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[music] >> Hello, I'm Anthony Okolie, filling in for Greg Bonnell, and welcome to MoneyTalk Live, brought to you by TD Direct Investing. Coming up on today show, we'll discuss whether the world's largest economy is already in a recession with Thomas Feltmate, Senior economist at TD Economics. In today's WebBroker education segment, we'll look at how you can compare one company to another using the WebBroker platform. And here's how you can get in touch with us. Email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker. Before you get to our guest, let's get you an update on the markets. We'll start here in Canada with the TSX Composite Index. It has been supported by some strong batches of earnings recently. It is trading up by 29 points, up about .1%. Some of the big movers today of course Bombardier, a business jet maker, it just posted a smaller than second-quarter loss thanks to a steady demand and lower interest expenses. We will take a look at Canadian Natural Resources as well. It's actually down 1%. It actually reported that its quarterly profits more than doubled in the latest quarter. It's benefiting from higher crude prices during the quarter. The S&P 500 is down 1.5%. Wall Street is coming off a strong session on Wednesday when market investors were jumping back into some tech stocks prompting some upbeat economic news. It is down just slightly .03%. Of course we are getting the big US jobs report on Friday so there may be some hesitancy to jump into the markets at this point. Let's take a look at thatNASDAQ composite index, also down about 3%. taking a look at some of the big movers today, Ellie Lily is down about 2.8%. It reported a 4% decline in its second quarter revenue. And that is your market update. markets are mixed today asWe await US is jobs report on Friday. Two quarters in a row of negative GDP growth has some asking with the world's largest economy is already in a recession are about to enter into one. Joining us now with his take is Thomas Feltmate, Senior economist at TD Economics. Thomas, you've heard the debate. There some of the market saying that the US is already in a recession. We have seen that markets have taken a hawkish bet that the Fed will hike rate so much so that the economy will fall into a recession. Others disagree and one has said the Fed has a chance of not taking the economy and achieving a soft landing. What's your view on the US economy? >> It's the million-dollar question right now, with the US economy is in a recession. You already pointed out that second-quarter print on GDP coming in at .9% quarter over quarter, and you will -. 9%. It has certainly started to ring some bells that the US economy could already be in a recession. Two quarters of contraction in economic growth is one, I would say, relatively narrow measure of whether or not an economy is in a recession. But the thing we really need to consider is the National Bureau of economic research who is the… [video buffering] the US economy could already be in a recession. Two quarters of contraction in economic growth is one I would say relatively narrow measure of whether or not an economy is in recession. But the thing that we really need to consider is the National Bureau of economic research who is the pace of hiring still. The on employment rate at 3.6% is still near historic lows. And then we are also looking at things like job openings. Well, they certainly come in. There are still 1.8 jobs for every unemployed person currently out there actively looking for a job. So definitely, from what we are seeing in the labour market standpoint, it was suggested that the US economy is not yet in a recession. Now coming back to the GDP data, I think there is definitely some areas of concern, particularly… We are seeing some doubts that there could be some measurement error in GDP. When we look at the movements of GDP which would be kind of the expenditure side of the economy and we compare that to things like gross domestic income, which is just the income side of the economy, so every dollar that is spent needs to show up somewhere as income, those measures move together typically over time but we have seen a more recent divergence suggesting there could be some underlying issues and how GDP might be being measured and it could be underestimating some of the economic activity that still present in the economy today. Now, that's not to say we haven't seen some slowing economic growth. Certainly, more recently, we have seen consumer and business sentiment really come in and that is starting to come through on measures of consumer spending. We are seeing a pretty strong pull back there in underlying activity. It definitely seeing some signs of slowing but not necessarily in a recession just yet. >> Certainly the Fed has said that the more data dependent as opposed to providing guidance. Investors saw that the Fed hiked interest rates 75 basis points and they are still waiting to hear from the Fed. What are your thoughts about the Fed's latest rate hike? >> Yeah, I think was basically in line with our expectations. Certainly, the June CPI number is what really kind of tipped us off that they were going to do another what they are calling a supersized rate hike because we saw further acceleration in CPI and we know that this is on the Fed's radar right now. price stability is kind of their key aspect that they are targeting right now and inflation is running too hot and they would like to bring about closer to the Fed's target of 2%. That means that rates need to become more restrictive quickly. Certainly, the chair Powell has pointed to this more recently. So that kind of warranted the 75 basis point hike. > So the super hike, I think the question is… [video buffering] Be more