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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'll only see here. We'll take you through what's moving the markets and answer your questions about investing. Coming up on today show, Christian Medeiros, Portfolio Manager at TD Asset Management will join us to discuss the checklist he's using to try to figure out whether a bottom is in for stocks. And in today's WebBroker education segment, Jason Hnatyk will show us how you can analyse different sectors using the WebBroker platform. And here's how you can get in touch with us: just email us at moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker. And before we get to our guests today, let's get you an update on the markets. It's been an interesting day. We have bond yields pushing higher and the US dollar pushing hire an earnings rolling in. A lot of things investors trying to way out. A bit of a chop your session south of the border between negative and positive territory. We are negative right now in Toronto. 18,689, more than 100 points down or half a percent down. A bit of moving in the direction of some of the oil majors. West Texas intermediate shy of 84 bucks a barrel, up about a percent. Let's check in on Precision Drilling. A long-term contract signed in the Middle East so money moving in that direction. Bond yields on the market with US dollars on the rise as we see gold prices on the rise. Right now you have Barrick Gold at 19 bucks and $0.90 a share, down about 2%. South of the border, as we said, it's been a choppy trade as we are pretty much getting into the thick of earnings season now particularly with some of the American names. Where the banks last week. Procter & Gamble, a few others, Netflix after the closing bells yesterday, investors trying to make sense of it all while bond yields continue to perspire. Of course inflation, it refuses to give up. It gives does not give up its grasp on us. We have the S&P 500 right now. Down a pretty modest 11 point a little less than 1/3 of a percent. The tech heavy NASDAQ is in an interesting space to keep an eye on. As we said, Netflix impressing after the close but still under the pressure to the tune of 1/2 a percent. Will check on one of the energy names, Exxon. With crude up about a percent as we said with West Texas intermediate. Hundred and three bucks and change almost 3%. And that's your market update. It's been a tough year for stocks, but we've also seen several big moves to the upside in between the declines. So amid the so-called bear market rallies, how can investors be sure when we've hit the bottom? Well, our featured guest today has a checklist he's keeping an eye on. For more we are joined by Christian Medeiros, Portfolio Manager at TD Asset Management. Welcome to show Christian. >> Thank you. >> We will reveal one at a time hereto see and we will go through them one by one. To see how much pain. The first is inflation. >> Inflation has not been a major concern in this time around it is quite high and hard to get under control. The Fed is dead set on bringing inflation down and with high and rising rates, that's going to be a major head of its markets. So with that problem solved, it will be hard to see markets turning around until it's solved. How do we look at inflation? We took an analogy behind find very helpful. The outer layer, you have global trading commodities. These are things that we are used to rising in price over the last year. Law lumber and oil were expensive, gasoline was a huge challenge… We see in our checklist. The second layer is goods inflation. We are all used to the supply chain disruptions, the high cost of durable goods, we also see that improving. Looking at many of our fast-moving debt indicators. The supply chains have improved globally, back lots are down and goods prices are starting to fall. The inside layer is housing. And we can see in the US, it's so strong over the past year, when we see faster rental that marginal rents are falling and into next year we do expect rents to mediate. Then we get to the core this is the problem with the overall inflation. Core services inflation is still very very strong. The consumer is too strong. We see that across consumer spending data. They are spending similar amounts as before despite higher rates. Employment is strong in wages are strong. So the Fed is very focused on getting that wage inflation under control and that's going to still require higher rates and we have at present. As a result, our overall checklist from the inflation metric has seen inflation fall from a peak but is not yet at levels that we would be comfortable with given the strength of the consumer. >> Level still pretty high. In Canada today 6.9%. Kingdom with the 10.1%. Inflation is number one of the checklist. What's the next one? Growth. What we need to see here? >> Growth is one of the most important metrics of any checklist. Economic growth is what drives markets over the long run. We are looking for surveys of purchasing managers and consumer activity. On the growth side, what we would hope to see is that the growth metric would turn down quite substantially. Once we