 were once again the most pessimistic age group.
Now, again, when we break things down by sector, self-directed investors fell to -7 down 11 points month of month.
Notably some of Canada's biggest banks posted weaker than expected third-quarter earnings in August.
Meanwhile sentiment in the tech space remain positive at +4 in August.
Despite a three point drop. The tech sector rally last month which was fuelled in part by the blowout earnings by chip giant Nvidia and as well as tech giants.
… Bank of Nova Scotia, TD Bank, CIBC and Royal Bank.
MegaCap tech sought not surprisingly were among the most heavily bought names in the IT sector including Apple, Microsoft, Shopify and chipmaker Nvidia which notably, was widely held across all demographics last month.
Finally when we look at trading activity among investor age, boomers were among the most pessimistic group with overall sentiment following month over month. That's a look at the TD Direct Investing hot highlight for the month of August 2023. Greg back to you.
>> Thanks for that Anthony. MoneyTalk Live's Anthony Okolie. No for an update on the markets.
We are back now with advanced dashboard looking at the heat map function giving you a view of the market.
Taking a look at the TSX 60, screening by price and volume. In terms of green on the screen it's Dollarama with its quarterly earnings coming in. Not only did they beat expectations for the quarter but they are raising their sales forecast. Obviously Canadians feeling the pinch of higher consumer prices have been looking to bargain retails like Dollarama.
The shares they are about 4 1/2%.
Mixed seen across the energy space today. The financials, we have some green on the screen down there as well.
Let's screen through the S&P 100 now and get a sense of what's happening on Wall Street, one of the most big companies in the S&P 100.
Right now some automakers, traditional automakers in the EV business to.
Getting some positive sentiment up about 2.8%. Tesla over there about 1 1/2 and the chipmakers on the rallying mode again. Netflix down there about 4%, we can check into that when later and see if there's any headlines associated with that.
You can get more information about TD advanced dashboard by visiting td.com/advanced dashboard. We are back now it's got Colbourne from TD Asset Management getting back to your questions. Right now we have (Greg reads the question) Jeff is been sending questions on a regular basis and we appreciate them thanks Jeff.
After a decade of financial crisis and borrowing costs, where is the new normal?
>> That's a great question on a really hard question to answer.
Obviously you can come up with scenarios and that's one way to do it right?
Handicapped soft landing… A soft mild recession and a hard recession and you can sort of handicap or you think inflation may play out and where rates may go.
Another way to think about it over the next year or so is to sort of say "what is the market thinking about inflation, headline inflation over the next year?
I said earlier it's sort of moving towards 2.5%-ish. So if you take that as sort of a guide for inflation headline inflation, second half of next year, where might fed policy be? Right now real interest rates, 10 year real interest rates around 2%.
Make no assumptions about the direction of where the economy goes. 2 1/2% inflation +2% real rates give you about 4 1/2%. That gives you a handicap of where policy rates and 10 year rates might gravitate to over the next year or two.
So it's a way of thinking about it.
But it's a really tough one depending on the scenario playing out.
And we might get another hike. It might be closer to 4 1/2 to 4 3/4% but at the end of the day that's one way of thinking about how rates normalize.
At the end of the day, the summary of economic projections long run rates are 2 1/2%.
We are a long way for 2 1/2%.
So we are well under restrictive territory.
So the ultimate trajectory is lower. It's just the path.
When you're dealing with supply, dealing with sticky inflation and sticky labour prices the other that there is lots to handicap.
As you pointed out earlier.
It's not a straight line trajectory.
>> Alright thanks for that when Jeff.
Something to think about.
A viewer wants to get your take Scott on the US and Canadian dollars right now.
The mighty US buck.
I think I saw someone quipping the other day on social media saying they would not want to get away in the way of this US buck train.
>> We have seen the USB strong relative to the rest of the world and it continues to support a stronger US dollar. Occasionally there are brief setbacks with the markets but I think for the time being the mighty US dollar continues to be supported by an extraordinarily positive tailwind coming out of the pandemic which fiscally and monetary policy driven and we will continue to sort of outshine the rest of the world. The rest of the world is already starting to contemplate cuts in the emerging market worlds.
We are definitely at the end of the rate hiking cycle, I think here in Canada and many other places.
Australia… We might get a hike out of the BOE, ECB tomorrow but I think we are clearly at the end. So the US dollar, in that environment will continue.
>> With the summary highness, anybody doing their Summer reading, it's hard not to come across a headline of a D dollarization. I don't see those headlines as much anymore.
