The Week of May 10 – May 14, 2021

Macro Update

• Compiled by the Federal Reserve – U.S. industrial production rose 0.7% in April, but it is still below pre-pandemic levels. ‘Capacity utilization’ improved from 74.4% in March to 74.9%, still significantly below its long-run average of around 81.0%.
• U.S. April retail sales came in unchanged from March, a weaker-than-expected print, although March was revised higher to a gain of 10.7%, from 9.8%. The important ‘control group’ (retail sales excluding autos, gas stations and building materials, which goes into Gross Domestic Product (“GDP”) calculations as ‘personal consumption expenditures’) fell 1.5% in April. March was also revised higher to a gain of 7.6%, from 6.9%. (The last special stimulus check was mailed in March, which explained the decline in April).
• U.S. April Consumer Price Index (“CPI”) rose 0.8% month over month, 4.2% year over year. Excluding food and energy, core CPI gained 0.9% month over month, 3.0% year over year. The Council of Economic Advisers (“CEA”), an agency within the Executive Office of the U.S. President, noted that, a ‘price index of pandemic-affected services’ shows a sharp increase in April, but that the level of prices is still below the pre-pandemic level. Controlling for base effects by smoothing across the 14 months since February 2020, the rate of core CPI inflation was 2.2%.
• According to the U.S. Bureau of Labour Statistics (“BLS”) – ‘Real average weekly earnings’ increased by 0.2% month over month, due to no change in ‘real average hourly earnings‘, combined with an increase of 0.3% in the ‘average work week’. On a year-over-year basis, ‘real average weekly earnings’ fell 1.4%, despite a 2.3% lengthening in the ‘average workweek’, because ‘real average hourly earnings’ fell 3.7%. Wages has not been keeping pace with the price increases (CPI rose 4.2% year over year, while ‘real average weekly earnings’ fell 1.4%). The U.S. consumer will have to cut back on discretionary spending. That would be negative for growth going forward.
• U.S. April Producer Price Index (“PPI”) +0.6%, vs +1.0% in March. PPI for intermediate goods was flat, indicating some producers had difficulty passing along higher prices down the production chain, a negative impact on profit margins.
• Canada March manufacturing sales +3.5% vs -1.6% in February. March wholesale sales +2.8% vs -0.9% in February.
• Eurozone economic sentiment survey index rose to 84.0 from 70.7 prior.

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 May 14, 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.