aggressive in the future to tame inflation. To the question, have they done enough to tame inflation and can it be done? Will that actually cause a recession? >> Good question. I would say that at this point, not yet. If we see where the policy rates its today, 2.5%, it's basically in line with the consensus view on where the neutral rate is. The neutral rate is the rate that is neither restrictive or accommodative. We know that they are trying to get the economy into a more restrictive territory, that suggest that interest rates are going to need to come up even more in order to tame inflation. We have started to see some slowing and economic data, suggesting that previous rate hikes are starting to have some effect. But still, we haven't seen inflation necessarily turned yet and that is certainly a key factor that is going to kind of plan to how future interest rate hikes kind of proceed. Now, you've already alluded to the fact that chair Powell has already moved to the data dependent way of proceeding on rate hikes and I think the next CPI and employment report, we get to each before the next Fed meeting, are going to factor in to how much more we are going to see in terms of rate hikes this year. If we look at the consensus view among FOMC members, they are currently predicting that we will have another 100 basis points of tightening this year alone, which will bring the policy rate well into restrictive territory. Whether or not this is going to take the economy into a recession, I think most forecasters are still trying to look into that and gain more understanding. I think looking at the employment numbers over the next couple of months are going to be pretty telling because like I said there is still a bit of a disconnect there in terms of still seeing really strong job growth and that's not necessarily something that would be indicative of a recession. But we know these things can turn quickly. >> And of course you want to talk about the labour market. You touched on it. But there are still signs of a strong labour market. We are getting the jobs report tomorrow. What are your thoughts on what we are exciting? >> Yeah, so as I said, the labour market has been incredibly strong in the first six months of the year, averaging 450,000 jobs per month. If we look at higher frequency indicators, things like weekly jobless claims, they've definitely come up in the last couple of months, suggesting that we are starting to see some slowing. And when we look at the jewelled survey, it's a bit backward -looking because we just got June data the other day, it has shown that job openings have already peaked earlier this year and they are starting to come in now. But we are still high, at about 10.7 million job openings, but there is some indication that things are going to start ease going forward. So the thought right now as we are going to see employment report another strong number, likely somewhere in the 250,000 range,and if we are looking at the balance of risk, certainly over the last couple of months, we have seen those numbers come in much higher than what consensus would suggest. But there are definitely reasons to suggest that we are going to see further slowing in employment over the months ahead. >> A lot of anticipation for this jobs report coming up. A great start to the conversation, Thomas. we will get to your questions about the US economy and automotive sector for Thomas Feltmate from TD Economics in a second. You can get in touch with us anytime, email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker. And now here's an update on the top stories in the business world today and a look at how the markets are trading. 47% in July versus the same period last year and the reason, rising rates, higher borrowing costs and inflation concerns. Meanwhile, the average price of a GTA property slid in July but will still cost you over million dollars. Earlier this week, Vancouver reported home sales were down nearly 20% while Calgary posted a 3% year-over-year decline. Turning to earnings news, Tim Hortons parent company, Restaurant Brands International, reported profits of $236 million, which was better-than-expected. The company said earnings were driven by sales at its Tim Hortons and Burger King businesses. Tim Hortons accounts for nearly 60% of RBI's revenue. But it has taken it much longer to bounce back from the pandemic largely because of tougher COVID restrictions in Canada. And finally, the Bank of England has raised its key interest rate by 50 basis points, making it the biggest rate increase in 27 years for the BOE.The UK, like other regions, is dealing with soaring inflation, driven by higher food and energy prices. The central bank also warned that the British economy is likely to enter a recession later this year. The bank also expects headline inflation to peak in October but will likely stay above its 2% target until 2025. And here's how the main benchmark index in Canada is trading. Currently it is up about 31 points. Nearly .2%. Let's take a look at the US market, Wall Street, the S&P 500 index is pretty much flat at this point, at 4152 and some change. And taking a look at the NASDAQ 100 Index, it is just up slightly by nine points. Alright, we are back with Thomas Feltmate from TD Economics taking your questions on the US economy in the automotive sector. The first question off of our platform is about the US dollar. The question is, do you accept the US dollar strength to continue? Thomas, we have heard so much with the US dollar reaching twenty-year highs against a basket of currencies. What are your thoughts on that? >> ER, we have over the last year seen the US dollar appreciated by about 12% and what's interesting is we kind of look back over the last year and try to get a sense of why that is