>> The bar to do that is extraordinarily high.
It's a great conspiracy theory but honestly the practical realities of displacing the US dollar, the euro dollar market is such a huge component of international trades.
It backs commodities. At the margin there is desire by some of the markets, the participants out there to D dollar eyes but that's a long, long, long trend.
Nothing to worry about in the near term.
>> Alright we will squeeze one more question in here before you say goodbye to Scott.
We will give you this one. We will let you go not without talking about GICs. Have GIC rates peaked?
>> If monetary policy rates stopped and obviously G.I.
rates GIC rates rather have stopped. It's quite simple.
The banks are not to pay more with the direction of interest rates are in the bond markets.
So yeah, if you think monetary policy, as I do, we are definitely at the end.
More of a hike.
GIC rates are you know at their peak. That's an expensive way for banks to raise money. So it's ultimately, they will come down.
>> Scott it's always a pleasure to have you and look forward to our next conversation.
>> Thank you.
>> Our thanks to Scott Colbourne, Managing Director and Active Fixed Income and TD Asset Management.
As always be sure to do your own research before making any investment decisions.
Stay tuned on Thursday, Haining Zha, VP and Dir.
at TD Asset Management will be our guest taking your questions about China's economy and markets.
And a reminder that you can get a head start by emailing us@moneytalkliveatd.com. That's all the time we have for today thanks for watching and will see you tomorrow.
[music]
Every day I'll be joined by guests from across TD, many of whom you will only see here. We'll take you through with moving the markets and answer questions about investing.
Coming up on today show, will discuss what's hotter than expected US inflation report means for next week's Fed rate decision with TD Asset Management Scott Colbourne joining us. MoneyTalk's Anthony Okolie will have a look at the latest results of the TD Direct Investing Index and what it's telling us about how retail investors reviewing the market right now.
And in today's education segment, Jason Hnatyk will take us through some different types of graphs you can find on the advanced dashboard.
Here's how you can get in touch with us.
Just email moneytalklive@td.com or Phil at the viewer response box under the video player on WebBroker.
Before we get to our guest of the day let's get an update on the markets with the TSX Composite Index right here at home.
I think we have some green of the screen today. A 58 points to the upside. A modest, I will call it 1/3 of a percent. Or a court of a percent. Somewhere in between.
Some of the most actively traded names on the TSX of the sour including Air Canada, not to the upside, down about 2%.
Hearing some rumblings particularly south of the border from the airline industry about rising fuel costs and labour costs. The bottom line seems to be pulling the wider group down today and Air Canada with it.
B2Gold, checking on that right now not quite as firm as it was early in the session but for bucks and $0.21 it's still about half a percent. South of the border, of course that US inflation report, a little tick hotter than expected. Markets seem to be taking it all in stride. Your bed broader read of the US market, the S&P 500 up about 1/4% and will check in on the tech heavy NASDAQ and see how it's pacing against the broader market.
A little bit firmer.
Up almost shy of 1/2 a percent. Did want to show you American Airlines though they are one of the names actually did come today warning about this fuel costs and labour costs hitting the bottom line you can see that stock right now at 13 1/2 bucks down to about 4%.
And that's your market update.
US inflation pushed higher in August on the back of higher gasoline prices and it comes one week ahead of the next federal rate decision from the US Federal Reserve. Joining us now to discuss at all is Scott Colbourne, Managing Director head of Active Fixed Income a TD Asset Management. Great to have you on this show Scott.
>> Great to be here.
>> Interesting with the market reaction with the currency trade etc. we did get that tick higher and inflation but at this moment it seems that the market is take it in stride.
How do you think the markets are interpreting the numbers?
>> Surprising, a little upside. But at the end of the day as you know, the market reaction is been pretty benign and I think from the point of view of next week's Fed meeting, they basically have telegraphed that they are on hold into next week's meeting.
So it's not really much of a surprise to the market. I would say the broad trends of inflation are consistently moving in the right direction when you look at three month annualized core inflation down about 2.4%. Six months a little higher 3.7.
So I think when you think about central bankers and what they've said here in terms of policy, we've got a long way in terms of inflation. We've got a long way in monetary policy.
You know, the next sort of, last mile if you will, between where inflation is right now and hopefully by certain mid-next year, end of next year, it's a longer road to travel. But, you know, the direction is in place and so, from a market surprise point of view, I don't think there's much in today's data with small interpretations of this way and that way. The broad trend is in place and it's consistent with policymakers on what they are saying.