see that on fast-moving data, we believe we are hitting bottom on that indicator. What we've seen so far is a lot of purchasing indices have fallen down for very lofty levels to around midpoint levels. Around neutral. But in a recessionary scenario, we expect inflation to come under control, we need these growth indicators to fall much lower than the neutral level. In two let's say, 40 or 30 range on the PMI. So there is still more to go on growth that we are moving in the right direction. We expect this to weaken over the course of the next few months at the midpoint of 2023 and hope to see an inflection and growth metrics. >> Inflation, growth. The next one is risk sentiment. What are we seeing here? >> We see this across a whole host. Not surprising given what we see in the markets over the past year. When we look at volatility, another good measure of investor fear, we also see that elevated levels. However, when we look at our checklist and were looking for, we expect to see a blow often volatility. Very high levels of volatility and we haven't seen that so far this year. Volatility has been elevated but relatively tame as markets of slowly ground down over the course of a year. So we are really looking for much higher levels of investor risk in inversion in fear with the crash of market drawdown and we have seen currently. That would be more consistent with the bottom of an equity market drawdown. >> 3 to 4. The final one of the checklist, trying to figure out past the worst of all this, earnings valuations. An interesting one considering we are getting into the thick of earning season. >> This is important because you want to see the fundamental companies within the equity market to help determine if investor expectations are properly pricing in the market draw off. The bulk of the equity market drawdown this year has been to invite valuations coming from the mid-20s down to the midteens. So the drawdown of valuations for US companies : we think a lot of this is already happening. But the second aspect is earnings. This is what analysts are expecting for earnings across the companies. What we have seen actually, is they have not really coming very much. Only until recently have we started to see earnings revisions come down. Right now, as we look at it we see mostly single digit decline in earnings and we don't think that sufficient to price in a recession. A milder recession would be high single digits in the deeper recession would see a 20% decline in earnings. So there is more to go unfortunately as well in earnings for us to be comfortable as well. >> So investors, definitely a question they keep asking when they see these rallies. I know you are calling Michael Craig at the chair to start to see a big change. He calls them bear market rallies. Inflation growth, risk sentiment in earnings valuations. Once we check off these four boxes, then we just patiently wait for the turnaround? It's still hard to time the market. There still criteria to say we passed the wars but if we check off all four… Here we go. >> To call the market bottom, we don't know if this checklist will give us the exact date or price point but it will give us comfort to start looking back into risk assets. So we mention those criteria. We expect inflation to need to come under control. Especially with core services inflation for the Fed to be able to lighten up, perhaps pause, perhaps pivot. On growth, we need to see much higher levels of investor risk inversion in fear of equity markets. Lastly we would hope the analyst revisions continue to decline to reflect the economic condition we are seeing in the growth metric. So there's more to go it's more a directional thing. We don't need to call it the exact bottom but we do need to see a trough thing in these metrics and that's been consistent with past economic cycles. >> A great start to the program. We will get to your questions about asset allocation Christian Medeiros in just a moment's time. A reminder of course that you can get in touch with is any time by emailing moneytalklive@td.com or Phil at the edge of your response box right under the video player here in 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. Shares of Netflix are in the spotlight today. That after the streaming giant added 2.4 million new global subscribers in its most recent quarter. More than double Wall Street's expectations. And Netflix is forecasting another 4.5 million subscriber additions for the current quarter. The news follows a decline in memberships earlier this year as competition from the likes of Disney heated up. Parkland Corporation is warning investors that third-quarter results will come in below expectations. The gas station operator is pointing to volatile prices in challenging economic conditions for the downward revision. However, Parkland is standing by its outlook for the fourth quarter, saying it expects to see solid seasonal demand from its commercial fuel clients. Strong demand for travel saw United Airlines deliver an earnings beat in its most recent quarter. And the air carrier is forecasting profit for the current quarter will come in stronger than forecast. United