Thackray Newsletter · 2020/4/4 · Market Update We are all becoming graph curve experts! Covid-19 infection rate analysis is going to make us all experts in analyzing graph curves

Thackray Newsletter— Know Your Buy & Sells a Month in Advance —

Published the 10th Calendar Day of Every MonthVolume 14, Number 4, April 2020 Written by Brooke Thackray

alphaMountain Investments - alphamountain.com

S&P 500 (Technology Sector) Technical Status

One of the canaries for the health of the stock market that I follow is the technology sector. This sector has lead the stock market higher over the last few years. When the leader of the stock market continues to outperform the S&P 500, it typically indicates that investors have not truly capitulated. We have seen an unbelievable drop in the stock market, a dislocation in the credit markets and money leaving the stock market. Yet, there is a signifi cant number of investors that are hiding out in the technology sector, rationalizing that the sector is still going to be a leader and should be one of the least aff ected sectors by Covid-19.

On an absolute basis, the technology sector, has its up trend in tact. Relative to the S&P 500, the sector has been outperforming in 2020, with a steeper slope of outperfor-mance compared to most times over the last few years.

While the technology sector is outperforming the over-all stock market it is probably indicating that the stock market is still healthy and maintains a good chance of stability and moving higher. Of course, that could change.

After weeks of negativity on how bad Covid-19 is for society, the media will be using curve analysis to show positive improvements. The number of daily new infec-tions is starting to decrease in diff erent countries and this is defi nitely a positive development.

As some initial progress is being made against Covid-19, the media is starting to make statements such as “there is light at the end of the tunnel,” “we are on the other side of the curve,” and many other similar statements.

As the infection rates drop, governments will start to talk about dates to open businesses and lifting isolation re-strictions. Tentative schedules will be developed in hopes of “everything getting back to normal.”

Right now, earnings, job availability, manufacturing and service surveys, unemployment, GDP do not really mat-ter that much. Investors know that they are all bad, so they fi gure that the results are already priced in the stock market to a large degree. Why fret over something that is temporary?

Investors are looking forward, trying to fi gure out when the economy is going to pick up, after the Covid-19 pan-demic. One of the key metrics that they will be looking at

Market Update

We are all becoming graph curve experts!

Covid-19 infection rate analysis is going to make us all experts in analyzing graph curves. People on CNN are going to start talking about peak rates, infl ection points, second derivative changes, skewness (ok maybe not sec-ond derivatives and skewness).

alphaMountain Investments - alphamountain.com— 2 —

Horizons Seasonal Rotation ETF (HAC : TSX)Portfolio Exposure as of March 31st, 2020

Symbol

Holdings % of NAV

Canadian Dollar Exposed AssetsEquities

HXT Horizons S&P/TSX 60™ Index ETF 26.0%HXCN Horizons S&P/TSX Capped Composite Index ETF 16.5%

CommoditiesHUN Horizons Natural Gas ETF 2.2%

United States Dollar Exposed AssetsEquities

HXS Horizons S&P 500® Index ETF 43.9%VOO Vanguard S&P 500 ETF 6.6%

US Dollar Forwards (Apr 2020) - Currency Hedge ** -0.2%

Cash, Cash Equivalents, Margin & Other 5.0%

Total ( NAV $253,444,640) 100.0%** Refl ects gain / loss on currency hedge (Notional exposure equals 30.13% of current NAV)

The objective of HAC is long-term capital appreciation in all market cycles by tactically allocating its exposure amongst equities, fi xed income, commodities and currencies during periods that have historically demonstrated sea-sonal trends. The Thackray Market Letter is for educational purposes and is meant to demonstrate the advantages of seasonal investing by describing many of the trades and strategies in HAC.


is the number of new infections. In 2002/03 SARS crisis, the stock market started to rally when the daily new infec-tion rate started to decline. Maybe it is not a good model this time, but investors will be using it to help judge if it is time to be aggressive with equities. Investors are anx-iously waiting to be in the stock market.

Not so fast!China’s new cases of Covid-19 have fallen dramatically, with very few new cases being reported. Italy’s new cases are declining, Spain looks to be next with lower new daily rates. So, which country’s curve do you look at?

