The Week of August 24 – August 28, 2020

Macro Update

• In his opening speech at the Federal Reserve’s annual symposium last Thursday, Chair Powell said that the Fed will now target a 2% average inflation, and put emphasis on “broad and inclusive” employment, with the shift motivated by underlying changes to the economy, including lower potential growth, persistently lower interest rates and low inflation. “Following periods when inflation has been running persistently below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time.”
• Bank of Canada Governor Macklem also spoke at the symposium. He mentioned that many central banks are at the lower bound on rates. He said central banks need to make a larger effort to spending more time speaking and listening. There was no reference to the future path of monetary policy in Canada.
• U.S. July personal spending +1.9% vs +5.6% prior. Personal income +0.4 vs -1.1% prior. The core PCE Deflator (Personal Consumption Expenditure Price Deflator, the Fed’s favourite inflation gauge) came in at 1.3% year over year. That is a long way from 2.0%.
• U.S. July durable goods orders +11.2%. Prior was +7.6%. The important ‘Non-defense capital goods excluding aircrafts’ (the best proxy for business capital spending) +1.9%. Prior was revised up from +3.4% to +4.3%.
• Canada Q2 GDP -38.7%. Q1 was -8.2% (unrevised). June GDP +6.5% month over month vs +4.5% prior. July GDP forecast to rise 3.0% in a flash estimate by Statistics Canada.
• Spain, and Europe as a whole, are seeing a surge in cases. For the U.S., while the count is still high, there is now a steady down trend. More importantly, hospitalizations have turn negative in many states (more people leaving the hospitals than entering). Deaths are also declining and capacity of healthcare facilities remains adequate.
• U.S. China tensions intensified. South China Morning Post – “Chinese military fires ‘aircraft-carrier killer’ missile into South China Sea in ‘warning to the United States’”
• U.S. State Department statement – The U.S. has imposed visa restrictions on certain Chinese individuals over actions in the disputed South China Sea. 24 companies were also added to the entity list for helping to build military islands in the area.

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 28, 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.