The Week of June 22 – June 26, 2020

Macro Update

• Last week, credit rating agency Fitch downgraded Canada from ‘AAA’ to ‘AA+’; “outlook stable”. There was hardly any market reaction since most investment mandates employ ratings by Standard & Poor or Moody’s.
• The Canadian dollar was hurt more by the return of risk aversion as new COVID-19 cases climbed in a large number of states in the U.S. While Treasury Secretary Mnuchin has said there will be no more lockdowns, a formidable second wave could still negatively affect consumer behaviour and thus business activities.
• According to the U.S. Department of Labour, including those who are on ‘pandemic unemployment assistance program’, total unemployed has reached over 30,000,000.
• U.S. May personal income -4.2% vs +10.8% in April, during which households received relief of $1,200 stimulus, and now such benefits are beginning to fade. The $600 weekly unemployment benefit is also scheduled to expire on July 31, 2020.
• U.S. May consumer spending +8.2% vs -12.6% in April. Spending on goods +14.1% vs. -13.5% in prior month. Spending on services was only +5.4% vs. -12.2% in April. The recent surge in case counts would not help.
• U.S. May durable goods orders +15.8% vs. -17.7% in April. ‘Nondefence capital goods orders’ (best proxy for business capital spending) +2.3% vs. -6.5% prior month.
• U.S. May imports -1.2% m/m; exports -5.8%. Compared to pre-COVID levels, exports has fallen more than 30.0%, consistent with the collapse in global trade.
• U.S. May new home sales +16.6% m/m.
• Among major economies, PMIs (Purchasing Managers Indices) are staging their rebounds as we have mostly gone past the trough for economic data. However, they are all still below the neutral line of 50.0; in ‘contraction territory’.
• China Beige Book International, the largest private data-collection network to track the Chinese marketplace, concluded that China’s economy contracted in Q2 from a year earlier, and that slow global demand remains a drag on growth.
• According to Reuters – “Gilead Sciences Inc. said last Monday it expects to be able to supply enough of its antiviral drug Remdesivir by year end to treat more than 2 million COVID-19 patients, more than double its previous target of 1 million.”

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 June 26, 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.