>> Of course the central-bank is and is nervous that only one line straight down to two.
That would be a bumpy road. Bank of Canada warning about the same thing.
We know it doesn't take an economist or a big thinker to say "hey I'm paying more" when I flip my car all the time. This seems to be pushing the headline further higher and could push even higher in Canada.
With the states and in months to come.
>> You have some risks but I think central banks can be patient here.
You can let some of the noise and some of the choppiness, whether energy prices, play out. They are going to be on hold here and watch the labour developments on both in Canada and in the United States. Obviously potential strikes in the US coming up so there's a lot for them to be patient and let the data play out here. There's no need for, you know, to Excel accelerate the aggressive policy because we've had a lot of that. They front voted on and it's been the rapid tightening cycle. Let's let the legs play out, the monetary policy legs play out and see how things evolve over the next 3 to 6 months.
> Even if they are on pause or on hold and stay there, they have warned us in repeatedly that they are going to stay at an elevated level for a while.
Is that, we don't know their minds but is that the long term plan? Or is that something what you need to tell the market to keep achieving this downward path for inflation?
>> There is so much uncertainty right now.
Everybody is in sort of this data dependent mode right?
Broadly speaking, when you look at the markets, the fixed income markets, there are three broad drivers right now. Growth, inflation and liquidity.
The inflation story is, you know, on the right path.
If you look at today's market reaction, the markets are really not reacting to inflation anymore. The narrative is been put into the market that the central bankers have told us to be patient and they will keep things here for a while until further improvement on inflation. They are really focused on the growth, the labour, the wages and see how that develops.
Obviously, we've seen a lot of surprise on that side this Summer right? Between mid July and August, we had a backup in rates of 50 basis points. Personally I think that responded to a gross shock in the US and obviously, there is a lot more supply in the market both corporate and government. So you know, I think the central bankers are content to say "we are going to watch particularly on the labour development, the growth of an up of employment and how growth plays out.
" Over the next little while. We will keep things here on hold for as long as possible.
They do pencil in, the Fed has penciled in a cut next year. So we will see how things evolve.
We have another Summer of economic projections next week released to see where they think things evolve and they also said they think they will have another hike in the markets. Or at least the option to hike into the end of the year.
So very data dependent.
I think government policy government Gov.
Powell said look "we are navigating by our star under a cloudy sky.
" I think it really speaks volumes to how we are navigating here. Very data dependent.
We think the trend is in place and it's a little stickier than we expected.
>> When it comes to what they've been trying to do all along, including the economy, they said they warned us that there would be some pain here and like you said, the labour market is been resilient on the consumer might slow down a little bit but still spending.
It seems now that when you put all that together maybe you get the soft landing, maybe no landing. Maybe you do all this and get inflation under control of we will walk away without too many wounds to bandage.
He cannot happen?
>> I'm always a bit of a sceptic. I've been doing this for a while. You know, it's different this time. There is not been many soft landings.
It's a really hard objective. I mean, think of what we've gone through. We went through a pandemic shock and the monetary fiscal policy response has been off the charts.
To think that, you know, monetary policies can land the supertanker on that soft landing, given the massive stimulus that we've had, I'm a little bit of a sceptic.
I don't believe that we are going to get there. I'm still in the mild recession. But prove me wrong.
It is a really tough thing to navigate.
So if monetary policy is on hold, I think we will see the legs play out in 2024. I'm in mild case.
Because I think both corporate and households went into the pandemic in much better shape than they have been in the past. So it's more of a mild recession in the monetary policy will bite. Fiscal policy will ultimately stop being a tailwind.
>> Take all that and I think of what it means for the fixed income market. Obviously we are seeing yield that we have not seen in a long time.
Some people thought we would be cutting by now and that would be something else for bond prices. How do you see all playing out?
>> You know, I think ultimately we will see one or two cuts next year at some point in the US. I think that's my base case over the scenario.
At minimum, what your to see his inflation continuing to move down. Market sort of expecting inflation to be, you know, 2.5 to 2.6%, headline inflation sort of June to September of next year.
If the Fed doesn't recalibrate interest rates, what you have is real rates continuing to move up.
That is a tightening.
Continuing to tighten into you know, a downward trajectory and inflation.
So I think the Fed can recalibrate modestly.
Still behave with higher for longer and still be disciplined here.
But I think it's a very attractive level but to be adding some fixed income to your portfolios.
