Scott Colbourne

[theme music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.

Every day, I'll be joined by guests from across TD, many of whom you'll only see here.

We're going to take you through what's moving the markets and answer your questions about investing.

Coming up on today show, we will discuss whether the rate cuts are still on the table in July as Canadian inflation came in harder than expected for May with TD Asset Management Scott Colbourne. I have Thursday's presidential debate, MoneyTalk's Anthony Okolie will have a look at TD economics report on what the selection could mean for America's rising debt load.

And in today's WebBroker education segment, Jason Hnatyk will look at how stock splits work and we can find them here on the platform.

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 all that and our Guest of the day, let's get you an update on the markets. We will start here at home with the TSX Composite Index, pulling back 1/4 of a percent.

Movement in the telecom names. Telus is pulling back a little shy of 2%.

Manulife was making gains earlier, they are modest. There up a little more than 1%.

South of the border, Nvidia has sprung back to life modestly after a couple of days of losses. It is helping the broader market.

It's up 17 ticks or .3%. The NASDAQ is up more than a percent.

1.08%, to be exact.

Nvidia had a fairly substantial pullback yesterday, Thursday losses. Today, a bit of a bounce back.

Canadian inflation came in hotter than expected for the month of May, clouding the picture for what the bank of Canada might do when it comes to interest rate.

Joining us now to discuss his Scott Colbourne, managing Dir. and head of active fixed income with TD Asset Management.

What are we making is this?

>> It was negative for the market. Short and bonds have sold off, the Canadian dollar sort of mixed and markets have repriced what they expect for the July meeting so going into the inflation print, it was about let's call it two thirds of a cut in July and we've moved it to maybe one third now. It's not zero odds for a July cut, but I think they are sort of more balanced in the Outlook. Certainly, headline and core CPI, the upper end of that one to 3% band. The bank also looks at these annualized, three month annualized and six month annualized, and they were below 1% and popped up to, 2 1/4%. So it's not that it's completely ruled out any possibility but we need to see, July 16, I think, is the next CPI and we have the meeting on July 24.

There is a possibility if we get another good inflation print that we see a cut but right now, I think it's reasonable that there are lower odds, but I think in the big scheme of the picture, the bond market has repriced the destination of rates.

It's about the timing. We've moved out of it.

I know it presents challenges for investors in mortgage renewals and stuff like that, but I think at the end of the day, the bond market still believes that rates will be lower over the next couple of years.

>> I guess there were worries in this rate cycle that the services inflation would prove to be sticky. We still have those concerns and we think eventually they are going to start to run down as well?

>> Everybody is concerned. We have had the ECB, the Bank of Canada, they have all thrown in one cut to start the process.

The Bank of England, I think they will be September and November, the same as the Fed. The same trajectory. Growth has moderated on a global basis.

Specifics for each country. Inflation has moderated.

But the path of easing that all the central banks are to be following is pinning it on service inflation. We see it moving in the right direction. The labour markets, broadly speaking, have normalize.

They are still healthy but it's on its way to more balanced wage growth is being more moderate. So it's sort of this conditional focus on service inflation, and it's a patient easing cycle and it will be dependent on how sticky it is.

Leading indicators, a lot of the sticky inflation component suggest current trajectory particularly on shelter that is going to moderate, it's just taking a little bit longer than expected. So Canada is not unique to this.

There was a feeling that we were exceptional, we had seen some massive performance in Canada, but I think this number sort of brings us, course for access to the extent of outperformance relative to other central bank.

>> The inflation report is obviously key on this because that's been the whole point of hiking rate so aggressively in the Western world, to tame inflation, we have seen it start to come off. When we look at the overall health of the economy, there might be a stronger case for cutting perhaps on the economic side, with robust growth in new Canadians, we are not really keeping pace with jobs or even economic growth.

>> Yeah, I would say that Canada, broadly speaking, has underperformed and he saw that really evident data in the second half of 2023. We had almost 0 growth and on many, many measures, it was pretty weak.

The inflation data seem to indicate that they were on a different trajectory than the rest of the world. We have seen growth come back.

We have seen some data surprises to the positive side, but lower growth, maybe 1.5% real growth for the balance of the year. So it's that extent of underperformance relative to the world is sort of moderating and that's the position we find ourselves in as investors were the opportunities… >> You talk briefly about the bond market reaction, I want to get back to that, what it means the Canadian bond market. We got a disappointment today, the destination doesn't change the path to get there.