CEO Scott Kirby says demand remains strong despite concerns about a global economic slowdown. you can see United right now up to the tune of about 7 1/2%. Let's check in on the main benchmark indices. Starting right here at home on Bay Street with the TSX Composite Index after and I started the week to the upside. A bit of a pullback at 18,661, down hundred 37 points, about three quarters of a percent. South of the border, the S&P 500, that broader read of the American market. A bit of a choppy session. Bond yields pushing higher. Right now down about 23 points, a little more than about half a percent. We are back now with Christian Medeiros taking your questions about asset allocation. The number one question off the platform as we are getting a Bank of Canada rate decision next week. What are you expecting? >> We expect Bank of Canada to be quite strong even in the face of all this. Their goal is to crush inflation. Their goal is to continue to hike rates until they are comfortable with the pace of decline with inflation. So we will expect a strong hike of interest rates at the next meeting. Whether that be 50 or 75 basis points, I'm not quite sure. But we expected to be quite a hawkish hike. >> In terms of trying to win this fight against inflation, are we seeing any signs yet? We've had jumbo sized rate hikes, we've seen people with loan obligations whether be mortgages or others. Have we made a dent at all? >> We are making a dent on the outer layers of the onion. Commodities and goods of come in and welcoming further. I think if you look at the Federal Reserve for example you look at two mandates, inflation and employment. But now they are single mandate. In order to cut through that central layer of the onion you have to see some weakness on the unemployment side. So they are weakening that consumers or services inflation will slow. You should expect that as rates go higher, we start to see some weakness on the unemployment side. This is a challenging thing to do right? We just came to the COVID crisis. It was so hard to hire new workers. It was so hard to get back up to speed so it will take a while for companies to see the slowing and data and it will take a while to start laying off workers. It will take a while for consumers to give up the habits of they've had spending a lot of money through the reopening. It will be a longer and more challenging process and we are perhaps used to or what is expected with rates at such high levels. >> The central banks always trying to crush the demand and crush inflation at the same time. But when you enact monetary policy, you really affect change further down the road. We have the business out Outlook survey this week and that's one of the exercises. "Where do you think things are headed? " Is a banking forward enough? Is there looking at data? What are they talking about last month? Do they have the tools to look forward and say that we've done this and what will we do here? >> All central banks that are not as we are looking at it as an asset manager we've talked about, consider data consumer data rather looking at prints that are published on a regular basis and are backward looking. I think the problem though is they can necessarily look at, or make a prediction on what is fast-moving data and what it will be like in six months. Because if they were to make that decision and are wrong, inflation might get out of control. So they will need to see data as it comes in and start to move in a very least in the right direction. So it's a very challenging position to be in. They cannot be too forward-looking because they need to make sure they have a handle on things. >> Before we leave the subject, because I love the central bank stuff so much, right now the Fed of the BOC, central banks all noticing that we have to do this and this… At some point can the world diverge? In the BOC diverge from the Fed? We've done in the past. >> Market pricing : the terminal rates, the rate that the markets expect the Fed to hike to you at the highest point, a little bit higher for the Federal Reserve in the states than it is for the make of Canada in Canada. Why is that the case question mark I think investors are expecting Canada to be more sensitive to higher rates. Why would that be? More of our economy has employments to real estate, employment ties to real estate and that is much more interest rate sensitive. Also high levels of consumer debt across the economy. So the expectations of the economy will slow sooner and the make of Canada will be able to pause and perhaps cut sooner than the Federal Reserve. We are seeing a little bit of divergence and I do think Canada does have more of those risks that I've talked about. So that divergence I think, will persist. We will realize we do get to that end state of the rate hiking cycle. >> Fascinating stuff I love to talk about the central banks. This will Tiant as well, when will the US dollar begin to weaken? This is a bit of a trade that is crust rather crushed a lot of asset classes. > Why is that in the case, I think that will help us understand where we will go from here. Probably three reasons why we saw the US dollar