The Week of May 25, 2020 – May 29, 2020

Macro Update

• U.S. Q1 GDP -5%. Inside the report personal consumption -6.8%. Exports -8.7%; imports -15.5%.
• Canada Q1 GDP -8.2%.
• Q2 for both U.S. and Canada could even be worse as it contains the period of full lockdown. However, month-to-month data should start ‘improving’, as reopening gets underway. Still, the economy would be much weaker than before the pandemic, amidst fundamental changes in the economy.
• Germany’s economic think tank says that the German economy would likely shrink by 6.6% this year, and likely to grow 10.2% next year. Q2 will likely see a contraction of 12.4% due to the coronavirus crisis.
• Canada April building permits -17.1% vs. -13.2% prior.
• U.S. April personal income +10.5%, as federal payments more than cushioned households. Personal spending -13.6%. Durable goods orders -17%. The important ‘non defence capital goods orders excluding aircraft’ (best proxy for business capital spending) -5.8%. ‘New home sales’ +0.6% m/m, a nice surprise given a -23.4% estimate. March was -13.7%.
• U.S. latest consumer confidence index improved to 86.6, compared to a revised 85.7 prior.
• As we move towards June, we will start receiving economic data from May instead of April (full lockdown). The reopening has been limited so minor improvement in data would be the most likely scenario.
• Japan and South Korean economic data for April also showed improvement, but they are dwarfed by the recent large declines.
• European Central Bank President Lagarde: “It is very likely that ECB ‘mild’ scenario is outdated.”
• There continues to be encouraging progress in the medical research community.
• The currency markets returned to focus on the erosion of the still sizeable U.S. interest rate advantage over other major economies, leading to a general decline in the U.S. dollar against major currency pairs, evidenced in last week’s price action. The Canadian dollar gained ground accordingly.

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 May 29, 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.