How's the bond market pricing that through?

>> At the short end of the market, today's reaction was an adjustment higher in short-term yields, in that 5 to 10 basis points higher into your yields today.

That's repricing in the very short term.

When you look at sort of the path of the next one, two, three years, the destination of rates where we started at 5%, we cut to 4 3/4, the market is saying over the next three years the destination is probably between three and 3 1/4%, and that's been relatively positive to the course of this year and last year, it's just the path of where we ultimately get really is what it says is that the terminal rate is higher, we are not going back to where we were through that sort of post DFC environment with negative real rates and zero interest rates, we will probably settle on 3% in Canada, maybe 3 1/2 to 3 3/4 in the states. The cost of money has gone up.

We are going to get there.

The economy slows down. As the monetary policy feedthrough, the fiscal policy dampens a bit and we will see what happens at the end of this year because that might change everything here in terms of the narrative on inflation and fiscal impulses well.

>> Let's jump to the end of the year. What are you washing that could change?

>> I think it's very difficult to have an edge.

We know it's close. We've had some elections this year. We've had Mexico and India and South Africa in the emerging-market world, and we had the new election in France.

>> No one was expecting that.

>> No one was expecting that. I would say that the reactions differed but pundits would say, it was priced into the market going in. In every case, no!

And that's my warning to investors is, is don't think it's priced in, be very careful in portfolio construction. I have no edge. Most people don't have any edge in terms of where the elections are going to go and we don't know, we can handicap now, we can think it's tariffs for trump, fiscal for Biden, but we don't know.

There are potential variables. It speaks to how much concentration you have in a portfolio.

>> As we sort of stopped raising rates in the Western world and we had that long pause, obviously, from a bond investor, there is one point of view that they could take, I'm getting the bond and waiting.

We got one cut from the bank of Canada.

>> When you look at total returns in the Canadian and US bond market this year, credit has really worked out nicely.

Sort of a mixed picture on the interest rate, capital appreciation, price appreciation, total return. That's okay.

We are in a world where we get income and that's fine for fixed income, it's just choosing which instrument do you want, how do you want to stretch your fixed income, how much you believe that you need some hedging in terms of managing risk in your portfolio?

>> Always interesting stuff was Scott Colbourne. We'll get your questions about fixed income for Scott in just a moment's time.

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

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

Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.

Microsoft is facing scrutiny from antitrust regulators in Europe.

The European commission is accusing the tech giant of illegally linking its video app teams with its office suite of programs. The commission says that gives Microsoft an unfair advantage over its rivals.

This complaint was initiated by salesforce, which owns the messaging app slack. Steady demand for cruise vacations has Carnival Corp raising its full year forecast. 2024 has been a record year for the industry and carnival says that momentum is going to carry into next year's bookings. They are already seeing that. It is the second time this year that Carnival has raised its annual profit forecast.

You can see the stock up today to the tune of about 7%.

Shares of Novo Nordisk are also in the spotlight today. The company's weight loss drug Wegovy has been approved in China, of course, China is the world's second-largest economy so a fairly important market for them.

They are up right now almost 3% on the wake of that news. A quick check in on the markets. We will check in on Bay Street to begin. We have some modest downside right now, nothing too dramatic.

60 points, a little more than 1/4 of a percent. South of the border, the S&P 500, we've got Nvidia coming back to life again after a couple of days of selling off, supporting some of the broader indices including the S&P 500, which is up 16 points, a little more than 1/4 of a percent.

We are back with Scott Colbourne from TD Asset Management, taking your questions about fixed income. First one here for you.

Said divergence. How much divergence might we see between the Fed and the BOC?

>> I think you've seen a lot of divergence that started last summer and when you look at two-year, five year, 10 year long term bonds, it's anywhere between three quarters of a percent to a full percent below US rates and I think that reflects the end of last year where we had very weak economic growth in more moderate growth this year. We had a substantial decline and broad inflation confidence in the fact that core inflation is coming down, not to make, overemphasize today's data, but today's date is sort of I think puts a stop in terms of the near term momentum for Canadian divergence from the US Fed, the Bank of Canada's divergence from the US Fed and and that's what the market is saying. Theoretically, can we see interest rates in Canada go a lot lower than the US? There's plenty of reasons why, productivity, common growth, but we can likely see a stop in that right now and so I think as portfolio managers, we are looking for this as an opportunity to look at other bond markets to outperform relative to the Canadian bond market at the moment.