appreciate so strongly this year. First one is rate differential. The Fed is been one of the strongest central banks, hiking rates most aggressively, the second rate is the US is a very strong growth, particularly compared to the rest of the world, particularly compared to developed markets like Europe in the UK and we see how much they struggle economically. And third, whenever we have a crisis in risk assets, we have a slowdown in economic growth and fear, people tend to flock to the US assets for safety. All these three factors have caused a perfect storm which has pushed the US dollar higher and higher rate frankly, we don't see that this trend will sustainably reverse until the Fed lighting up an interest rate path or global growth picking up and synchronizing. We think this might happen in tandem but we don't expect that to happen until next year once growth data has deteriorated more substantially. >> I think back to regular times, if there were regular times in our lifetime… But pre-COVID… The Fed says "you know, this is the central bank of the United States of America. They have to have some concern about what we do affecting the block broader global community. Affecting the emerging markets. " Or do they simply have their own house to put an order? >> It is actually beneficial. So they are happy. A past. Were we had the US dollar really appreciate to the point where it's really hurting and foreign Nations was right before the Plaza courts. The XY got to about 150. We are about 112 today. At that point it was really causing pain for US rate partners. They got together at the Plaza Hotel and decided to join the markets to bring down the US dollar. But 150 is a far way away from where we are now in the strongest dollar is currently helping the US and their mandate. So it's a little bit of a different world and I don't think the political consideration will come in to crush the dollar. At least at this point. >> Interesting stuff. Another question at this point about central bank action and what it could result in. Recession risk: how long and deep could a recession be if there is one? >> As I mentioned before, the Fed will need to see employment… Employment ticked up but doesn't tend to move by tens of basis points. It tends to move by hundred basis points. That can be material for an economy with higher debt loads. We think it will be mild, moderate recession. That means that it will be something that we have to contend with. A traditional recession that we are expecting. I think, given the way that service inflation is involved, so strong and so persistent, just a mile slowdown or a soft landing is probably not going to be enough to crush inflation. >> The Fed, from what we've heard from J Powell. He said if we do hit to hit a recessionary environment, the pain is real. People are losing their jobs. Will the Fed, I guess, have the resolve to hang in? You would think a central bank would say "okay we will cover rates and get the economy going. But there is sort of a different mission this time. >> This is the most important question at this point. When the Fed was hiking rates it wasn't much of an issue. Usually usually the drawdown equity markets is enough to start… We think at this time around the Fed wrote a call in the equity market that is Returns. The Fed cancelled for loosening too much. I think the real pain will be the jobs market. But we need to see much more pain then for them to actually step in and stop things. Jerome Powell at the end of that Jackson Hole meeting, at the end of his last minutes as well, he came out and said "hey, we will do what it takes" that is been his message consistently over the past couple of months. So that means that he probably has quite a bit of resolve. He's only taking more pain than we can expect and I really do think that the Fed, in order to live up to their one mandate which is crush inflation, is going to have to see some pain happen in employmentInteresting times ahead. Please make your own research at home before making any decisions. We will get back with Christian Medeiros in just a moment's time. A reminder of course that you can get in touch with us any time by emailing moneytalklive@td.com. Now let's get to your educational segment for the day. If you're looking to do research on certain sectors of the market, WebBroker has tools which can help you. Joining us with more now is Jason Hnatyk with TD Direct Investing. Senior client educator. Jason take us through it. >> Thanks so much once again for having me. Asset allocation and diversification are terms that investors should be familiar with and WebBroker has many useful tools to help you achieve that. Whether or not you're doing more of a bottom up approach, we we'll take you through a tool to maybe do more of a top-down approach. WebBroker has some really pretty neat tools to really help us achieve that. So, getting ourselves into a broker here, starting from the market overview page, this brings us into an area where we get the opportunity, whether or not we are looking at Canadian or US economy, we are looking at the US for our purposes here. We get the opportunity. This can be a great tool. A