Active yields are very attractive for historically so I think it's still appositive.
>> We will get your questions about fixed income with Scott Colbourne in just moments time.
A reminder that you can get in touch with us any time by emailing MoneyTalk Live ATD.com or Phil at the viewer response box under the video player and WebBroker.
Right now let's get you updated on some of the top stories in the world of business and take a look at how the markets are trading.
Cash-strapped households are searching for bargains drove sales and profit higher at Dollarama. The discount retailer says demand for food and cleaning supplies help power of more than 15% rise in same-store sales. A key metric for the industry.
Dollarama is also boosting its full-year sales forecast to nearly double its earlier guidance for investors.
Right now we will call it at 4%. American Airlines is joining a chorus of US carriers warning that rising costs will hit the bottom line.
The airline says higher jet fuel prices and a new labour deal with pilots will dramatically reduce earnings-per-share's for the all-important Summer quarter.
Southwest Airlines and Alaska Airlines cut their earnings forecast earlier this month. American Airlines down a little more than 4%.
Taking a look at shares of Madura are on the rise today. The drugmaker is reporting positive results for a flu vaccine that has late stage trials currently.
Stocking up a 3 1/2%. Separately, the US Centre for disease control and prevention is recommending ages six and older get an updated covert shot.
We've got some green on the screen today.
36 points, a little shy of 1/5 of a percent. South of the border, as investors a digest US inflation report, taking hotter than expected but markets seem to be getting a pass at least for now. The S&P 500 up a court of a percent, the bond market is pretty comp located today. Back with Scott Colbourne now taking your questions about fixed income.
Here's the big one.
One might central banks begin cutting?
Talking about what the Fed might be up to. Let's start here at home with the Bank of Canada.
>> I'll start with what's priced into the market as a certain starting point for discussion.
Basically there is no more hikes priced in in Canada or the US. Maybe more of a 50, 50 call by the end of the year in the US. Nothing in Canada. Sometime in the second half of next year there is a possibility of rate cuts in the US. Maybe one, maybe two. Nothing in Canada.
So, using that as a starting point, I would say there is more of a likelihood the candidate will cut before the US. Why? I think when you look globally right now, how monetary policy is playing out, obviously, you know, the US has been this exceptionally resilient economy.
But when you look outside of the US, Canada, Europe, UK, China… All these economies are slowing and have slowed a lot.
So I think it's hard for the US to sort of buck that trend forever. So I think Canada, the trend is to slower growth.
I think the interest rates are biting on the consumer.
A little bit more levered here to the households.
And I think there is more of a likelihood that the Bank of Canada might have to cut the second half of next year.
>> That's an interesting argument in the sense that we do know that we have household debt at higher levels.
More heavily indebted nation we are. The fact that that should really start to squeeze us at some point is, as you servicing the debt we have against having some money to put into the economy… Has taken longer than we thought it may have?
>> Everything about this cycle has taken longer.
Honestly, I've been surprised. When you go back to how policymakers respond, you know, when we look back and missed calls and that type of stuff, there was physical response of the monetary policy response were off the charts.
It has caused this cycle to be somewhat different and you know, the timing has been off. But ultimately, it does bite monetary policy. It does and the legs do play out.
Maybe we don't get the same rate cycle that we've had historically. Given a variety of reasons, the higher debt loads… You know, maybe less globalization.
Green inflation, all these types of issues and structurally higher inflation.
But the bottom line, I do think you'll get a bit of a rate hike or a rate cut sorry.
Starting to play out sometime in the beginning or second half of next year.
>> Of course some people hoping for an aggressive cutting of rates that takes us down. I don't see anyone saying we will get back to her used to be because those are emergency rates.
Taking us down dramatically in a short period of time.
B is a case of being careful what you wish for?
Something wrong the economy.
>> You have to think of the probit of the probabilities. My scenario which is a mild recession which leads the Fed, given where inflation is, to begin the cutting but if you do have something more of a hard landing, and you absolutely have to handicap that, maybe things do bite a lot more in 2024. Yeah.
You can get a lot more movement in interest rates.
Particularly in the long end of the yield curve.
>> Let's get to another question here now. This one is pondering the idea that if rates actually stayed high, for longer, like the central banks keep telling us they will, what areas of the market could benefit?
>> Well I think the simplest thing is you are being paid to way.
So there is a lot of opportunity at the front of the end of the yield curve. The decision I think investors have to make is do you want duration or not want duration?