The problem is that it is not that simple. China was very slow in dealing with the problem, but once they acknowl-edged the problem, they used very draconian measures to bring the situation under control. Italy is having compli-ance problems from its citizens. Its daily infection rate curve will look very diff erent that China’s.

In addition, western societies compared to China, could have problems with a gradual lifting of restrictions, which could make them more vulnerable to a second wave of infections. There are too many variables in trying to fi t an investment model to diff erent infection rate curves, but the media and investors will certainly try.

On a positive noteA vaccine for Covid-19 will be good in the long-term, but because it will not be available for many months, or even a year, it does not help in the short-term. On a positive note, there is potential for medical tests that did not exist one month ago to make a diff erence in bringing the Co-vid-19 situation under control. A multitude of new tests are currently being developed, including a fairly inexpen-sive fi ve minute Covid-19 test. A mass implementation of Covid-19 tests could help to fl atten the infection curve substantially.

Even more promising in the short-term are tests currently being developed to determine if you have already had Co-vid-19 (serology tests), but are no longer contagious. This could be a big game changer as parts of the population could return to work, as in theory they have developed immunity to Covid-19. Given that most people are as-ymptomatic that have Covid-19, these tests could ramp up the get back to work agenda by providing a base of work-ing population and allow an eff ective transition strategy.

Although these tests could help get the economy get go-ing, they will not restore the economy to its full potential as many workers would remain unable to work because they have not had Covid-19.

It is a tricky exercise trying to weigh all of the potential negatives versus the positives in order to determine the future infection and recovery rates.

The big problem - not anticipating the long-term hangover of economic destructionI keep seeing too many articles stating that Covid-19 is a temporary phenomenon and that the economy will bounce back to previous levels once Covid-19 fades away. The basic premise to this argument is that all of the monetary and fi scal stimulus will “kick in” once people start going back to work.

Investors are spending too much time looking at infection rate curves and not economic curves.

It is natural to perceive that if the stressor is removed that everything will return to normal, but this is unrealistic. The basic premise to this argument is that the stimulative monetary policy will “juice” the economy as it recovers. Investors perceive this to be true because it has been true in the past, although with substantial diminishing returns with each policy action as the 2009-2020 bull market un-folded.

This time is diff erent. An incredible number of people have lost their jobs and the numbers will keep climbing. The US unemployment number for March 2020 recently leapt to 4.4%. We are still well short of the unemploy-ment rate that ticked up over 10% in 2009, but the Co-vid-19 crisis has the potential to cause the unemployment rate to be dramatically higher.

It is going to take a long time for businesses to get back into full swing and despite government assistance, many will not survive. Many people will continue to be unem-ployed.

The big risk to any sustained rally in the stock market is investors starting to perceive that the economy has a severe impairment in moving back to previous levels. If investors start to react negatively to economic reports or earnings, the stock market will probably move to the downside and have diffi culty putting in another sustained rally!

Compared to the Great Financial Crisis the start-ing point is diff erent this time - not good!Back in 2006, before the Great Financial Crisis was start-ing to unfold, the federal funds rate was 5.25%, allowing the Federal Reserve to aggressively cut its rate all the way down to “0”, in December 2008 in order to stimulate the economy. This is not the case today. In February of this year the federal funds rate was 1.50% to 1.75%. The Fed-


eral Reserve over the last two months has reduced their rate to 0-0.25%. After reducing rates by just one-and-a-half percent the Federal Reserve has no where to go but negative, which would be a huge mistake. It was a mis-take for the ECB to go negative, but it would be an even bigger mistake for the country with the world’s reserve currency to go negative.

The Federal Reserve has stated that it has lots of tools to use to combat the crisis. What do you expect them to say? If the crisis continues to deteriorate, expect the Federal Reserve to reach in to its bag of tricks and keep coming up with new policy actions. Some may have some eff ective-ness, but most are going to have long-term consequences.