happened, through that first six-month period, was really a story of the US economy outperforming some of the other advanced economies, mainly because we saw COVID restrictions ease more quickly there than other countries around the world. That led to a pretty strong rebound in economic growth. Now looking over the last six months, there has been kind of a change in that narrative where we have seen a pit in terms of how hawkish the Fed has become. That has led to an increase in interest rate differentials compared to other advanced economies so that has been supportive of the dollar. And then in the wake of the Russia Ukraine war as well and the impact that has had in terms of flows that have gone into the US so these are factors that have pushed the dollar higher. At this point, I would say with the Fed having, with markets already pricing in another hundred basis points, a lot of that appreciation has come through. So barring any change in terms of monetary policy stance from the Fed, if they have to tighten further, if inflation comes in hotter than expected, warranting a stronger response on monetary policy front door if we see further escalation in geopolitical tensions, these are kind of the two main factors that we are considering right now that would likely lead to a further appreciation of the dollar. But at this point, barring any changes on that front, I think the dollars pretty much run its course. >> So you think the risks with the US dollar appreciating, the Russia Ukraine conflict, are there any other risks to the US dollar beyond that? >> I think it might just be underperformance. It's really going to depend on how the economy kind of evolves over the next year relative to what markets have participated in. And if we see deviations relative, may be a recession happening, certainly that could have some impact on the dollar. >> Okay. Let's go to the next question. How many more hikes, this is about the Fed, how many more hikes do you think the Fed will do and will this just lead to them cutting rates in the near future? I think this is another big question that clients are wondering. How aggressive is the Fed's monetary policy going to be? There is a question about leading to recession. Thoughts? So again, if you look at the FOMC meeting consensus forecast they have rates coming up 500 basis points over the next year. We are on the lower end of that, seeing 75 basis points. It's the story of data dependence. It depends on how employment data comes in. Whether or not these hikes alone will suddenly reversed course and if the economy into recession, that's not necessarily our baseline forecast at this point. we are forecasting what's being called as a soft landing but we do see rate cuts coming in 2024. The main reason for this is if rates are going into restrictive territory above what we consider to be neutral, as that has downward pressure on the economy and it turning towards the Fed's policy then there's no need for the rates we so restrictive and we should see some of that come off the table. In 2024, provided we see inflation get back towards the Fed's target, that should certainly lead to some rate cuts. >> As the Fed mentioned, it is more data dependent when it comes to policy. Let's take a look at the next policy. This is been in the news a bit. Are there any signs of inflation peaking? We have seen the headlines, food, energy costs, pay more for groceries. What are your thoughts? Is inflation there, are we peaking at? >> Yeah, few and far between is the evidence that is out there right now that inflation has peaked. When we look at July, gasoline prices have come in alongside oil. We have seen gas prices in the US come down about 16%. That means energy's contribution to inflation at least in July should be negative. It should subtract and put some downward pressure on inflation. The reality is that in June we didn't see that. In fact, the opposite. Goods prices accelerated on a month over month basis, rising by .8%. We kind of G you will dive into the pressures, they were brought. They were coming from new and used vehicle prices, apparel was off, recreation was good, pretty… Lies in the face of some of what we have been seeing in some of the consumer spending data more recently. It has actually started to pull back to some degree. We are hearing some anecdotal evidence that retailers late last year had really restocked inventories and this was at a time when consumer demand was already pivoting so the thought there was that this would start to lead to some downward price pressure. >> We have heard of companies that have been slashing prices, trying to get rid of inventory, so you would think that that would translate into the inflation numbers? >> That's right. The reality is we haven't seen it yet. Arguably, hopefully, over the next two months we certainly will. But no, not necessarily any evidence there. But when we think about CPI going forward and what needs to turn first, certainly at some of these elements on the good side of the economy because that's what was driving inflation earlier in the economic recovery. When we look at the services side, which is the other portion of CPI that we haven't talked about yet, we have seen price pressures really brought in there, so it started there and what started with housing cost has moved into transportation… Things tied to reopening and an easing of restrictions. Price pressures there have also broadened and those are going to be much slower to turn. They are not necessarily indication that the outside is going to be easing anytime soon. >> If we do reach peak inflation, it's still going to be sticky going forward. It's not like it's going to be coming from 9 to 2. It's going to be sticky for some time. Is that something the Fed is also looking at, whether or not… How