If you're concerned about long-term interest rates, for whatever reasons, you are being paid whether it's money market or short-term corporate bonds or even short-term government bonds to invest.
So, you think about five, six, percent short-term investment corporate bonds incredibly attractive.
And you know, could form a very important part of people's portfolios right now. So yeah.
Absolutely attractive but obviously if you're thinking what a portfolio, you know, fixed income plays a diversification or hedging role.
And to handicap a harder landing, that would play an important part of your portfolio. You would see long-term yields come down so I think that will be a positive.
Not to exclude that.
In a way you can almost barbel fixed income.
A lot of short-term corporate's and have some longer government bonds to hedge that risk.
>> What are the risks that investors have to think about if they think of a strategy like that? Is it just a matter of if you're going to do that to be patient?
If you're being paid to wait, that suggests patients to.
>> You get , slow down. Labour growth moderate and slow down, inflation moderated slow down. So the broad trends supportan abilityfrom fixed income. That's your starting point right? We have income meaning you're paid to wait right now. The price gains may or may not come to putting on how the economy evolves and I don't see a lot of substantial upside to yields. I don't see a rapid acceleration of US growth or Canadian growth at this point in time. You know, we broadly see global growth continuing to moderatethe broad trends allowed to… In absence of shock.
>> The emerging markets, how are the emerging markets looking right now?
>> They were the first to hike. A number of them started to cut already. So you know, there… We have been informed I think over the last number of years that it is very country specific.
Buying a broad basket of emerging-market of the debt side has been a real challenge.
You have countries like Turkey, Russia, Argentina… All sort of special situations which have been very disastrous for fixed income holders.
So I think you have to be very specific.
Like a handful of markets.
We've been invested in Brazil this year. South Africa, you know, specific opportunities. So it's very much a "pick and choose" opportunity.
>> Doesn't make it a tougher space to play in for the retailer? I think of what's available to them with ETF and broad basket which includes some of those countries that have not been favourable.
>> I mean it's really difficult for retail investors to invest. ETF's out there but you're getting everything in that exposure.
>> Interesting stuff is always at all make sure you do your own research before making any investment decisions. We will get back to your questions with Scott Colbourne in fixed income in just a moment's time. A reminder of course you can get in touch with us anytime by emailing MoneyTalkLive@td.com.
Now is get to educational segment of the day.
In today's education segment will take another look at two TDs advanced dashboard. A platform designed for advanced traders available through TD Direct Investing.
Jason Hnatyk, Senior Client Education Instructor with TD Direct Investing joins us now to show some of the different chart customization tools available.
Take it away.
>> Great to be here Greg a really excited to show off these capabilities in advanced dashboard is one of the functionalities that sets the tool apart.
We've actually partnered with a third-party company that you can get it go and buy a subscription with an we've been able to get their technology right in the platform so it's available to all advanced dashboard users so let's get in there and take a look. Working a first start by talking about how to make some basic customizations.
As well as chart styles and time frames so we can know the ins and outs of how that's in work.
Within the platform, if you're looking to customize features and in the charts it's no different, you're looking for these little gears that you can see in the top right-hand corner of the chart as well as in the bottom right-hand corner to allow us to make changes to our experience.
First of all, if I go ahead and click on the gear and the top right this will allow us to really personalize the look and feel, the colours… We can change the appearance of the background. We can change the appearance of even the gridlines that your mouse is making. So really the ability to make this a personalized experience. And if we go down and take a look at the bottom right-hand corner gear, I want to focus on the lines and labels. These are opportunities to add additional visual notifications here.
Really trying to get the most out of the picture the range presented with. I like to have the high and low price labels.
Snapping to the right-hand side of the bar and really informed without having to do extra research where that ranges on the timescale of the chart. Let's see, the next thing we will take a look at his adjusting the charts. I'm on… We have read and agreed here as well is solid and hollow candles. If that's for you you can go ahead and follow my lead there. Alternatively there are many other charts available on this package as well.
Just by going ahead and clicking on the candle icon next to the symbol up of the top left-hand corner. You can see we've got different bars, candles, we have the hike action as well as many other more niche charting packages.
Those will all be available to all users within the platform.
Next thing to show off is how to adjust and look at the time periods and frequencies of your candles.
Whether or not you're a daytrader or swing trade or or someone that looks at may be buying and holding for a long term.