A shift in consumer psyche!As China returns back to work with its “self proclaimed” containment of Covid-19, they are fi nding that consumers are not spending money or travelling. It is probably in part because the Chinese are leery of getting Covid-19. It is also the fear of the possibility of a second wave of the virus occurring as often happens in pandemics. In ad-dition, their jobs are probably not as secure as they once were as a result of a slowing global economy.

North American consumers will be no diff erent. They will not suddenly cram restaurants, buy clothes and cars. They will not be jumping on planes to travel all over the world. It is going to take a long time for consumers to go back to their old ways of leveraging themselves to spend money on goods and services.

There is not a on/off switch with Covid-19 for society. It doesn’t just end one day. On any infection rate graph curve, there is not a magical date x, where everything goes back to normal and we all instantly going back to shaking hands, hugging and kissing on both cheeks.

The change in our psyche goes beyond the fear of catch-ing “the virus.” High unemployment creates a change in

consumer perception of the future as consumers become less certain of what lies ahead. With uncertainty comes less spending.

Do not be fooled with the pent up demand argument. It is not going to happen. If you eat dinner out once a week, you will not go out and eat a bunch of dinners. If you were going to buy large ticket items, you are probably going to hold-off until the economic future is more certain.

All governments will tell you what a wonderful job they are doing and that everything is getting back on track, and everything should be back to “normal” soon. Their job is to inspire confi dence in society once the eff ects of Co-vid-19 start to fade away.

Expectations are running high that fi scal policy will save the world - it is not going to happen in the short-term and probably not the long-termIs seems that everyone is asking for fi scal policy to help stimulate the economy. There are two types of fi scal pol-icy.

First, short-term government spending to subsidize or support certain groups in society that are need of fi nancial assistance. These are the policies that the governments around the world are currently implementing to help in-dividuals, families and companies survive. There is no question that some form of support is necessary, but this will not help with the long-term problems.

Second, longer-term government spending to stimulate the economy on a longer-term basis, such as infrastructure spending will not kick in for over a year. The economy may still need help (probably), but it does not help right now. In addition, there are all sorts of other problems with increased government spending, such as mismanagement, spending on “pet” projects, ineffi ciencies, crowding out private sector investment etc.

How does seasonal investing mesh with what is happening and what could happenThe Covid-19 crisis struck during the heart of the favor-able six-month period for stocks. Bad things can happen at any time, including exogenous events aff ecting the stock market.

Where does that leave the seasonal investing strategy as we approach the six-month unfavorable for stocks which starts on May 6 and ends October 27? Does it mean that stocks will rise in the next six months because they went down in the six-month favorable period?


Investors are wondering, what now?

The stock market is a weighing machine. There are al-ways pluses and minuses for the stock market to move higher or lower. It is currently priced on the aggregate expectations of the future, no more, no less. Because it has gone up a lot, it does not mean that it is going to cor-rect and vice versa.

The same concept applies to seasonal trends. The fact that the stock market has gone down in its seasonal period does not mean that seasonal trends are out of sync. The stock market is priced as it is, based upon future expecta-tions.

Seasonal trends underlie the fl ows of outcomes in the economy and stock market. At any time, the outcomes from the economy and stock market can overwhelm sea-sonal trends that are at play. But over the long-term, sea-sonal trends remain valid. Given that the stock market is priced with future expectations built-in, expectations for the success of seasonal trends remain.

Using a pre-existing framework to navigate the markets is a hallmark of long-term successful investing.

Seasonal investing provides a pre-existing framework in which to allocate investments. It is not bullish. It is not bearish. It is seasonal.

In my writings, I will occasionally put forward a report with a bullish or bearish tone. The purpose of these reports are not to proclaim a bullish or bearish stance, but rather express infl uences that are moving, or could be moving the market within seasonal periods. It should be noted that bearish trends tend to be more exasperated in the weaker six-month seasonal period for the stock market.

The combination of seasonal investing and technical anal-ysis provides tools to target opportunities and reduce risk. As an overlay, technical analysis can help determine if an investment is not working as expected, or provides a good risk-reward relationship. This is particularly true with seasonal investing. The methodology by defi nition has a limited window of opportunity with start and end dates. Technical analysis helps determine if a position should be entered into early, late or not at all. Likewise, it helps determine if it should be exited early or late.