fast is inflation coming down and how much do we still have to be aggressive to try to bring inflation down over time? >> Yeah, that's exactly right. We are seeing that on the good side right now. Prices are sticky and not necessarily coming down. even when we look at the FOMC projections, they don't even have their preferred inflation measure getting back to something in around 2% until 2024. So when we look at their projections, they have further rate hikes happening in 2023 as well to the combat some of these inflationary pressures that we are seeing. >> Fantastic perspective. Great question. As always, do your own research before making investment decisions and we will get back your questions for Thomas Feltmate on the US economy and the automotive sector in just a moment. You can get in touch with us any time by emailing moneytalklive@td.com. Let's get to today's education segment. In many sectors of the market, there are a handful of companies that have similar traits and are close competitors. So if you have identified one company you are interested in, how do you decide whether it's better than its peers? Well, WebBroker has tools that can help. It joining us to discuss that is Jason Natyk, he's a client education instructor at TD Direct Investing. Jason, welcome. Good to see you again. >> Great seeing you again, it's always my pleasure. >> Jason, how can we compare companies using the blood from? >> once you have identified a stock you are considering investing in, it's not uncommon to want to know just about everything there is to know about the company. WebBroker has a wealth of information including a useful tool, which is the ability to do pure comparisons. This can be very useful in many ways. It can allow you to see behind the curtain, see how the potential investments to accept fundamentally, how the recent stock performance compares to its peers, as well as ensuring that maybe you are diversifying into the right company itself. Additionally, it might be easy to guess who a large bank here in Canada competes with, but this WebBroker tool can be useful when you are trying to identify the peers of more obscure or even a new company. To find this information, we will start by choosing from WebBroker research from the top of the page and then under the stocks… Rather under the investment column, we will choose stocks. This page might look very familiar to the audience. It's the main landing page where you can start being into the companies and start doing your own research. From here, the first thing I would like to show you, we are going to stay on the overview page, we are going to scroll down about half the way. I'll direct your attention to the left-hand side of the screen. Not only are you going to get a description of the prospective business, we've also identified a list of the companies who this particular business is competing directly with. Here we can see the size of the company by market, which is taking total number of shares multiplying by the company share price, you can also see to earnings ratio the companies in the sector. Additionally to track the stock performance of the group you can choose the performance tab that is listed directly above the list. This will allow us to see the share performance and price performance over a defined amount of time. Okay? Additionally, no, actually, we don't stop here. Let's take one step further and look a little deeper into comparison that's available in WebBroker. I'm gonna scroll back to the top of the page here and this time we are going to choose the fundamental step. From here, we get access to all of the company's fundamental data that's available, including their balance sheets. But more than that, we can break this down and compare our potential investments data to the industry average as well as the competitors by choosing the pair comparison tab directly at the top of the page here. On this page, lots of good information. You got that P/E ratio that we touched on the previous page. We can compare the dividend rates and the yields that the companies are paying. As well we can look at revenues and we also can look at the number of employees and see how they'll stack up against each other. Lots of great useful information. >> Okay so now we've identified how to compare company's fundamentals, is there an easy way to compare the prices and overall trends? >> Absolutely. I'm going to make sure I've got the right screen up on the page. WebBroker comparison tools don't stop at the fundamental information. Charts can be a very useful tool to compare histories and may even do a little technical analysis. Timing the market certainly is not an easy thing to do. It might not even be necessary depending on how undervalued you feel the company may be but it never hurts to identify the price trend of the potential investment. From the overview tab, we simply need to click on charts and now we can begin even further comparison. From here, the first comparison we can make is maybe comparing the stock itself to may be an index or a sector to see whether or not the company is over performing or underperforming in that particular sector. We can start by doing that, you'll notice about the charts there is a series of drop-down menus. On the right-hand side, there is a comparison section that allows us to choose from a selection of indices or allow us to enter something ourselves. It's on the S&P TSX 60. Let's choose that for visual sake. We can now get a sense of how this company is performing against the index and now maybe decide for ourselves if we want to be investing in the company directly itself or it might be more advantageous for us to choose a sector or index ETF that might be better. The chart is no different. Under the comparison tab, we can go ahead and begin entering