We have the charting opportunities for you. You'll notice the very bottom left-hand corner, there's gonna be some commonly used time frames to look at your chart but if you really like to drill down and get specific, next to where the symbolism the top left-hand corner, you can go ahead and click on this. It shows a D for me because I'm looking at a one day candle but you'll notice this drop-down menu, there is, you know, an overwhelming amount of different selections you can make for yourself.
So I'll leave it up to the viewer to decide what's best for their own experience.
The last thing I want to leave is how do we add indicators to our chart?
Over 100 different indicators in 50+ drawings you can go ahead and make sure that you got the right information to make your trading decisions.
The indicators button is at the top of the page. We go ahead and select that. You can either go ahead and scroll down through the list to find out and look for a new indicator or alternatively you can go ahead and type in the search bar at the top of the screen to really narrow down your search.
I went to go ahead and add in an exponential moving average to the chart.
All we will do in this particular case is click on the name of the study.
You'll notice there is an EMA popping up in the top left-hand side of the chart. I will click this twice just to show you how easy it is to add multiple moving averages to the experience we've got here.
We've got one blue line added onto our candlesticks.
That means both moving averages are having the same period. Let's go ahead and customize one of them. You can customize any study of got a platform by hovering your mouse over the study in question and clicking on that gear icon that I was talking about earlier.
And then from here, you got all sorts of ways to change inputs.
Not just for moving averages. If you've added other studies like… You have the ability to really make sure that you have the right inputs to your own liking.
So we can go ahead and change this length.
We can change the style to make different colours. So it's really going to be the information and the display just the way we want to see it.
>> Alright a lot of great information there to sort of get viewers thinking if they want to start working on those charts.
Customizing them for themselves.
But when you're working the chart, maybe you see so that makes you think "I have to take some sort of trade action off of this" can you trade for those charts in advanced dashboard?
> That's a great quite that's a great question Greg.
The easy answer is yes in the advanced dashboard makes it very a quick process to get that done.
So it's all about speed of execution and all of her getting your trades to the market in an efficient manner.
Let's show you how.
This is how you kill two birds with one stone.
We will create a "buy and sell order the same way we create an alert on platform as well.
Once we create these alerts, there will be visual flags right here in the platform so you will always be kept informed of that information.
If I could directivity's attention to the top right-hand corner. You will see the "buy, sell and alert" buttons are all there.
We go ahead and click on the appropriate action.
Bring our mouse down to whatever price were looking to enter order out and go ahead and click that to then begin the ordering process and then your order ticket will appear on the screen. It's a simple as that. Point and click and you're often ready to go.
>> Great stuff as always Jason really appreciate that.
>> My pleasure.
>> Thanks to Jason Hnatyk, Senior Client Education Instructor TD Direct Investing.
Make sure to check out the learning centre on WebBroker for more educational videos, live interactive master classes and upcoming webinars.
Before we get to our questions with Scott Colbourne, a reminder of how you can get in touch of us.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
>> Okay, we are back with Scott Colbourne taking your questions about fixed income.
Lots coming in of the past couple of minutes.
(Greg reads the question) >> All start off by saying I'm not an expert but I would say that I would make this observation. It's a market that is shrinking in Canada.
Really.
One of the largest issuers in our Canadian banks, the regulator has encouraged them to shift the existing retail oriented preferred shares to a more institutional oriented issue.
it's always been a big part of Canadian investors.
The retail oriented nature is one of the risks and regulators people see and they are encouraging issuers to issue outside of that market so over time it's a shrinking and then will have an impact on liquidity and potential investor base.
So that's the one caveat I have for investors. I focus exclusively on fixed income. The opportunity set and we participate now and that institutional oriented first sharemarket but it's essentially a fixed income market.
Further down the capital structure.
>> Glad we got the question I had no idea.
I'm educated on that one. One here [Greg it reads the question] >> I acknowledge that earlier in our remarks. When you look back on the movement in bond yields in the US, July to August, it was a big upward adjustment. 50 basis points in US tenure rights.
One of the big contributor's is the issuance.
We have seen a huge shock and post.
The announcement by the treasury of how it's going to issue on this large amount.
This large deficit.
So absolutely that's going to weigh on the markets.
The global issuance is a factor.
I acknowledge there are three factors playing in.
The valuation, fixed income versus inflation.
We know that story and of talked about it.
Growth.
We have had upside surprises but we think it will shift to lower and supplies definitely weighing in on the US being a huge issue were fun doing funding it's large deficit and huge initiatives there.
So that absolutely is had an impact on rates.
To the higher side obviously.
