The Week of October 26 – October 30, 2020

Macro Update

• The Bank of Canada indicated last Wednesday that it will extend its purchase of Government of Canada bonds out to 3 – 15 years. These maturities more closely mirror the needs of businesses and households and thus this policy shift will provide more support for the economy. The bottom line is, central banks want to keep real interest rates as low as possible (as in negative), to support growth and risk appetite/assets. The Federal Reserve should not be much different, if at all.
• Canada August GDP +1.2% month over month. July was +3.0%. On a year-over-year basis GDP -3.8% vs. -5.0% in July. Very old data. Statistics Canada’s preliminary September estimate +0.7% month over month. Preliminary Q3 estimate +10.0% quarter over quarter. Activity is about 5% below the peak reached in February.
• Canada September building permits +17.0% vs +1.4% prior.
• U.S. Q3 GDP +7.4% quarter over quorter, old data.
• U.S. weekly jobless claims at 751,000 vs 791,000 prior.
• U.S. September ‘pending home sales’ (signed but not yet closed) -2.2% vs +8.8% prior; the first decline in 4 months.
• U.S. September personal income +0.9% month over month vs. -2.5% prior. Personal spending +1.4% month over month vs. +1.0% prior. Core Personal Consumption Expenditure Price Deflator (The Federal Reserve’s favourite inflation gauge) +1.5% year over year vs. +1.4% prior.
• The impact from the recent rise in case counts is beginning to come through in economic data. Japan, Germany and France are experiencing weaker Purchasing Managers’ Indices (“PMI”) 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. Ultimately, it is important to note that the pandemic can be brought under control. Nikkei Asia – “Taiwan hits 200 days without a domestic transmission.”
• France is the latest hotspot for new cases. Unlike the U.S., Germany’s healthcare system is now being stretched.
• Bloomberg – “Germany, France Impose Strict Month-long Curbs to Rein in Virus”. “France Says Second Lockdown Will Cut Economic Output by 15%”.

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 30, 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.