The six-month unfavorable period for stocks does not mean sell everything and go fi shing- there are investment opportunitiesIn the six-month unfavorable period, the stock market has over the long-term been on average much weaker than the favorable six-month period (Oct 28 to May 5), but there are still opportunities.

Despite the six-month unfavorable period for the stock market (May 6 to October 27) being weaker over the long-term for the broad stock market, there are sectors of the stock market that tend to perform well, along with other asset classes. Some examples of sectors that have their period of seasonal strength in the six-month unfa-vorable crisis are consumer staples, utilities, health care, biotech, gold, government bonds and others.

In addition, there are seasonal opportunities for the broad stock market. The S&P 500 and other major broad stock market indexes tend to perform well in the last few days of June and into mid-July as earnings season gets under-way.

May 6th, the start of the six-month unfavorable period, is not necessarily an all-out of the equity markets date. As May and early June is really a transition period into the unfavorable period, sometimes it can make sense to hold some broad market exposure during the transition time if the stock market is showing strong momentum. In addi-tion, the transition month into the six-month favorable pe-riod that starts in late October, can present opportunities to hold some broad market exposure if the stock market is performing well before the actual start on October 28th for the six-month favorable period for stocks.

Having a window of opportunity with start and end dates means that the possibility of making an emotional deci-sion to hang-on to an investment that is not working is substantially reduced.

The Covid-19 crisis does not change the prospect of sea-sonal investing over the next six months.

No one knows if the economy is going to get into gear over the next few months or later this year, or next year.. Covid-19 could fade away in the near future or persist for a long-time. We do not know the speed of the potential medical breakthroughs. There are so many unknowns.

Seasonal trends are still expected to persist despite the turmoil in the markets.

What the HAC? In March, HAC started the month substantially invested in equities. At the end of February, HAC held approxi-mately 10% in cash. During the month of March, HAC held varying amounts of cash. At times its cash allocation was above 20% as it was making adjustments to its hold-ings, mainly selling sectors of the stock market.

During the month of March, HAC sold its positions in Canadian banks, Canadian REITs, value sector, materi-als and consumer discretionary and increased its broad


market exposure.

Seasonal Opportunities

Consumer Staples - Consumer staples sector has a seasonal period from April 23rd to October 27th

The consumer staples sector (Consumer Staples Select Sector SPDR® Fund (XLP)) has been outperforming the S&P 500 in the Covid-19 crisis. The main reason is that historically companies in the consumer staples sec-tor have had more stable earnings and a higher dividend yield. During strong market declines, the consumer sta-ples sector tends to outperform the S&P 500, as investors that want to remain invested in the stock market are at-tracted to defensive sectors, such as the consumer staples sector.

The consumer staples sector’s relative performance com-pared to the S&P 500 has been driven somewhat by the movement of the US 10-Year Treasury yield. In the graph below, XLP’s performance relative to the S&P 500 is ap-proximately inversely correlated to the yield on the 10-Year Treasury Notes.

In 2017 and early 2018, interest rates were rising and XLP underperformed the S&P 500. In the middle of 2018, when interest rates were fl at, so was the relative perfor-mance of XLP compared to the S&P 500. In late 2018 and into 2019, interest rates were falling and XLP performed

at market. This would be expected because the S&P 500 was on a rip roaring rally. Although falling interest rates support the consumer staples sector, in a strong rally in-vestors are attracted to momentum and growth stocks.

As investors start to question the growth potential of the economy, despite falling Covid-19 infection rates, the consumer staples sector could be an attractive sector. This would be particularly true if interest rates were to be fall-ing at the same time.

My Call: The consumer staples sector will probably moderately outperform the S&P 500 in late April and May.

UtilitiesUtilities have a seasonal period from March 8 to Septem-ber 20

In 2019, the utilities sector performed at market. It ben-efi tted from rates moving lower. As expected, it had diffi -culty outperforming the S&P 500 as the stock market was moving higher. In 2020, utilities have been outperforming the S&P 500 as interest rates have been moving lower and the stock market has been moving in the same direction.