visual representation of how the different sectors in the economy are performing against each other. You get the opportunity to really specify how the comparisons are being made and you get the opportunity to change the different time frames that you're looking at. Or maybe you look to see if you're concerned about how large the average company is in that particular sector. WebBroker has a prequel tools. Let's go ahead and scroll down a little further. Now we get a bit of a table view on all the sectors so we can see many different measures that the sectors are being judged against. You have the opportunity to sort and find out which is the most important to you. I'll go ahead and start digging a little bit deeper here. Let's go ahead and choose the technology sector just from the top the list here. Go ahead and choose that. It will bring us to a very similar page. This time now, we get the opportunity to do some analysis of the specific industries within the technology sector itself. So once again peeling back that onion as the guest was talking about earlier. We now have the opportunity to do that within the sector as well. We are also getting high-level screens, able to see which companies are performing the best and the worst for today. As well as some other screens in term of dividends earnings-per-share and some pricing components as well. Now, similar to how we chose the tech sector on the previous page, we now the opportunity to dig a little bit deeper into very specific areas within the technology sector here. For instance, I'm going to go ahead and choose the opposite equipment industry. Now this is going to bring us to a page where we now have a list of laid out companies within that sector. So you don't need to know these companies off the top of your head. You can kind of funnel it down to get you to that goal. What's cool about this page as well is if there is a news function here, we are very concerned about the opposite equipment news area. We now have an ability to have that sorted and filtered as well. All right. Now, where the rubber meets the road here, so we don't have to follow the trail to get back every time, if you've identified a couple of companies within this list, you want to keep an eye in it for future use, I really quick way to do that is to go ahead and click on the symbols of the companies in question. Then we have the ability to added to a watchlist within WebBroker for quick access for repeat viewing and analysis over time. Then we get to choose the different list appropriate for us. I'll go ahead and choose tech for that. So it's all nice and appropriate. From here, to view this at a later date, you can go back to the top of the screen and now, we are already on our tech list and we can go ahead and continue to watch these companies that we found interesting because they met our criteria. >> All right. So we have built this list of prospects when it comes to companies. What about further opportunities to do some deeper comparisons of the results? >> Absolutely. So the next step is to peel back the curtain a bit more and get into the weeds to see how this company maybe compares a little bit deeper to its industry peers. The way we can do that, back on the industry screen here, if we go back under the same company, from here at the bottom of this pop-up, we go to "overview". The place I would like to direct everybody she was the fundamentals tab beneath the quote. What's really neat about this is we have an opportunity to do a peer comparison. Within the peer comparison we have the select company that we have chosen from our industry and our comparing it against our industry average and now we have got some very close competitors and peers within the industry. We get to see how our company's fundamental stack up against them. We can see if we are concerned about ratios and dividend payouts. If our company are competitors or even paying dividends. So it's one of those opportunities where we started from a very high level approach and now we've been able to narrow that down and find some trading ideas. Now we are once ready to execute our trades, we can choose the "buy and sell" button of the thought rather at the bottom of the page. > Thank you Jason. > My pleasure. >> Jason Hnatyk, Client Education Instructor at TD Direct Investing. be sure to visit our website for webinars and master classes. And a reminder of how you can get in touch with 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. We are back now with Christian Medeiros taking your questions about asset allocation and a lot of them coming in and we thank you for that. Let's get to them. Once the market bottom happens, which sectors will see the biggest pop? >> The market would start to person with the fed cutting rates on the short end and on the long and we expect lower growth and lower inflation affectations to also post down rates of the long end as well. So to sectors we think would outperform first: technology, the lower discount rate results in a better pricing of these long far out cash flows of technology companies. Technology is one of the most long-duration sectors so we do expect technology to