The Week of August 31 – September 4, 2020

Macro Update

• Risk aversion has clearly set in among equities and other risk assets.
• U.S. August Nonfarm Payrolls rose by 1,371,000; versus July’s 1,734,000 (revised from 1,763,000). The unemployment rate dropped to 8.4% from 10.2% in July. The Labor Force Participation Rate improved to 61.7% from 61.4% and the Average Hourly Earnings rose 4.7% on a yearly basis to match July’s reading. The drop in unemployment rate was generally greeted with optimism, but within the gains in nonfarm payrolls number, there were 248,000 temporary census workers. The internals are poor. The gains in jobs came from a sharp drop in ‘Number of Unemployed on Temporary Layoff’, but amidst a simultaneous increase in ‘Permanent Job Losers’.
• Canada Net Change in Employment registered at 245,800 in August; the Unemployment Rate dropped to 10.2% from 10.9% in July.
• U.S. July trade deficit swelled to its widest since 2008 at -$63.6 billion vs -$53.5 billion in prior month. Exports +8.1%; imports +10.9%.
• Canada July trade balance -$2.45 billion vs -$1.59 billion prior. Exports +11.1%; imports +12.7%.
• U.S. July factory orders +6.4% vs +6.4% in prior month (revised up from +6.2%); July durable goods orders slightly revised up to +11.4% vs. +11.2% prior.
• U.S. Q2 nonfarm productivity +10.1%. Unit labor costs +9.0%. These data are distorted, sadly because the majority of job losses are among low wage earners and service sectors.
• Credit conditions in the U.S. are deteriorating. Apart from tightening lending standards for C&I loans (commercial and industrial), credit card limits are also being lowered for the less qualified customers, hitting the lower income card holders the hardest.
• Eurozone retail sales fell 1.3% in July.
• Escalating U.S./China tensions.
• Nikkei Asian Review – “Japan, India and Australia aim to steer supply chains around China. Trade ministers of three nations launch plan to reduce dependence on Beijing.”

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 September 4, 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.