The Week of June 8 – June 12, 2020

Macro Update

• Towards the end of last week, rising numbers of cases in Florida and Arizona triggered worries of a second wave. Arkansas, North Carolina, Texas and Utah all reported record numbers of patients entering hospitals on Saturday. Risk appetite suffered a significant set back as equities fell, taking the Canadian dollar with them.
• U.S. ‘weekly job claims’ and ‘continuing claims’ are at odds with the strength in ‘nonfarm payrolls’ in the May employment report. ‘Continuing claims’ remain stubbornly high at 20,900,000. The Bureau of Labour Statistics (“BLS”) model responsible for the ‘nonfarm payrolls’ might be too optimistic (thus the negative two-month revisions of 640,000 to March and April).
• From its meeting concluded last Wednesday, the Federal Reserve continues to be cautious about the economic recovery and remains supportive of asset prices. It said that it will keep the Fed funds rate at current levels (near zero) through at least 2022. It will also purchase $80 billion of Treasuries and $40 billion of mortgage-backed securities every month to support financial markets.
• The Fed seems to be happy with higher long rates. The 5 to 30 year Treasury yield spread widened to at one point 120 basis points, the steepest since mid-2017. Higher long yields can offer a better return for fixed income investors like pension funds and insurance companies, including individual savers. Higher long rates might also discourage investors from over allocating to equities.
• U.S. May producer price index +0.4%, core (excluding food and energy) -0.1%; month over month.
• University of Michigan U.S. consumer sentiment index improved to 78.9 from 72.3 prior.
• German industrial production plunged by a record 18.0% in April.
• Eurozone April industrial production -17.1% vs -11.9% prior.
• There has been further progress from the medical research community.

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 12, 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.