The Week of March 16, 2020 – March 20, 2020

William Chin, MBA

Portfolio Manager & Chief Technical Analyst

William Chin, Chief Technical Analyst for Caldwell Investment Management Ltd. (“Caldwell”), is the lead Portfolio Manager on the Tactical Sovereign Bond Fund and Portfolio Manager for the fixed income portion of the Caldwell Balanced Fund. He also advises fixed income portfolios for affiliate Caldwell Securities Ltd.’s separately managed account platform and contributes to the Caldwell Investment Management Ltd. team’s research, specializing in macro-economics, currency risk management and technical analysis. William is a member of Caldwell’s Investment Risk Committee.
William has over 35 years of international investment experience in the areas of portfolio, currency risk and treasury management. He began his career in the currency market, progressing to the role of treasury manager for a large international bank. He was first registered as a Portfolio Manager with the Ontario Securities Commission in 1999 and managed high net worth client portfolios on a discretionary basis prior to joining Caldwell.
William has an MBA in economics and international finance. He has been a volunteer and a board member for the Canadian Society of Technical Analysts since 2001 and is their former President (2012-2014).
William is a frequent speaker on macro analysis, monetary policy and technical analysis.

Macro Update

• After slashing the Fed funds rates band to 0.00% – 0.25%. The Fed also launch a new $700 billion quantitative easing program last week. From its statement “…over coming months the Committee will increase its holdings of Treasury securities by at least $500 billion and its holdings of agency mortgage-backed securities by at least $200 billion.” The Fed needs Congressional approval before it can expand the classes of assets that it can buy.
• Other central banks, including the Bank of Japan, also took action. The IMF said this morning it is ready to mobilize its US$ 1 trillion lending capacity.
• Crude oil benchmark West Texas Intermediate at one point fell to $20.52 a barrel on the back of a glut in the ‘spot’ market. The U.S. is using this opportunity to fill up its SPR (Strategic Petroleum Reserve).
• China’s Industrial production fell 13.5% in January and February from the same period a year earlier. Retail sales fell 20.5%. Fixed-asset investment dropped 24.5%. (This is the category that the government uses to prop up GDP, the large drop is very troubling). The unemployment rate jumped to 6.2%, the highest on record.
• Beyond health issues, the global economy faces a shortage of liquidity as countries go into various degrees of the lock down mode, as non-essential businesses grind to a halt. The global economy also faces a solvency issue. Businesses need to remain solvent by the time the health crisis passes so the economy can stand up again. To a large extent, central banks and governments ‘get it’.
• The Federal Reserve, along with the Bank of Canada, the European Central Bank, Bank of England, Bank of Japan, and the Swiss National Bank are in coordination to ensure liquidity is readily available. Monetary policy can also ensure the plumbing in the credit/banking system does not clog up. Fiscal policies can work to backstop the balance sheets of businesses and households. Former Federal Reserve Governor Kevin Warsh outlined such blueprints on CNBC this past week. In the case of the U.S., if Congress and Treasury can coordinate with fiscal policies such as taxation, and equity injection, among others. Along with the Federal Reserve, the economy should be able to recover over time. Canada is rolling out a similar string of measures aimed at supporting businesses and households through this difficult period. Other countries may have different systems but the essence would be the same. We can expect more details from the U.S. and Canada this week.