perform with lower rates. The opposite of what we've experienced this year in the technology sector. We also expect to see financials perform well. The reason being is financials are pretty economically sensitive. Their credit is what drives the economy and they do have to face the ebbs and flows of the economy as a whole. But on the right side, we do see the Fed start to pivot around the market bottom, that results in a yield curve steepening and the banks tend to do well with a steeper yield curve so that would be another sector. Watch for. >> The financials of been interesting because we just got out of the big Wall Street banks. Even though the rising rate environment did help, margins at least for those three months, we are seeing the other side, of course the economy is not working in the favour of dealmaking in other areas. >> Yeah. They seem a lot weaker. More than made up for with credit rates by the banks of special is broader money banks and a lot of business lines. I think that's really something that leads to a checklist that is quite challenging. We have seen weakness on the good side of the economy, on the growth side of the economy but not in the consumer side. We still see a lot of credit card spending and consumer spending and that's what banks are seeing two people. People continue to take out loans and have credit card debt. So the credit cycle will elongate the economic cycle. Banks will to a rather continue to do well on the earning side for any provisions for any losses and credit concerns. >> Your checklist really has the interest of the audience. I'm piggybacking on the back of this question: should we be screening through large caps? Push mega caps? >> Around the market bottom, the size factor tends to fend well. Small companies are more sensitive. Because sometimes the balance sheets don't give us as much access to capital and they are more challenged and turn in terms of their competitive edges especially when the economy are slow down be they begin to suffer. We see small companies that tend to do the best first. That's traditionally what we've seen. Historically, around market bottoms, conversely though when heading into a recession, it's the large, most quality companies attend to do best. So you can really think about economic cycle in terms of capitalization of the company as well. >> Fascinating stuff. Next question coming in. What is your outlook for oil? >> That's a really quick question. We think of this range, we expect oil to… The reason being is on the downside we see OPEC continuing to cut and supply is very tight across the board. We don't see any new production from any new X. We also see that the US is announced that they may start buying more oil into the SPR. All that puts a bit of a downside on oil. It could fall a bit further. We don't expect it to fall materially although we do think that economic growth is a challenge oil. So that keeps it in this range. We think that there is downside from policy action that will keep the market tight. Markets existing already tight. Although we don't see it going substantially higher because slowing economic growth tends to be bad for commodities. So we don't see it moving into large of a direction. >> Has China become a wild card in this? Or other commodities? Zero code policy… Do you think they will drop this at some point and renew their appetite? >> China is a major wildcard at this point. Low economic activity and they didn't even publish their GDP growth figures this week. Definitely challenges there. We've had lower commodity price appreciation growth and we would expect it. Lower aggregate demand globally. China works to reopen and get rid of the zero code policy… We would probably be seeing more aggregates. More commodities and global growth at least in the short term. I would not caveat though. Past cycles, China was able to spend a lot of money in infrastructure and on domestic property spending building apartments and homes. This is been something that Xi Jinping is been cracking down on and China really struggling with their credit issues. So we don't see there being as much demand in the past as for iron and copper as we would've seen in past cycles for short-term setback. >> Let's get to another question. This one has more of a political slaver. How much of a risk of the US midterm elections affect the markets? >> We think it will be more of an nonevent to a positive. The US midterms happened as a legislative election. So we are reelecting all members and representatives within the house and we are reelecting one third of the Senate. So what this does sit changes the balance of power in Washington to see who could pass legislation. We are entering the selection as you normally do after a presidential cycle with the Pres. and the White House, Democratic Party and control in this case about the house and the miner control over the Senate. The Pres. has been able to have some big legislation passed, covert policy etc. what we have seen historical he and presidential cycles as voters tend to get quite tired of the Pres. and power when it comes to the two-year mark in the 10 to go the other way. We've seen the