The Week of January 25 – January 29, 2021

Macro Update

• Last Wednesday, the Federal Reserve Open Market Committee (“FOMC”) kept monetary policy stable. It did acknowledge the pace of economic recovery, employment has moderated. It also referenced the important role vaccines will play in the recovery.
• U.S. weekly Initial jobless claims lower at 847,000 vs. 914,000 in prior week; partly due to workers being allowed to return to Las Vegas. Continuing claims at 4,770,000 vs 4,970,000 in prior week.
• U.S. Q4 GDP +4.0% (quarter over quarter, annualized), which was weaker than the expected +4.2%. Personal consumption +2.5%, which is also softer than the expected +3.1%.
• U.S. December personal income +0.6% from -1.7% in November. Personal spending -0.2% vs. -0.7% in November. The ‘core personal consumption expenditure price deflator’ (the Federal Reserve’s favourite inflation gauge) edged up to 1.5% year over year.
• U.S. December durable goods orders eased to +0.2% vs. +1.2% in November. The important ‘nondefense capital goods excluding aircrafts’ (best proxy for business capital spending) +0.6% vs. +1.0% in November.
• U.S. Case-Shiller National Home Price Index +9.5% year over year vs. +8.4% in prior month. ‘Pending home sales’ -0.3% in December, vs. -2.5% in November. U.S. housing data are taking a breather but overall demand is still strong.
• Canada November GDP +0.7% month over month, after +0.4% in October; old data.
• Last Wednesday, the German government revised its growth forecast for 2021 down to 3.0% as Europe’s biggest economy faces persistent headwinds from the coronavirus pandemic. In late October 2020, the government had forecast growth of 4.4% for 2021. Business expectations survey indices were lower as well.
• Trading activities in heavily-shorted stocks triggered large losses among leveraged players who had to liquidate long equities positions to bring down their risk exposures and to offset the losses. There were episodes of heavy selling in mainstream equities last week, which often coincided with bouts of weakness in the Canadian dollar.
• As noted above, economic data have generally failed to exceed expectations as downward revisions for growth have started to trickle in. A lower base for 2020, and a slower than expected Q1 (restrictions so far this year) could combine to be a disappointment as markets are pricing in high expectations.

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 29, 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.