>> We have another question coming in about outperformance. Do you see in outperformance of Canadian government debt versus US treasuries given the divergence between the two central banks and what factor will the currency have on capital inflows into Canadian assets versus US assets?

>> I think that we benefited from this great rally in Canadian interest rates.

We've benefited from the credit cheapness year in Canada, that's been awesome for Canadian investors.

But I think we are, the scope for relative outperformance, we would need to continue to see the data diverge meaningfully. Some data has surprised the positive side relative to expectations. That's important. Inflation has sort of, coming back in the wheelhouse and maybe put in, as Tiff Macklem, Gov.

the Bank of Canada said, we are going to be cautious on cutting and maybe it's every other meeting that that's a possibility. And so maybe that's the likelihood that we move to every other meeting and that would probably bring us more in line with the US Fed. So I'm not handicapping my portfolios by saying, look, I've gotta continue to bet on Canadian rates outperforming the US. There are some opportunities in the US, there are opportunities in the UK and Europe, we believe, and I think people will take advantage of that.

>> The other side of the divergence question is what's going on in the states?

I don't know what the messages right now about the US economy.

>> I definitely think that they have zero interest in raising rates.

I think they are mindful of data dependency.

I think that we have seen evidence that the US economy has slowed. Referencing the second half of last year, the meeting was exceptional in the US. It's still good and it's relative to Canada better but it's still more moderate economic growth and we have seen evidence that the US labour market has-- is normalizing, some breathing room there.

I think from a growth perspective and a labour market perspective, I don't think there's really any significant impediments for the Fed to begin the process of normalizing or cutting some of this tightness out of the monetary policy, but I think you got a really focus on the inflation and I think it's July 11 that the US CPI data comes out and that will be very important input into whether the Fed looks to cut rates and I think on balance, most, the market is leaning towards a September cut, not 100% but leaning towards a September cut.

>> Another audience question that goes with this conversation, talking about central banks, divergence and rate policy, outlook for the loonie. How is our currency going to fare?

>> We have been agnostic on it. There are some positives with the normalization. The bounce back in economic growth has been okay. The commodity markets, generally, have some talents but I think, broadly speaking, we got rates well through the US. It's not like they are going to go back and normalize relative to so there's a headwind from interest rate. There is a headwind from productivity. So I think that on balance, I'm more of a, there are other, better opportunities and I think we see is slightly weaker Canadian dollar relative to the US dollar.

>> There is debate around whether the Bank of Canada cares. Their official mandate isn't to care about the value of the currency but at some point, part of that math would have to go into their calculations and they might say that the dollars impacting the economy.

>> From a theoretical impact, my team looked at this, had some research from the Bank of Canada, and they said look, you get a 10% depreciation in the Canadian dollar, it's about a .3 impact on inflation.

That's an important understanding. It's not a headwind to substantially diverge so you can take the currency weakening. It's never just weakening. It's the rate of change and if it's a sloppy, messy deterioration of the Canadian dollar, central banks always care and the Bank of Canada would care about that in terms of its feedthrough into the stability of the financial markets. So while you can have a theoretical impact and you can understand what the Canadian dollar relative to the CPI does, there is an impact on the financial markets.

>> Interesting stuff. As always, at home, make sure you do your own research before making any financial decisions.

We will get back to questions for Scott Colbourne on fixed income at any time.

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 education segment.

Nvidia and Chipotle are among some of the major companies have announced stock splits recently in her to walk us through the process and how you can find more info on what brokers Jason Hnatyk, Senior client education instructor at TD Direct Investing.

>> Let's get into it. Investors might jump into their accounts and see there's a big difference in the quantity of shares but I do want to say that when splits happen in an account, rest assured, there's no change in the underlying value of the investment in the account, it's just a change in the price a number of shares but works out to be the same in the end. There are two common types of slits that happen in the account. That would be a reverse split, sorry, a forward split, similar to what we got with regards to Chipotle, and then we got reversal it's as well.

What we are going to be experience and tomorrow Chipotle is where they are going to be reducing the value of the share trading price and they will be doing that by increasing the number of shares that customers have in their accounts, they are doing that to make it more attractive or attainable for investors to be able to go in by a number of shares. The number of shares is going to increase by the same ratio that the price will be reduced by.

