The Week of April 20, 2020 – April 24, 2020

Macro Update

• Last Monday, one day before the front futures contract (May) for crude oil (WTI – West Texas Intermediate) was due for settlement, the futures contract fell to a low of -US$40.00. The longs were squeezed to the extent that they had to pay someone who could find storage capacity to take their contracts off their hands to avoid taking physical delivery themselves. The Canadian dollar fell in sympathy, but soon recovered as this is more of a short-term storage issue, notwithstanding the severe imbalance that still exists between demand and supply for the medium-term.
• The majority of incoming economic data will soon include survey periods from mid-March to mid-April, roughly coinciding with the height of fear and uncertainty. Since then, progress in medical research and rising capacity of the healthcare system, coupled with social distancing measures, have managed to ‘flatten the curve’, and improve sentiment.
• The latest batch of PMIs (“Purchasing Managers’ Indices”) from major economies around the world reflected high levels of pessimism, likely due to elevated levels of uncertainties towards how economies would reopen.
• Japan manufacturing PMI came in at 43.7; service at 22.8.
• Eurozone services PMI at 11.7;
• France services PMI at 10.4;
• Germany manufacturing PMI at 34.4.
• It is important to note that the survey period is from April 7 to April 22, roughly coinciding with the height of fear. As such, it is likely that we are now beginning to go through the trough of the crisis and the worst of the economic data.
• Canada March Consumer Price Index (“CPI”) fell 0.6% m/m; mostly on falling crude and gasoline prices.
• U.S. March preliminary durable goods orders fell 14.4%. Excluding transport (which suffered tremendously), orders fell 0.2%. The important ‘non-defence capital goods excluding aircrafts’ component (best proxy for business capital spending) rose 0.1% (all month-over-month data). This is a volatile series, but it is much better-than-feared.
• More fiscal and monetary programs are on their way. Last week, the U.S. Senate passed a $484 billion fiscal package to replenish the Paycheck Protection Program (“PPP”) and other small businesses programs. ECB loosens collateral rules to accept non-investment grade bonds as collateral, and the EU is looking at fiscal programs totaling 2 trillion Euros.

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.

All data is sourced from Thompson Reuters and Capital IQ as of April 24, 2020 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.