same thing this time around with Biden with very low approval ratings. Some of the lowest getting into the midterm elections. We've also seen the generic sentiment quite poor for Democrats and we expect in past cycles as we have as well that we will swing in favour for Republicans. We think Republicans will pick up the house and there is a chance they will pick up the Senate. What is been different this time around is Roe V Wade and questions around abortion and also some improvement on gas prices has seen a bit of a boost in the polls for Biden and the generic democratic valid but we have not seen that follow materially. So we expected to… The control of both legislative bodies will lead to a split house. While in that environment it's hard to find new legislation in an environment where there is very new legislation. Markets can be comforted that they are not going to see surprise policy over the next two years. So we see it as a positive. If it goes as we expect and Republicans pick up one or more of those houses, we have a split government, Washington is now… For next year. >> Interesting stuff. We will get back to your questions with Christian Medeiros on asset allocation in just a moment's time. A reminder to do your own research before making investment decisions. You can get in touch with us in a moment's 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. Another red-hot Canadian inflation reported in September but it did take one step in the right direction. MoneyTalk's Anthony Okolie joins us now with more Anthony. >> That's right Greg. TD economics does feel a Canadian inflation took a small step in the right direction in September. Consumer prices coming in at 6.9% year-over-year in September. Now, that marks the third consecutive monthly drop in headline inflation since peaking back in July at 8.1%. Of course, lower gas prices were mainly responsible for cooling headline inflation numbers. When you look at core inflation, it actually came in a little hot as well in the month of September. When you exclude the food and energy prices, they rose 5 point percent year-over-year. That's after a 5. 3% gain in August. Now, driving a headline inflation of course, Canadians are paying more at the grocery stores. Food bought from stores cost 11% more versus one year ago. That's the fastest pace year-over-year since August 1981 for statistics Canada. As you can see, this chart, on a year-over-year basis, Canadians are paying more for such items as meat, dairy, fresh vegetables, cereal products are also among the other food items that Canadians are paying more for. Other items, shelter inflation which of course carries a very heavy weight in CPI, up six points year-over-year. Versus August space. Within shelter costs, the uptick was driven by higher mortgage interest costs. Canadians renewing or starting new mortgages at higher interest rates. Now, additionally, average hourly wages rose 5% year-over-year. On average prices rose faster than wages. Now, TD economics says that certainly this is a good headline, inflation took a small step in the right direction. However, they still feel that there needs to be more cooling in inflation numbers in order for it to come down to the Bank of Canada's 1 to 3% range. Greg? >> Reports are fascinating and so widely watched because as Canadians, we feel the inflationary pressures about the things we buy but also feel the pressures of the central bank, delivering these double size rate hikes. TD economics, where they did Inc. the bank is headed for the rest of this year? >> Certainly inflation numbers did come in high. Average wages were still running at 5. 2%. So the Bank of Canada expects that the federal, Central Bank, Bank of Canada will continue to hike industry interest rates rather aggressively. They are calling for another 50 basis points at next week's meeting. They think based on the support, they need to come out strong with at least 50 basis points. They expect that the Bank of Canada will get close to a pause on rate hikes by the end of the year. Where they see a rate of 4%. > All right. Anthony, great stuff. >> My pleasure. >> MoneyTalk's Anthony Okolie. Let's do a quick check of the markets. We are seeing some downside pressure on both Bay and Wall Street. Right now you have the TSX Composite Index down a little more than half percent. Tackett consumer, healthcare names and financials seem to be weighing in of the trade on Bay Street. We want to check in on Suncor. A bit of affirming with the price of food, of that pricing modest, about 1 1/2%. Yields moving higher south of the border as well. You have Kinross down to the tune of about 2% almost 3%. Let's check in the S&P 500 after a nice start to the week. We are seeing some downward pressure again. Some of the healthcare names in the states, actually utilities and their financials. Weighing on the broader industry. Tech heavy NASDAQ, a quick check on that one as well. A little more pain there. Not much more. A little more than half a percent. Procter & Gamble, earnings, passing higher costs on to consumers. Shares up a little more than 2%. >> We are back now with Christian Medeiros from TD Asset