There also reversal it's where we are companies that are maybe looking to increase their share price, maybe to make it more attractive for investors to purchase or it could be listing requirements on exchange is. That would be a case where they would be decreasing the number of shares in issuance while increasing their price along with the same ratio. Let's jump into a broker so we can take a look at the information that's available to the audience.

To show everybody what alerted me to the upcoming split at Chipotle, you can go up and click on your name in the top right-hand corner, we go down and she's messages, and under the general Here, we can see that there is a web broker message that was put out here for Chipotle.

Tripoli is a very expensive stock and they are going through a 50 for one split, so the shareholders are good have their price reduced by 50 times but the number of shares is going to go up by that same ratio.

Beyond the messages, if we want to find splits before they happen, we can choose research in the platform. If we go down to events… Chipotle's event is happening tomorrow on the 26th and we can move over to the US markets by clicking the US flag in the top right. This was heading is right here above all the different listings and we can see Chipotle listed there. If you're looking to dig a little bit deeper, you can always click on the symbol name and then down at the bottom, we've got overview, opportunity to bring you into a place where you been many times on this program. I want to have it for everybody that the news, specifically for big companies, you can have lots of people weighing in and that's no different here for Chipotle.

The last place I would like to show everybody here where you can get information is actually going to be in a chart. So there's a company that recently went through a split. We have Barrett business services which we will use for our example. If we go into our charts function, there is an opportunity for us to add events.

If I choose slits and consolidations, take a look here on the chart, the right hand side, this little ass above yesterday's candle, loud and clear for everybody to see, we now know there's been an adjustment to the stock price and that means all past stock prices have been adjusted. You can click on the S or hover over it, rather, to see that this was a four for one split yesterday. Lots of information to stay on top of the market.

>> Now we know where to find this information about splits, what if someone wants to learn more about the concept?

>> Yeah, it's all about teaching people to fit here, so I would be amiss not to talk about some of the videos we have on the platform.

We've got our search bar at the top of the screen.

We can go ahead and search for stock splits.

We've got to videos that are really going to lay the foundations for your understanding. We have how do stock splits impact options? And then also why do companies do these types of corporate actions?

So really foundational information to help you understand what's going on.

>> Great stuff as always. Thanks for that.

>> It's my pleasure.

>> Jason Hnatyk, Senior client education instructor with TD Direct Investing. And a reminder that June is Options Education Month at TD Direct Investing.

[music] For more information, you can use this QR code to navigate to the Options Education Month homepage.

Okay, we are back with Scott Colbourne, taking your questions about fixed income.

Next one here for you. What are your guests thoughts on the high-yield market?

>> I would, I think it's a great asset.

I'm a big fan of the high-yield market.

Very attractive historic yields and it gives you great risk-adjusted returns. And we have a great team at TD Asset Management. As a preamble, that gives you context for my bias but I think we have to be mindful about yields. They rallied a lot. We had nine, 9 1/2% yields last year.

We are now below 8%.

So we have come a long way. We are coming into a heightened period of uncertainty, so you have to be a little bit more cautious on looking to add here or perhaps trim would be thoughtful.

When you look at, there are some potential risks developing. I am mentioned the election and associated uncertainty but you also have to be mindful of economic risks so for that asset class, we are really focusing on earnings and where do we go in terms of earnings and as a cue for the direction spreads, the spreads relative to historic spreads are pretty tight in the high-yield market, at about three, 3 1/4, something in that range.

It bounced off most recently from its lows but it's an indication that would come a long way in that market we got to see how the consumer and the earnings developed for the balance of the year and how liquidity in the market continues to evolve.

>> I have a question that's a good follow on to this. If you're talking about things you need to be mindful of in high-yield, we have a viewer asking what are the red flags to watch for in high-yield bonds?

>> I was talking with the high-yield team and they pointed out that in the high-yield market, the consumer sector is a lot more concentrated, and that may be a bit of a canary in the coal mine, if you will. Watching that sector over the next months, the earnings season, as an indicator of if there is some wobbly-ness in that sector, it may spread to the investment grade market as well.

That's something, a red flag to watch, if you will. Liquidity matters in fixed income and I think that takes you into that, the whole fiscal debate. We've had a lot of issuance on the government side and how yields and everything trays off of that so to the extent that maybe the good times that have come along in both investment grade in high-yield, new issuance of pricing, if that slowly starts to consolidate, not be as ebullient into in the months ahead, that's another thing to watch. As much as I love the asset class, you have to be mindful of some of the risks.

