The Week of May 31 – June 4, 2021

Macro Update

• U.S. May unemployment rate fell 0.3% from April to 5.8%. The ‘labour force participation rate’ fell 0.1% to 61.6%, partially offsetting the drop in the unemployment rate as more people left the workforce. In the employment report, labour shortages were often cited. The main reason was the ‘skill mismatch’ in the U.S. labour market. There were not enough trades people and trained high tech workers. ‘Nonfarm payrolls’ +559,000, missing consensus expectations of +650,000. Cumulative revisions to March and April was +27,000. ‘Average hourly earnings’ +0.5% month over month, easing from April’s +0.7%, as reopening brings back lower-paying service sector jobs. ‘Average weekly hours’ unchanged at 34.9 hours, which seems odd given the progress in reopening.
• Reuters – “Half of U.S. states, all of them led by Republican governors, are cutting off billions of dollars in unemployment benefits for residents, rebuffing a key part of President Joe Biden’s response to the coronavirus recession.” These benefits amount to $300 a week, which has been large enough to encourage some people to stay home rather than to go to work.
• U.S. May manufacturing Purchasing Managers’ Index (“PMI”) slightly better than April. Services PMIs are also generally higher. Price indices remained elevated. ‘Price paid’ for businesses generally lagged ‘prices received’ from customers, hurting profit margins.
• U.S. Q1 nonfarm productivity +5.4%, little-changed from Q4 2020; unit labour cost +1.7% vs -0.3% in Q4 2020.
• U.S. April factory orders -0.6% vs +1.4% in March. It does not rhyme with the strong recovery narrative.
• Canada May ‘net change in employment’ was -68,000 as most provinces went through lockdowns. The unemployment rate edged up to 8.2% from 8.1% in April. The ‘labour force participate rate’ fell from 64.9% in April to 64.6% in May. The Canadian dollar actually firmed up slightly as the U.S. dollar fell across the board after the disappointing U.S. employment report.
• Canada March Gross Domestic Product (“GDP”) +1.1%, versus +0.4% in February. Q1 GDP +5.6%, versus +9.3% in Q4 2020.
• Canada May Markit manufacturing PMI came in at 57, little-changed from 57.2 prior.
• Eurozone April retail sales -3.1%, vs +3.3% in March, also going the wrong way.

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 4, 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.