The Week of January 18 – January 22, 2021

Macro Update

• Last Wednesday, the Bank of Canada kept monetary policy unchanged. It stated, “In view of the weakness of near-term growth and the protracted nature of the recovery, the Canadian economy will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In our projection, this does not happen until into 2023.” The ‘no change’ disappointed those looking for a ‘surprise’ cut. The Bank rate remains at 0.25%. The Canadian dollar rallied, but fell back towards the end of the week.
• Canada December Consumer Price Index (“CPI”) -0.2% month over month, after +0.1% in November. Two consecutive months of poor showing took the year over year rate down to +0.7. Core measures are generally lower as well.
• Canada November retail sales +1.3%; very old data. Statistics Canada’s December estimate is -2.6%.
• There were encouraging developments in the U.S. in limiting the virus spread; likely resulting from a combination of restrictions and vaccination rollout. Case counts and hospitalizations have fallen below their respective 7-day moving averages. 
• The Mayo Clinic, citing experts, estimated that herd immunity would be reached if around 70% of the population is immunized; and that would suggest the start of fall this year.
• National Home Builders Association (“NAHB”) U.S. housing market index eased to 83 from 86, still elevated.
• U.S. December existing home sales +0.7% month over month. November was revised from -2.5% to -2.2%. Overall, the U.S. housing market is still very strong.
• Purchasing Managers’ Indices (“PMIs”) were released for major economies last week. Unfortunately, their predictive powers have been much diminished because of supply chain disruption due to lockdowns and rising prices resulting from shortages. In normal times, supply chain disruption and rising prices would indicate strong demand, but not during this pandemic.
• Incoming economic data are reflecting the impact from restrictions due to rising case counts and hospitalization rates in November and December. Many prominent forecasters still have ‘stale’ forecasts that were made in October or November 2020, that were based on August or September data. Risk appetite might experience a setback if downward revisions for forecasts start showing up.

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 January 22, 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.