The Week of June 7 – June 11, 2021

Macro Update

• Last Wednesday the Bank of Canada held its target for the overnight rate at the effective lower bound of ¼ percent. From its website, “The Bank is maintaining its extraordinary forward guidance on the path for the overnight rate. This is reinforced and supplemented by the Bank’s Quantitative Easing (“QE”) program, which continues at a target pace of $3 billion per week. Consumer Price Index (“CPI”) inflation has risen to around the top of the 1-3 percent inflation-control range, due largely to base-year effects and much stronger gasoline prices. Core measures of inflation have also risen, due primarily to temporary factors and base year effects, but by much less than CPI inflation. While CPI inflation will likely remain near 3 percent through the summer, it is expected to ease later in the year, as base-year effects diminish and excess capacity continues to exert downward pressure. The Governing Council judges that there remains considerable excess capacity in the Canadian economy” This subtle change might hint at a later date for withdrawing stimulus.
• The Canadian dollar retreated last week despite higher crude prices. Perhaps, the foreign exchange market has started to lower its expectations of early withdrawal of stimulus from the Bank of Canada.
• U.S. National Federation of Independent Business (“NFIB”) Small Business Optimism Index slipped to 99.6 in May, a tad lower than 99.8 in April. The bigger implication is how small businesses continue to struggle and fail to participate in the ‘recovery’ that many Wall Street strategists are forecasting. Small businesses account for roughly half of U.S. employment.
• The Federal Reserve has stopped buying corporate debt and actually will start to unwind its holdings (less than $15 billion in a $1.4 trillion market, small, but the change in direction is important). At the same time, its holdings in Treasuries continue to rise. Most ‘tapering’ discussions missed out on the details. The Fed is definitely withdrawing its support for corporate debt but increasing its support for Treasuries.
• U.S. May CPI +0.6% versus +0.8% in April. Excluding food and energy, core CPI +0.7% in May, versus +0.9% in April.
• U.S. May imports -1.4%; exports +1.1%.
• Canada May imports -4.7%; exports +1.0%.
• Canada Q1 capacity utilization improved to 81.7% from 79.7% in Q4 2020.
• Eurozone Q1 GDP -0.3% quarter over quarter, versus -0.6% in Q4 2020.

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 11, 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.