>> What duration and quality in the bond market is your guest see opportunities from the interest rate cuts, in the short and long term?

>> I think we are at the beginning of a slow-moving interest-rate cut cycle and, ultimately, as central banks cut rates, it needs to have a slightly steeper yield curve and as bond investors, we sorta concentrate our investments more and what you would call the belly of the yield curve, the sort of 5 to 10 year area, it benefits relative to 20 year and 30 year period you can look at the shape of the yield curve and how it changes and that's equally important to the bond investor that is I think the beneficiary of the cutting cycle that has started here and will likely start this fall in the United States. You get these periodic adjustments and today the curve flattened a lot because they have repriced some of the outperformance in the Bell curve or the yield steepening. On the broader trend, we expect the yield curve to continue steepening.

>> If you're talking about the belly of the curve, the 5 to 10 area, are you talking about the Canadian belly, the US, the UK?

>> The timing is different, the Fed and the Bank of England later this year, but others have started and so you see that general trend on a global basis.

>> Has anyone ever said, talked about it that way in this lingo?

I bet not.

All the kids will be saying at this time next year. We will be getting back your questions for Scott Colbourne on fixed income in just a moment's time.

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

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

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

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.

With the first US election debate just days away, the mounting US deficit is more than ever the elephant in the room.

Anthony Okolie joins us now with a TD economics report that looks at the challenges of tackling the national debt.

What we see here?

>> I think whoever wins will have to tackle this growing US national debt which continues to grow in the high interest rate environment. The non-Congressional Budget Office projects the budget in the US to rise from 1.6 trillion in 2024 to 2.6 trillion a decade from now and even though interest rates are expected to inch down as interest cools, interest rates and the portion of GDP will continue to rise.

TD economics notes that whoever controls Congress next January will likely need to deal with further budget negotiations in 2025. They note that the spending limits legislated by the fiscal responsibility act, the FRA, will still apply to cuts in discretionary spending if a continuing resolution is still in place of May 1, 2025. They note that the expiration of the current debt ceiling suspension on January 1 of 2025 will likely result in the budget negotiations and debt ceiling negotiations taking place at the same time at year end which may carry over into 2025.

Now be on these near-term issue's, another big good development next year is the expiration of some of the provisional inclusions such as the 2017 Tax cut's at the end of 2025 and that could have implications for the US national debt going forward.

Both presumptive nominees for president have endorsed extending most of the expiring measures with some key differences. Biden's budget extends all of those income tax cuts for those earning under $400,000 a year but his budget also outlined some tax increases as well.

Trump's budget is seeking to make provisions of the tax cuts permanent as well as lowering the corporate tax rate from 21% currently to 15%.

Regardless of who wins, they will need to consider the implications to the rising national debt and the higher interest rates increase the cost of kicking the can down the road.

TD economics is baseline is that tax cuts will stay in place across the board.

>> This election will have its own unique characteristics. I can't think of an election in this country are south of the border where the economy doesn't end up being front and centre, battered about.

What is the thinking here?

>> TD Economics is looking for the US economy to grow at a rate of 2.4% this year. They believe that is due to the strong handoff from the second half of 2023 where we saw strong growth at 4%. By the end of this year, they expect growth to slow to 1.7% on a Q4 over Q4 basis and that's because higher interest rates will likely weigh on the consumer as well as the job market at the end of the year.

>> Interesting stuff. Thanks.

>> my pleasure.

>> MoneyTalk's Anthony Okolie.

And now for an option on the market.

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

This is the heat map function, nice view of the market movers. The TSX 60, we are screening by price and volume. Yesterday it was green across the board, decidedly mixed session today.

You have in the financial space Manulife up about 1%. Not a lot happening in energy outside of ADT.

Shopify is up modestly. Not a lot going on, some of the telecoms giving back some dollars today on the share price. South of the border, we will take a look at the S and P 100. Nvidia is on the move again today. It's occupying that the same amount of real estate as they were yesterday.

They were down yesterday 5 to 6% today it's going back five or 6%. A bit of whipsaw action in that name in the past two days. You can see across the rest of the board that Nvidia is dominating and then you get a bit more of a mixed picture.

Back now with Scott Colbourne from TD Asset Management, talking fixed income and interest rates. Next question.

Do you see the discount spread between Canada and the USA widening this year and the long end? It has narrowed recently.