Although this sector is in its seasonal period, is sensitive to rising interest rates. If the current situation of lower rates and lower stock markets reverses itself with higher interest rates and higher stock markets, the utilities sector


could stumble.

It is interesting to note that the utilities sector has on some days been trading strongly positive when interest rates have been moving higher. Investors are currently trading this sector as equity. If the utilities sector starts to trade lower, or substantially underperforms the S&P 500 as the S&P 500 moves higher, this could be a signal that the market is increasing its risk appetite.

My Call: The utilities sector will probably perform at market in April, and then moderately outperform the S&P into July.

Government bondsGovernment bonds have a seasonal period from May 6 to October 3

Government bonds have performed well in 2020, outside of their seasonally strong period. Although government bonds were performing well in January and February be-fore the S&P 500 peaked in February 19th, government bonds accelerated their strong performance as the fears of Covid-19 took hold.

The seasonal period for government bonds is approaching in the near future (May 6). Although the recent strong per-formance of government bonds does not mean that gov-ernment bonds cannot perform well at the beginning of their seasonal period, government bonds are susceptible to a downturn if investors believe economic recovery is about to start in the near future. Nevertheless, government bonds are expected to perform well in their seasonal pe-riod.

My Call: Government bonds will probably provide mild positive performance over the next few months, with stronger possible upside in August and September.

REITSThe REIT sector has a seasonal period from March 8 to September 20

The US REIT sector in Q4 underperformed the S&P 500 as interest rates were rising. In January and into Febru-ary, the REIT sector outperformed the S&P 500 as interest rates were falling.

Since late February, the REIT sector has been underper-forming the S&P 500, despite falling interest rates. The REIT sector benefi ts from falling interest rates, but if ex-pectations for economic growth are adjusted down sub-stantially, REITs tend to underperform.

My Call: The REIT sector will probably continue to struggle somewhat as investors continue to evaluate the economic slowdown from Covid-19. Persistent signs of outperformance from the REIT sector could be a sign that the S&P 500 is fi nding a path higher.


EnergyEnergy has a seasonal period from February 25 to May 9

The energy sector has been on a multi-year downtrend relative to the S&P 500. In 2020, the sector has continued to underperform the broad stock market. As the Covid-19 crisis unfolded, demand destruction for oil took hold. To make matters worse, Saudi Arabia and Russia entered into an “oil war,” and created a supply shock. Decreased demand and an increase in supply is not a good mix. At some point, there is not going to be enough storage for all of the oil produced.

Towards the end of last week, Trump announced that he was trying to get Saudi Arabia and Russia to come to an agreement. He announced that they were discussing cut-ting their production by up to 15MM bbls/day.

Energy investors who were anxious to bargain hunt....pushed the price of oil and the energy sector higher. We have learnt in the past not to take Trump at his word (not a political statement). In order for Saudi Arabia and Russia to reduce production by themselves, they would have to cut more than half of their production. Russia produced 10.8 MM in December 2019 and Saudi Arabia 9.8MM as of February 2020. Saudi Arabia and Russia will try and get other countries to reduce production, but they are go-ing to have trouble getting the overall cut to 15MM bbls/day.

Something will probably get done to produce higher oil prices because if the oil price stays at the current prices, huge amounts of energy workers will have to be laid off in the Permian Basin, which will have huge implications for the economy and Trump’s chances of being re-elected in November of this year.

This year, the energy sector has not performed well in its seasonal period. Given that there is only a few weeks left in the seasonal period, it makes it a diffi cult prospective investment.

Canadian EnergyThe Canadian energy sector has the same basic trends as the US energy sector. There are unique circumstances with the Canadian energy sector depending on selling Western Canadian Select at much lower prices than West Texas. If prices of oil remain lower for longer, the Cana-dian energy sector is going to start to see a wave of bank-ruptcies, mergers and acquisitions.

My Call: The energy sector will probably perform at market over the next few weeks before tapering off into late summer.