in specific symbols of companies we would like to see against this visual. So we will put in a number of symbols. Now, you can put in symbols to your heart's content. But maybe you want to see a little bit of discretion in the number of lines that you add into your chart because it might get a little cluttered and hard to see the forest for the trees. Once again, the benefit is right in front of us. We can now track and see which company might be in the most favourable point for investment as we stand right now. >> Jason, as always. Very informative. Thank you very much for joining us. >> My pleasure. >> That's Jason Natyk, client education structure at TD Direct Investing. Check out the learning section in WebBroker. Before I get back to your questions, a reminder that you can get in touch with us. >> Give 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. Send us an email anytime@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 will see if one of our guests can get you your answer right here at MoneyTalk Live. >> Okay we are back with Thomas Feltmate taking your questions about the US economy. And this one is on the automotive sector actually. We have seen some players cut jobs or freeze new hires. What's the health of the auto sector right now? Thomas, you and I have talked about this in the past. Given what has happened with supply chain and labour shortages, what are your thoughts on the automotive sector right now? >> There is no question that automakers are feeling the pinch from the ongoing supply chain issues. Certainly the follow from the… Not being able to source semiconductors. Now, I would say there are some signs of optimism on that front. If we look at production, North American automotive production, at least through the first six months of this year, it's up about 8 1/2% relative to that same time period last year. Certainly some encouraging signs that we are seeing more tips come to market in that's filtering into more vehicles being produced. But that's not to sound too optimistic at this point. If we look at production relative to pre-pandemic levels for the first six months of this year, it were still about 14% below those levels. With a market that is still already a undersupplied, that isn't necessarily helping the situation. Just to give you contacts, if we look at where new vehicle inventory sit today, they are at about 1.2 million units in the US. Or better 28 day supply. If you kind of look back relative to pre-pandemic time to just over history, and try and determine where does inventory sit in a more balanced market, it's in around 3 million units. We are still well, well below those levels. Obviously this is creating a lot of holes in the market, particularly when you look at SUVs and therapies, the vehicles that are in high demand. >> Especially for consumers looking for new vehicles. It's hard to find. You go to an automaker and the production is like six months, 12 months behind. >> We are seeing a lot of presale activity. It's the highest it's ever been. People want to get their names on weightless, put down a deposit on the vehicle them when it actually comes in, it will be delivered and then booked as a sale. So to some degree, when we are looking at the actual sales data, it somewhat skewed by the fact that we haven't necessarily seen production normalized to some degree and even later this year when interest rates are going to be incredible he hi, we are likely to see some pull through in sales likely because people have already signed contracts and they are just waiting for the vehicle to be delivered and ultimately that's when it's going to be booked from an economic standpoint in the data. If you look at July vehicle sales data, it was at 13.4 million units. So well below what we would consider to be trend sales in the US. A trend is just basically the level of sales that need to have it on an annual basis to keep up with population demand. Or a growing population and replacement demand. So still well below those levels. In fact, sales have been below trend for the last several years. This has created some degree of what we would call pent-up demand in the market. But unfortunately, just given the environment that we are in right now with rates moving higher, we look at new vehicle prices even on a quality adjusted basis, that suggests that they are of 20% through the pandemic. So kind of a combination of those two factors are certainly weighing on overall affordability. So while there's still a lot of pent-up demand in the market, the thinking now is there is likely to be some demand destruction as we look through this year into next year in terms of sales. > Just because prices have either been higher or there is just not enough supply. > And people are just getting priced out of the market. Some people are perhaps thinking well maybe I will delay my purchase for the next couple of years. >> Gets a lower prices. >> Exactly, more supply coming to the market and lower price as well. And the thought is later into next year at least on a monthly basis, we will start to see production normalized to something that looks akin to pre-pandemic levels. But again, last year we were seeing the same story for this year and supply chains are definitely taking longer to kind of sort themselves out then we have previously and dissipated. >> Media will have to if my car next year. Maybe that be better. Next question is on electric vehicles. Do you expect continued growth in the EV market? We have heard so much about EV markets and a move towards greater energy. What are your thoughts on that? >> If we look at Q2 data in the US, EV sales were up about 2000 units, so that's up about 60%. We are seeing a pull through and demand there. a few factors obviously. Supply chain issues are starting to ease