>> Is there healthy appetite of the market for that in shoe issuance?
The US, even though some of the rating agencies don't like all the political fighting around the budget.
> In the day at the end of the day there is always price.
It's the most liquid fixed income market and basically it re-prices everything else. So will there be an appetite for it? Yes.
Is it changing and are the dynamics of play? So many different people that invest in US treasuries.
There is foreign governments, there is banks, mutual funds, hedge funds, there is different drivers for each of these appetites but there is a clearing price in higher issuance coming with a higher yield.
>> Let's get another question here. This one is about corporate bonds.
What is your outlook in the corporate space?
> Corporate credit is, broad fundamentals are great.
When you think about the trajectory of the market, we see a lot of upgrades from high yields to investment grade with rising stars. So we actually see a shrinking of the US high-yield market given all these upsides and upgrades if you will.
The broad fundamentals are supportive.
At this point in time.
The valuations are sort of meh for credit but the broader appetite… You throw in yields and even though for me as an investor it's not as attractive as it has been, they will continue to be support or it for issuance next year, we will start ramping up. It's more of an issue in high-yield than it is investment grade.
We talked about a wall of refinancing being more of a high-yield story initially the investment grades, sort of a mixture. There are some trends at play.
Below issuers that can tap into the Capital Markets. If you go into the issuers that don't top, there are, there is an increase in bankruptcies it's been at play in the US.Small business sentiments deteriorating so there is some underlying concern about outlooks but broadly speaking, you know, investment-grade debt is well supported into the end of the year.
>> What I think of a corporate debt I just think about the economic backdrop if you have the harder landing which most of the world including you, doesn't seem to be calling for right now, with that but this space a little more in question?
>> Yeah a hard landing with everything in question and investment-grade high-yield will suffer. Even a mild recession will contribute to a wider spread and that sort of central scenario so some uptick in 2024 expense… Nothing to really be concerned about.
>> We will get back to your questions with Scott Colbourne on fixed income and just moments time. Do your own research before making any investment decisions.
A reminder into of course that you get in touch with us any time.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
The TD Direct Investing index for the month of August has been released. MoneyTalk Live's Anthony Okolie has been going over the numbers and joins us with the details. Anthony.
>> Thanks Greg. The TD index has been released for the month of August in the big take away for the month was that the sentiment for self-directed investors moved into a bearish territory.
Here are the details. First we will start with a look at the overall TD Direct Investing index which measures sentiment in a range from -100 for very bearish to +100 for very bullish.
It came in at -23.
That's down 23 points from last month.
It's also nine points lower than versus August of last year meeting that self-directed investors were not feeling they were feeling more bearish.
When we look at the components which look at the DI I, overall there is increased bearish sentiment month over month a car across the four proxies.
Significantly, the proxy for chasing trends or investors who bought stocks in a rising market, dropped to -9 in August. That's down 14 points month over month.
A few key points that stood out: one, financials have the lowest sentiment of all sectors. While technology remained on top for the six month in a row.
Secondly, baby boomers, those born between 1946 to 1964 were once again the most pessimistic age group.
Now, again, when we break things down by sector, self-directed investors fell to -7 down 11 points month of month.
Notably some of Canada's biggest banks posted weaker than expected third-quarter earnings in August.
Meanwhile sentiment in the tech space remain positive at +4 in August.
Despite a three point drop. The tech sector rally last month which was fuelled in part by the blowout earnings by chip giant Nvidia and as well as tech giants.
… Bank of Nova Scotia, TD Bank, CIBC and Royal Bank.
MegaCap tech sought not surprisingly were among the most heavily bought names in the IT sector including Apple, Microsoft, Shopify and chipmaker Nvidia which notably, was widely held across all demographics last month.
Finally when we look at trading activity among investor age, boomers were among the most pessimistic group with overall sentiment following month over month. That's a look at the TD Direct Investing hot highlight for the month of August 2023. Greg back to you.
>> Thanks for that Anthony. MoneyTalk Live's Anthony Okolie. No for an update on the markets.
We are back now with advanced dashboard looking at the heat map function giving you a view of the market.
Taking a look at the TSX 60, screening by price and volume. In terms of green on the screen it's Dollarama with its quarterly earnings coming in. Not only did they beat expectations for the quarter but they are raising their sales forecast. Obviously Canadians feeling the pinch of higher consumer prices have been looking to bargain retails like Dollarama.
The shares they are about 4 1/2%.