Natural GasNatural gas has a seasonal period from March 19 to June 22

Natural gas has been on a downtrend over the last three years, but has managed to perform well in its winter sea-sonal period (boxes in graph below).

Much of natural gas is a bi-product of oil production. As oil production starts to get shut-in in the US, natural gas production will decline, helping to support higher prices.

It is expected that there will be some demand destruction as shut businesses are probably going to keep their facili-ties at higher temperatures to reduce their air conditioning bills. Natural gas is used to generate the power to run the air conditioners. Why pay to keep a building cool if no


one is in it? Buildings will still air condition to control humidity but just not to the extent as if they were fully occupied. In addition, many manufacturing facilities that use large amounts of electricity have been shuttered, indi-rectly decreasing the demand for natural gas.

My Call: Natural gas will probably fi nd a bottom close to current levels and perform well over the next six weeks.

IndustrialsThe industrial sector has a strong seasonal period from January 23 to May 5

The industrial sector does not have any FANG stocks (tongue-in-cheek), as such it has been underperforming the S&P 500. On an absolute basis, the sector traded in a consolidation box and at the end of September in 2019, the sector was lower than the start of 2018. A lot of this poor performance was the result of the global trade wars.

Most recently, the sector has been underperforming the S&P 500 as Covid-19 has caused global growth expecta-tions to be substantially reduced.

My Call: The industrial sector will probably perform at market over the next month.

MaterialsThe materials sector has a seasonal period from January 23 to May 5

The materials sector has had a similar return profi le as the industrials sector, as it has underperformed the S&P 500 over the last two and half years. Like the industrials sec-tor, it has underperformed the S&P 500 in 2020.

My Call: The materials sector will probably perform at market over the next month.

FinancialsThe fi nancial sector has a seasonal period from Decem-ber 15 to April 13

The fi nancial sector performed at market in 2019, after struggling in 2018. The sector has been underperforming the S&P 500 since 2020 as interest rates have been head-ing lower. QE is once again hurting bank stocks by reduc-ing their net interest margins.

If investors believe that the economy is recovering and poised to perform well, interest rates could move higher which would help the bank sector.


My Call: The fi nancial sector will probably underper-form over the next few months.

Consumer DiscretionaryThe consumer discretionary sector has seasonal period from October 28 to April 22

Amazon is over one-quarter of the consumer staples ETF (XLY) and as a result the sector relative to the S&P 500 has been performing similarly to the performance of AMZN relative to the S&P 500.

In 2020, the consumer discretionary sector has been vola-tile as investors have been trying to process how consum-ers are reacting to the Covid-19 crisis. Overall, AMZN has been performing well relative to the S&P 500, but the rest of the consumer discretionary sector has been under-performing the S&P 500.

My Call: The consumer discretionary sector will prob-ably mildly underperform the S&P 500 over the next few months.

Currencies

CADUSD The Canadian dollar has a strong period of seasonality in April

The US dollar has been performing well relative to the world currencies in 2020. It has been volatile, but it has outperformed. In March, the Canadian dollar underper-formed the US dollar as investors sought refugee in safe havens. A falling price of oil was not helpful.

Seasonally, the strongest month of the year for the Ca-nadian dollar is April. The recent drop in the Canadian dollar, could help with a bounce over the next few weeks.

My Call: The Canadian dollar will probably outperform the US dollar in the month of April, before once again turning lower.


Brooke’s RantGet ready for more water....lots of it!

On March 27, 2020, Bank of Canada Governor Stephen Poloz announced that the Bank of Canada is cutting its overnight target rate to 0.25%. He also introduced more quantitative easing. In his announcement, referring to the amount of stimulus the Bank of Canada was initiating, Poloz made the proclamation:

“A fi refi ghter has never been criticized for using too much water.”

Ummmm. Not true.

Sounds good, but Poloz’s statement in wrong. I checked his statement with my friend, Richard, a retired Captain with the local fi re department. He said that the statement is simply not true. Sometimes a chemical suppressant is required instead of water. Even when water is used, un-less the structure is considered unsavable, using too much water can cause unnecessary damage and lawsuits.

