The Week of June 21 – June 25, 2021

Macro Update

• Incoming U.S. economic data continued to disappoint, which stood in sharp contrast to the latest Monetary Policy Statement published by the Federal Reserve Open Market Committee (“FOMC”): “Progress on vaccinations has reduced the spread of COVID-19 in the United States. Amid this progress and strong policy support, indicators of economic activity and employment have strengthened.” Emphasis mine
• U.S. May ‘durable goods orders’ report, which includes the important ‘nondefence capital goods excluding aircrafts’ (the best proxy for business capital spending), was another one missing expectations. The key component that tracks business capital spending, which is a leading indicator, came in at -0.1% month over month , missing expectations of a 0.6% gain, versus +2.2% in April (revised lower from +2.3%). A downtrend in the growth rate in business capital spending could be developing, as the growth rate might have peaked for the short-term. Being a leading indicator, activities farther downstream like industrial production and ultimately, hiring, and income could moderate to reflect this development.
• U.S. weekly jobless claims 411,000, missing expectations of 380,000, again.
• U.S. May ‘new home sales’ -5.9%, versus -7.8% in April. May ‘existing home sales’ -0.9%, versus -2.7% in April. Surging prices (partly boosted by higher costs of materials) had significantly cooled the once red hot U.S. housing market.
• U.S. May personal income -2.0%, versus -13.1% in April; personal spending came in flat, missing expectations, after +0.9% in April (revised up from +0.5%). As a result, the consumer had to draw down on savings to compensate for the drop in income. According to the U.S. Bureau of Labour Statistics, for the month of May, ‘real average weekly earnings’ came in at -2.2% on a year-over-year basis. U.S. May ‘Personal Consumption Expenditure’ (“PCE”) price deflator +0.4% month over month , versus +0.6% in April. Core PCE price deflator +0.5% month over month , versus +0.7% in April.
• U.S. Q1 GDP +6.4% quarter over quarter annualized.
• Large U.S. banks passed Federal Reserve’s ‘Stress Test’ last week. The report noted that large U.S. banks have strong capital levels and therefore pandemic-era restrictions are lifted. WASHINGTON (Reuters) – “Large banks will no longer face pandemic-era restrictions on how much they can spend buying back stock and paying dividends, the Federal Reserve announced Thursday after finding the firms would remain well capitalized in its latest stress test.”
• The Federal Reserve, despite ‘talking about tapering’, is still growing its balance sheet, which has ballooned to over US$ 8 trillion this past Wednesday.

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 June 25, 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.