to some degree. We are seeing some more vehicles come to market. As that happens, I think consumers… There is appetite there and no surprise. Higher gas prices are definitely leading people to buy more fuel-efficient vehicles and EVs are kind of that one option that I think a lot of people are actively trying to pursue. So yeah, from that standpoint, I think there's definitely a good story to tell here for EV sales future. And we also need to look at just last week, inflation reduction bill that has kind of been passed around the Senate right now. In that bill, there's about $430 billion of expenditures. A lot of it is going to be focus on climate related initiatives. About 85% of those expenditures are going to be on climate related expenditures, and of that, there's going to be 80 billion set aside to enhance the federal rebate program that is already in play. >> So making it cheaper for people to buy EV, electric vehicles. >> Exactly. We know that based on previous consumer surveys, the price point is a sticking item for a lot of people not moving into the EV space. So if we look at what is being proposed in this bill in terms of enhancing the EV incentives, basically that 7500 federal rebate is going to remain in place but in the past it was subject to manufacture caps. So companies like Tesla and GM that have already hit those manufacturing caps, people that were going out and buying those EVs today were no longer eligible for those rebates. So they are going to be lifting those caps. That's going to bring GM and has led back into the mix. People are going to be able to buy those EVs and be eligible for the rebates. There will also be further enhancements to the program for vehicles, EVs that are going to be built in North America. People could be eligible for an additional $4000 in federal rebates as well. Helping to bring down that price point more, bring more buyers into the market. >> As you said, higher gas prices helps. >> Also supply chain issues two. What we sell is a delay of a rule out of models. Certainly we know when we look at the sales data, CRV's, SUVs are what is in high demand today and we haven't seen a lot of those EVs come to market just yet. A lot of them have been delayed because of the semiconductor issues. But we expect to see more of those coming to you. So that should definitely be more buyers into the market as well. >> Let's go to the next question on semis. >> I would say were the near term no. And certainly this is a good deal in your thinking kind of medium to long term for where the US is going to position itself going forward. But no. These facilities alone take anywhere from 2 to 3 years to build the chip facilities. So that's not going to necessarily provide any immediate relief. But within that chips bill, there is over $50 billion of grants and tax incentives that are going to be in place. So the idea is Frank more chip manufacturers into the US and the hope to is as more chip producers come in, you're going to have other manufacturers, electronic manufacturers, automotive makers also coming back because they want to be close to the suppliers. So not necessarily anything is going to change the situation in the here and now but medium to long term, definitely going to have some impact. >> That's because they also have to build a plan to get the infrastructure in place in order to start manufacturing the chips. >> Yeah, exactly right. Not even today with the labour shortages the more over the last couple of decades we've noticed in the manufacturing sector specifically there is this kind of skills gap. Manufacturers are reporting just how hard it is to hire the right worker into those jobs. This is particularly true when we are moving into the more higher skilled many fracturing jobs, which is obvious to what these are. So there certainly still some challenges there but it paints a good picture for the medium term. >> Great question. We'll get back your questions for Thomas Feltmate on the US economy and the automotive sector in just a moment. As always, make sure to do your own research before making any investment decision. 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 easier 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@moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just writing your question and hit send. We'll see if one of our guests can get you your answer right here at MoneyTalk Live. >> Let's get you an update on the markets right now. We will start with the TSX Composite Index here in Canada. It is slightly in the green. Again, a lot of hesitancy ahead of the big US jobs report. It's up about 40 points right now, benefiting from some of the strong name to sell this morning. Let's take a look at the US market, the S&P 500. Very little movement. It is still trading flat, down just under one point. And take a look at the tech heavy NASDAQ, again, is also trading flat. It's up about 19 points and change. We are back now with Thomas Feltmate from TD Economics and viewer questions, the next one on gasoline. What's your look for the price of gas? will it continue to drive inflation higher? >> It looks like gasoline prices peaked back in June at about five dollars per gallon. And they have come in more recently through July. We saw prices come down by about 16%. The thought right now is there are some structural factors in the market that are likely going to keep gasoline prices higher than what the historical relationship between WTI and gasoline might otherwise suggest. So certainly when we look at through the pandemic we have seen some refineries, big US refineries close just as the result of demand destruction in the pandemic. That took about 5% of overall refining production off the market. And then also more recently with the Russia Ukraine conflict we have seen