After the fi re is over, if the property owner’s insurance company believes that too much water has been used,

they can sue the municipality for causing too much dam-age. The insurance company seeks remedy in the way of compensation to off set payments to the homeowner.

Implementing liquidity into the fi nancial markets is no diff erent than fi refi ghters using liquidity to put out fi res. First, fi refi ghters have to choose between chemical versus water to suppress the fi re. Central banks have to determine whether to use interest rates, QE or other tools. Second, fi refi ghters, if using water have to determine, how much, when and where to apply it, For central banks it is exactly the same, how much, where and when?

Ironically, Poloz had been fairly conservative in his ap-proach to providing stimulus to the fi nancial system up until this date. It is hard to anticipate the Bank of Cana-da’s actions as they do not give the same level of guidance an the Federal Reserve. But on March 27, Poloz threw in the towel (no pun intended). He did not want to appear to be sitting on the sidelines not doing whatever he could to help the Covid-19 crisis.

I am not saying that the Bank of Canada’s statement is unwarranted, I am just hoping that Poloz is wrong and the situation is not bleak as he is alluding.

Poloz is not alone. Other central bankers have pledged huge amounts of support to keep their fi nancial systems going. The operation of the fi nancial system depends on confi dence. Central bankers do not want to be found guilty of not portraying confi dence.

Powell has stepped up to the plate and committed the Fed-eral Reserve in a big way to stimulating the economy. Pre-viously, I had awarded Powell with the moniker “Mr. U-Turn,’ for his abrupt changes in monetary policy in 2018 and 2019. I now would like to change his moniker to “Mr. Unlimited.”

On March 26, Powell announced that the Federal Reserve will supply unlimited lending to support the economy. He also added that the Federal Reserve would be buying cor-porate bonds, muni bonds and treasuries, as well as bond ETFs.

So why am I worried central bankers dumping “unlim-ited’ amounts of liquidity into the markets? There is no question that some action is needed. It would be hard to fi nd someone that would say otherwise. But it is important that central banks do not cause too much collateral dam-age to the long-term economy in trying to fi ght Covid-19. Central banks should be acting judiciously, implementing liquidity, not fl ooding the system and creating long-term collateral damage through misallocation of capital and laying the groundwork for possible unwanted infl ation in the future.


Disclaimer: Comments, charts and opinions off ered in this report are produced by www.alphamountain.com and are for information purposes only. They should not be considered as advice to purchase or to sell mentioned securities. Any information off ered in this report is believed to be accurate, but is not guaranteed. Brooke Thackray is a Research Analyst with Horizons ETFs Management (Canada) Inc. (“Horizons ETFs”). All of the views expressed herein are the personal views of Brooke Thackray and are not necessarily the views of Horizons ETFs (Canada), although any of the opinions or recommendations found herein may be refl ected in positions or transactions in the various client portfolios managed by Horizons ETFs, including the Horizons Seasonal Rotation ETF. Comments, opinions and views expressed are of a general nature and should not be considered as advice to purchase or to sell mentioned securities. Horizons ETFs has a direct interest in the management and performance fees of the Horizons Seasonal Rotation ETF (the “ETF”), and may, at any given time, have a direct or indirect interest in the ETF or its holdings. Commissions, trailing commissions, manage-ment fees and expenses all may be associated with an investment in the ETF which is managed by Horizons ETFs Management (Canada) Inc. The ETF is not guaranteed, its values change frequently and past perfor-mance may not be repeated. The ETF may have exposure to leveraged investment techniques that magnify gains and losses and which may result in greater volatility in value and could be subject to aggressive invest-ment risk and price volatility risk. Such risks are described in the ETFs prospectus. The prospectus contains important detailed information about the ETF. Please read the prospectus before investing.

While the writer of this newsletter has used his best eff orts in preparing this publication, no warranty with respect to the accuracy or completeness is given. The information presented is for educational purposes and is not investment advice. Historical results do not guarantee future results

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Thackray Newsletter · 2020/4/4 · Market Update We are all becoming graph curve experts! Covid-19 infection rate analysis is going to make us all experts in analyzing graph curves