The Week of January 4 – January 8, 2021

Macro Update

• Incoming economic data continued to be negatively impacted by the pandemic-related restrictions. U.S. December ‘nonfarm payrolls’ fell 140,000, a much larger drop than consensus expectations. There are significant upward revisions to October and November but given the adverse trend of the virus spread, January could be challenging as well. Leisure and hospitality sectors were the worst hit. There is also the possibility that larger stimulus cheques would actually discourage some workers from returning to work.
• ‘Average hourly earnings’ rose to 5.1% from 4.4% year over year but that was severely distorted by the disproportionate loss in lower-paying jobs, and those who simply refused to go to work.
• The unemployment rate was steady at 6.7%. The ‘labour force participation rate’ also steady at 61.5%; but there was a worrisome shift in the pattern among the unemployed. Those who have been unemployed for 27 weeks and over (an often-used threshold for defining long-term unemployment) rose to 3,956,000, and advanced to 37.1% of total unemployed. This could be one of the measures of the permanent damage inflicted to the economy by the pandemic.
• The latest U.S. initial weekly jobless claims stood elevated at 787,000, versus 790,000 prior.
• Canada December unemployment rate was higher at 8.6%, prior was 8.5%. The ‘labour force participation rate’ fell to 64.9% from 65.1% prior. Net change in employment -62,500, compared to +62,100 prior.
• Canada December imports -0.3%; exports +0.5%.
• The Bank of Canada’s Quarterly ‘Business Outlook Survey’ Index rose to +1.29 vs -2.18 in the prior quarter. The Bank of Canada cautioned, “Interviews for the Business Outlook Survey were conducted from mid-November to early December. This was before some provincial governments further tightened restrictions to contain the pandemic and after announcements were made about effective vaccines.”
• Following the Markit U.S. Purchasing Managers’ Index (“PMI”), the Institute for Supply Management (“ISM) also posted a strong headline; its U.S. manufacturing PMI registered a reading of 60.7. The patterns were very similar in both, the headline readings were boosted by supply chain disruption and higher selling prices. Both would have been positive signs during normal times, but in the current environment, the supply chain disruption was due to restrictions and lockdowns; and the higher prices were a result of suppliers passing on higher input prices. The service sector indices exhibited similar patterns as well; improvement in the headline number was a result of disruption, rather than rising demand.

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 8, 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.