The Week of August 10 – August 14, 2020

Macro Update

• Case counts are flaring up in Europe and they stay stubbornly high in the U.S.; putting a major dent in the recovery scenario.
• Latest Daily Activity Indicators from Bloomberg Economics are leveling off, resonating the rise in case counts.
• Another sign the recovery is stalling is that the Federal Reserve’s Main Street Lending Program, launched to help U.S. small and midsize businesses, more than doubled its loans last week, registering the largest weekly increase so far. Data released on last Thursday by the Fed showed Main Street loans given by the central bank rose by US$131 million to US$226 million as of last Wednesday from US$95 million a week earlier.
• U.S. Small Business Optimism Index from National Federation of Independent Businesses (“NFIB”) also fell in July to 98.8 vs. 100.6 the prior month. According to NFIB: uncertainty increased; sales expectations declined; and business owners continue to temper expectations of future conditions.
• U.S. July retail sales +1.2%; prior +8.4%. The important ‘Control Group’ (sales excluding autos, gas stations and building materials – it becomes ‘personal consumption expenditure’ in GDP calculations) +1.4%; prior +6.0%. Massive distortions among sectors and industries.
• U.S. July consumer price index (“CPI”) +0.6% month over month. Core (excluding food and energy) +0.6% month over month. One big driver was prices of used cars, which went up 2.3% month over month, as consumers shun public transit. Food inflation is getting severe; while men’s suits and women’s dresses plummeted due to working-from-home. All things related to travel also suffered.
• U.S. July producer price index (“PPI”) +0.6% month over month vs -0.2% in prior month; core (excluding food & energy) +0.5% vs -0.3% prior.
• U.S. July industrial production +3.0%; prior +5.7%. Capacity utilization improved to 70.6%, but significantly below long-term average of 81.0%; thus questioning the production number. 
• Canada July housing starts 245,600. June was 211,700. That is a 16% jump. There is a rush to buy homes to protect the purchasing power of savings, and an urge to leave the cities for the suburbs and small towns.

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 August 14, 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.