The Week of April 19 – April 23, 2021

Macro Update

• Last Wednesday, the Bank of Canada kept its benchmark interest rate unchanged, but in its Monetary Policy Report, it surprised market participants by being very optimistic on Canada’s economic outlook. Among others, it raised its growth forecast for Canada for 2021 from 4.0% to 6.5%; a significant upward revision.
• The Bank of Canada also became the first major central bank to ‘taper’ (gradually withdrawing stimulus programs). BNNBloomberg – “Policy makers led by Governor Tiff Macklem said Wednesday they would scale back their purchases of government debt by a quarter to C$3 billion and accelerate the timetable for a possible interest-rate increase.”
• From the Monetary Policy Report – “We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2% inflation target is sustainably achieved. Based on the Bank’s latest projection, this is now expected to happen some time in the second half of 2022.” Observers generally interpret that as the time when the key benchmark interest rate would be raised.
• The statements by the Bank of Canada and the upward revisions to growth are inconsistent with the latest round of restrictions imposed across many Canadian provinces to combat the third-wave COVID-19 outbreak. There is a possibility that the shift in policy stance was formulated before the ‘stay at home’ orders were issued. If that is the case, there is a risk that a certain degree of ‘walking back’ from such optimism could take place in the coming weeks.
• Canada March new housing price index +1.1% month over month, versus +1.9% in February.
• After its meeting last Thursday, the European Central Bank kept monetary policy unchanged.
• As for the Federal Reserve, Reuters reported that in an April 8, 2021 letter to a U.S. Senator, Federal Reserve Chair Powell wrote, “We do not seek inflation that substantially exceeds 2 percent, nor do we seek inflation above 2 percent for a prolonged period,” Being vigilant on inflation is not being ‘restrictive’ in terms of monetary policy; this commitment actually will work to drive long yields lower.
• U.S. March ‘existing home sales’ -3.7% month over month versus -6.3% in February. Tight supply, rather than poor demand, has been the driving force. ‘New home sales’ +20.7% versus -16.2% in February. U.S. housing resumes strength after a brief pause.

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 North American Fund (formerly 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.

All data is sourced from Thompson Reuters and Capital IQ as of April 23, 2021 unless otherwise indicated. While believed to be reliable, the accuracy of the information cannot be guaranteed. Caldwell Investment Management Ltd. and its affiliates make no representations or warranty as to its completeness, reliability or accuracy.

Investment involves risk, uncertainty and assumptions. The value of investments rise and fall such that there is a risk you may not recoup your original investment. Past performance is not a reliable indicator of future performance.

The views expressed herein of those of the portfolio manager and not necessarily those of CIM. Such views, while based on current market conditions and information, are subject to change without notice such that there can be no assurance that actual results will not differ materially from such expectations. The views expressed are an illustration of broader themes and intended to be for general information purposes only. They should not be relied upon nor construed as investment advice. Readers are expected to consult with their investment advisor for advice specific to their circumstances before making investment decisions.

Forward-looking statements are not guarantees of future results as they involve uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.