an increase in demand for US exports, particularly of crude oil and refined petroleum products and gasoline is obviously one of the big line items there. So these two factors alone have certainly brought down the level of inventories of gasoline available on the market right now in the US and that is kind of leading to some of the upward pressure that we have seen in prices more recently. The thought now is that we will likely continue to see gas prices trend a bit lower but could hang in around that four dollars per gallon range which if we would have looked back over time, typically when oil is trading at around current levels, about $90 per barrel, gas has historically been about 325, 330 or the like that so that goes to show you a bit of the premium still built-in. Certainly in July, from an inflation standpoint, we will see some easing there in terms of price pressures from the energy side of things and then really is going to be more of a story of how did things evolve from there, it our forecasters have realized there might not be more. >> It looks like energy prices will be elevated for some time. >> That's the thing to. There's a lot of volatility coming through and market. There are a lot of unknowns particularly when we are talking about oil over the next couple of months. We know that the EU is set to put in an insurance ban on Russian oil, effective in December. That alone, if it comes into play without any kind of price Could put a lot of upward pressure on oil prices. The thought is and certainly we are hearing a lot from the U.S. Treasury and trying to bring some global partners on board to impose price That would be lower on the price of oil that will be shipped from Russia to penalize them, allow them to put supply on the market but penalize them, and that alone would help keep supplies elevated but there is a lot of uncertainty about whether or not they would even participate in that if a price Were to come into play. In fact, Russia could retaliate and take supply off the market which would deftly put a lot more upward pressure and lead to a repricing of the current premium. I think a lot of volatility is still to be expected when oil prices at least over the next couple of months. >> Yeah, that seems to be the name of the game this year, volatility. Let's take the next question which is on housing. What is your take on the US housing market? Is it headed for another 2008 style crash? We saw the numbers recently. There is a lot of weakness in the US housing market. Higher interest rates, higher borrowing costs. What are your thoughts on that? >> Yeah, so I mean we have definitely seen a pretty strong increase in price growth in the US through the pandemic similar to what we have seen in Canada. No surprise, we layer on topa rapid increase of interest rates as well, will point the 30 years fixed point interest rate has gone up to 6% which has deteriorated overall housing affordably. To give some context, if we look at where housing affordability measures it today, they are basically back to 2006 lows, where housing reached a peak right before going into the housing crisis. So that kind of shows you where buyer affordability is today. So no surprise. We have seen sales come in rather significantly. Right now you're today, we are down about 18% and certainly when we look at things like pending home sales, that gives us some insight into indicators of what's to come in the next months. We have seen for the deterioration is likely to come in the next few months for sure. What's interesting is even with the decline in home sales, we haven't necessarily seen a meaningful correction in home prices. Arguably, the data is a bit legged but when we look at things like the quality adjusted measure, it is showing that on a year-over-year basis in May, prices were still up 20%. >> Why is that? >> Because there is a very limited supply right now. That is going to work itself out with sales coming down. We are seeing more people starting to list to get ahead of this. More supplies coming. So you would expect a rapid pullback in prices. But we haven't seen that same degree of price declines that we have seen in the Canadian market just yet. So certainly when we look into 2023, we expect a faster unwinding. But again, the data still suggests that price growth still remains quite strong. >> So what are your final thoughts on the US economy with what's going on with inflation and higher interest rates? What are your final thoughts on the US economy? >> I think there's a lot of uncertainty over the next couple of quarters. While, like I said, recession isn't something that's baked into our baseline forecast just yet, if we are looking at the balance of risk, I would say certainly they are skewed to the downside. We know the Fed is certainly going to be chasing this goal of price stability and they are going to be pushing interest rates higher than where they are today just to get them into restrictive territory. Like I said, we are already trying to see some pullback in consumer spending, pretty strong acceleration in the first half of the year, some of those interest rate sensitive sectors of the economy like housing are already pulling back rather significantly so it almost kind of feels like we're just scratching the surface now and there is definitely more room for things to slow down. So it's really going to be interesting to see how the next couple of quarters player. >> Great perspective. Our thanks to Thomas Feltmate, senior economist at TD Economics. State. On Monday, Michael O'Brien, portfolio manager at TD Asset Management will be our guest taking your questions about Canadian equities. A reminder that you get a head start. Email moneytalklive@td.com. That's it for today, thank you very much for joining us. Take care. [music]
