The Week of October 19 – October 23, 2020

Macro Update

• The impact from the recent rise in COVID-19 case counts is beginning to come through in economic data. Japan, Germany and France are experiencing weaker Purchasing Managers’ Indices (“PMI”) composite readings. Manufacturing is still in expansion mode but services is stuck in contraction mode. It would seem that manufacturing has to work a little harder to build inventory amidst disruptions in supply chains. Re-imposing of restrictions, however, immediately hurts the service sectors.
• Hospitalization and death rates are not rising with cases (although they lag) given the younger profiles of those that are infected. Still, restrictions and shutdowns are not good for the economy and consumer confidence. Eurozone September advance consumer confidence index came in at -15.5 vs -13.9 prior.
• Death counts in the U.S. have started to rise (being 2 to 4 weeks behind rising case counts). The bright side is, infection rates and death rates are both significantly below peak levels due to broader testing (larger denominator) and milder symptoms among the mostly younger cohorts. As such, the capacity in healthcare systems remains ample. Still, it would be reasonable to expect some setback in the service sectors to come as well.
• U.S. September housing starts weaker than expected but still +1.9% vs -6.7% in prior month (revised down); building permits stronger at +5.2% vs -0.5% in prior month (revised down). The housing sector is very strong. The National Association of Home Builders (“NAHB”) housing market index reached an all-time high of 85 in its latest report.
• U.S. September existing home sales +9.4% month over month; +20.9% year over year. Prices +14.8% year over year. Supply at its lowest level since 1982 at 2.7 months. Quantitative easing boosted asset prices, and the housing sector is red hot; even though close to 23 million in the U.S. are still on government assistance.
• From the Federal Reserve Beige Book (a survey of the 12 regional Federal Reserve districts on economic and business conditions), modest recoveries were cited across many districts. One fly in the ointment – “Banking contacts in many Districts expressed concern that delinquency rates may rise in coming months, citing various reasons; however, delinquency rates have remained stable.”

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 October 23, 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.