Mixed seen across the energy space today. The financials, we have some green on the screen down there as well.
Let's screen through the S&P 100 now and get a sense of what's happening on Wall Street, one of the most big companies in the S&P 100.
Right now some automakers, traditional automakers in the EV business to.
Getting some positive sentiment up about 2.8%. Tesla over there about 1 1/2 and the chipmakers on the rallying mode again. Netflix down there about 4%, we can check into that when later and see if there's any headlines associated with that.
You can get more information about TD advanced dashboard by visiting td.com/advanced dashboard. We are back now it's got Colbourne from TD Asset Management getting back to your questions. Right now we have (Greg reads the question) Jeff is been sending questions on a regular basis and we appreciate them thanks Jeff.
After a decade of financial crisis and borrowing costs, where is the new normal?
>> That's a great question on a really hard question to answer.
Obviously you can come up with scenarios and that's one way to do it right?
Handicapped soft landing… A soft mild recession and a hard recession and you can sort of handicap or you think inflation may play out and where rates may go.
Another way to think about it over the next year or so is to sort of say "what is the market thinking about inflation, headline inflation over the next year?
I said earlier it's sort of moving towards 2.5%-ish. So if you take that as sort of a guide for inflation headline inflation, second half of next year, where might fed policy be? Right now real interest rates, 10 year real interest rates around 2%.
Make no assumptions about the direction of where the economy goes. 2 1/2% inflation +2% real rates give you about 4 1/2%. That gives you a handicap of where policy rates and 10 year rates might gravitate to over the next year or two.
So it's a way of thinking about it.
But it's a really tough one depending on the scenario playing out.
And we might get another hike. It might be closer to 4 1/2 to 4 3/4% but at the end of the day that's one way of thinking about how rates normalize.
At the end of the day, the summary of economic projections long run rates are 2 1/2%.
We are a long way for 2 1/2%.
So we are well under restrictive territory.
So the ultimate trajectory is lower. It's just the path.
When you're dealing with supply, dealing with sticky inflation and sticky labour prices the other that there is lots to handicap.
As you pointed out earlier.
It's not a straight line trajectory.
>> Alright thanks for that when Jeff.
Something to think about.
A viewer wants to get your take Scott on the US and Canadian dollars right now.
The mighty US buck.
I think I saw someone quipping the other day on social media saying they would not want to get away in the way of this US buck train.
>> We have seen the USB strong relative to the rest of the world and it continues to support a stronger US dollar. Occasionally there are brief setbacks with the markets but I think for the time being the mighty US dollar continues to be supported by an extraordinarily positive tailwind coming out of the pandemic which fiscally and monetary policy driven and we will continue to sort of outshine the rest of the world. The rest of the world is already starting to contemplate cuts in the emerging market worlds.
We are definitely at the end of the rate hiking cycle, I think here in Canada and many other places.
Australia… We might get a hike out of the BOE, ECB tomorrow but I think we are clearly at the end. So the US dollar, in that environment will continue.
>> With the summary highness, anybody doing their Summer reading, it's hard not to come across a headline of a D dollarization. I don't see those headlines as much anymore.
>> The bar to do that is extraordinarily high.
It's a great conspiracy theory but honestly the practical realities of displacing the US dollar, the euro dollar market is such a huge component of international trades.
It backs commodities. At the margin there is desire by some of the markets, the participants out there to D dollar eyes but that's a long, long, long trend.
Nothing to worry about in the near term.
>> Alright we will squeeze one more question in here before you say goodbye to Scott.
We will give you this one. We will let you go not without talking about GICs. Have GIC rates peaked?
>> If monetary policy rates stopped and obviously G.I.
rates GIC rates rather have stopped. It's quite simple.
The banks are not to pay more with the direction of interest rates are in the bond markets.
So yeah, if you think monetary policy, as I do, we are definitely at the end.
More of a hike.
GIC rates are you know at their peak. That's an expensive way for banks to raise money. So it's ultimately, they will come down.
>> Scott it's always a pleasure to have you and look forward to our next conversation.
>> Thank you.
>> Our thanks to Scott Colbourne, Managing Director and Active Fixed Income and TD Asset Management.
As always be sure to do your own research before making any investment decisions.
Stay tuned on Thursday, Haining Zha, VP and Dir.
at TD Asset Management will be our guest taking your questions about China's economy and markets.
And a reminder that you can get a head start by emailing us@moneytalkliveatd.com. That's all the time we have for today thanks for watching and will see you tomorrow.
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