Management talking asset allocation with a lot of questions coming in. Here's a good one as well: will bond funds eventually recover? With the bond index for Canada, let's say, the bonds returned both in yield and also the potential for capital gains and price appreciation, current levels are we are seeing maturities around 4.8% which is very attractive I in recent versus recent history. Income component… Mandates is quite large, quite attractive going forth with fixed income investors. The flipside is if we are going into a recession, like we do expect, given everything we talked about today, in a recessionary scenario, growth slows down and inflation also slows down. What tends to happen is bond returns actually are quite positive. That's because yields tend to fall in line with those metrics. When yields are falling and you have a bond index with some level of duration to it, that interest rate risk and pause for you and as a result you have a potential for capital gains as well. Past economic cycles especially in recessionary periods for your falling growth, falling inflation, it tends to be the best. For fixed income. So we do think fixed income is an attractive asset class to hold into the current. If you do believe a recession will happen. If you do believe inflation will fall back to normalize levels. >> Another good question. A lot to go through before the end of the program. How should investors view the current tensions between the US and China? They don't seem to see I do I and a lot of stuff. > Traditionally we have seen a rising power in an established power, there always tends to be conflict. In past states of the world, you may have had more life conflicts. Maybe challenging each other. We live in a different world today. One with nuclear power so there's no need or potential to have small-scale conflicts. There's too much risk. The deterrence keeps us away from life conflicts. Where is the conflicts taking place question mark in the economic realm, the cyber realm, all across both economies. So the US is trying to do right now, one of the most interesting fence of actions taken is going against semiconductors in China. Really reducing their ability for US potential intellectual property… Also they know how their allies as well to flying to China and really hobbling the development of the Chinese chips industry. This is an extremely strategic industry. Chips are one of the most important commodities of the 21st century. It goes into any high-tech arms, any high-tech computer so now the economy we think of, trying to moving up to technology and manufacturing, also very relevant to warfare. Without chips you can really have a modern and competitive Army and this is an offensive weapon that the US is using against China to really limit and play this power gameand check any sort of military ventures that they may expect in the future. Interesting. We can squeeze in one more question about bond funds eventually recovering. Is this 60/40 portfolio dead? This is been a rough year. Will it work in our favour? >> It's not dead but it needs to evolve. Asset allocation for a while… What we mean by evolve as we been used to a world in the last two or three decades, I will call it a two dimensional world where one thing we had to deal with his growth. Is it rising, or is it falling? Are we going into a recession recovering? Two dimensions. Inflation is now much more volatile and higher than it was before. When you have high inflation and volatile inflation, it opens up new regimes like the regime we've seen this year. When inflation is high. When you enter a world like that, the benefits of fixed income and equity start to be challenged in correlation start to become positive. You don't have the same diversification benefit. The returns can also be negative as you seen this year. So need to broaden your asset allocation from the 6040 and include alternatives. Things we think investors should consider is real assets such as infrastructure which have inflation linked cash flows that offer some potential for capital appreciation of the red properties are selected. Another one is commodities in periods of high inflation and other things worth including our public alternatives. Things like option strategies that can offer protection as well as other hybrid Securities that offer attractive components of both equity and fixed income. So really broadening your investor toolset as a component to a 60/40 portfolio. It will really help evolve and prepare us for a more multidimensional world. But that isn't dead because in a period of fixed income… Current levels of yielded income we do think that is complement tree to investors portfolio. >> Great insight Christian. Really enjoyed the conversation. > Our thanks to Christian Medeiros, Portfolio Manager at TD Asset Management. And stay tuned, Thursday will be joined by Bryan Rogers, Senior Client Education Instructor TD Asset Management and we will be taking your questions on how to better utilize the platform. A reminder that you get a head start an email as questions at moneytalklive@td. com. That's all the time we have for today. We will see you tomorrow. [music]