>> That feeds into this relative outperformance of Canadian rates versus the US. In the long-term, different factors are at play. Canada is a small market may have a large participant in the long end of the interest rate market in Canada and that's the liability for the investors and they supported the relative outperformance, we talked about the data supporting the relative outperformance of Canadian rates. I think we are in a period where Canadian long and outperformance is going to sort of pause here. You look back over 25 years, we are at sort of extremes.

So the question is what takes you to the even more extremes? Anything come up with scenarios. So I think Anthony was touching on fiscal and I think that's a big issue that I think plays out through a variety of markets and to the extent that the US fiscal outlook deteriorates and there is more of a term premium put into the US bond market in the US long and sells off to some degree relative to the short end, that could lead to further widening of Canadian outperformance relative to the US. So it's a very complex picture. It's a very highly uncertain picture. There are reasons to think that we can stay here or narrow relative to the US absent some sort of shock.

>> We have someone curious about the election which we talked about or elections, I should say, plural. How are global elections impacting the bond market? Including surprise one in France.

>> In all the cases, it comes down to this sort of shift, a popular shift and fiscal expansion and the accommodation that the bond markets are willing to price in and when you think about what we've had, you can look at France and you've seen the French government bond markets relative widen relative to the German markets and I think there is a leaning right now that we are going to have this cohabitation outcome in France, but when you look back in history, I think Francis had three of those outcomes, in all three cases, the spreads in France relative to Germany have widened.

So I think the bond market is saying, it's gonna cost you to be fiscally largess and when you compound that globally, as we saw in Indonesia with their elections, the musing of the new government was sort of like, let's increase the debt to GDP ratio and the bond market sold off there. I think we are going to have some concerns play out as we get greater clarity in the US about the scope of what they want to do on the fiscal side so it's a huge issue, it's just very hard in the short term.

>> When it comes to the US presidential election, are you looking at that first debate as an inkling of policy?

>> The edge here is tough.

I think for Trump, there's not a lot to gain or lose, I think there is more for Biden to lose if he really is a poor performer relative to the upside. I think we really know the actors in this and there's been some concern about Biden, the spring in his step, if you will, but there's a little bit more downside in my mind for Biden but I don't think we are really gonna have, it's really gonna turn… >> Waking up Friday morning, now I understand exactly what's going to happen.

>> No.

>> Okay. We skirted around this debate, are the emerging markets still an interesting place to look?

>> Yeah, it's interesting. They started cutting earlier. And then we had the US inflation data surprise in the first quarter of this year and that sort of slowed down but the broad notion of this Goldilocks economy growth, inflation coming down, ultimately central banks in the end were all cutting, this led investors to invest in a lot of what we call emerging-market character traits and a lot benefited from that.

And then we had an electoral surprise and whoops! In Mexico, as much as the market thought it had priced it in, it did not price in the extent, the potential for the Mexican government to have a super majority in the ability to change the Constitution, and we had a massive unwind and position starting with my skill. I was joking with the team this morning, the Mexican peso is sort of the Nvidia of the currency world.

It's been on a steady downward adjustment appreciation for a long time.

It just blew up with the election result.

What does that do and what does it mean for investors? Really be careful because a lot of investors, you get these volatility shocks and portfolio construction changes, CTAs and others target volatility, target volatility changes. You have to just positions and there's a ripple through.

There are assets that you didn't think were positioned in but they have to adjust their positioning because of a shock over here in the foreign exchange market. So these things have a huge impact. We had a huge unwind and a number of currencies and I think that's a warning in my mind of the potential impact of elections that it has a ripple through impact in terms of positioning for portfolio managers.

>> We are at a time for questions. Before I let you go, we had a fresh inflation print this morning, hotter than expected.

It has thrown a bit of a shadow on things.

We're just trying to figure out where were going next.

>> Ultimately we have another cut coming, perhaps later in the fall.

I think this is a bit of an aberration.

But I think we are on a path for one more cut here in Canada in the fall most likely, in September.

>> Always a pleasure to have you.

>> My pleasure. Thanks.

>> Our thanks to Scott Colbourne, managing Dir. and head of active fixed income at TD Asset Management.

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

if we didn't have time to get your question today, we will aim to get into future shows. Stay tuned for tomorrow show. We will have a look at some of the personal finance issues facing Canadians, including considerations if you inherit property and the tax considerations if you work remotely for a US company. That's all the time we have for the show today.

Thanks for watching and we will see you tomorrow.

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