Issue No.20

For the month ended March 2022, the TT Composite Index returned -2.16%, as both the All T&T Index and the Cross listed Index registered negative returns. The All T&T Index decreased by -0.80% due to price decreases in First Citizens Group (FCGFH) and Guardian Holdings Limited (GHL). The TT Cross Listed Index fell -5.94% the month as the negative return of -12.19% in NCB Financial Group Limited (NCBFG) weighted down the Index. During the period Angostura Holdings Limited (AHL) and Trinidad Cement Limited (TCL) both released their year end financial results. AHL’s EPS improved by 10% from $0.71 to $0.77 in 2021 whilst TCL’s EPS moved from a loss of $0.065 to a profit of $0.0379. Over the month 10 stocks increased, 13 declined and 2 held firm.

The government has now removed most of its COVID restrictions; “Safezones” are no longer in operation, large gatherings are no longer limited and all sporting activities can resume fully. The broader economy is expected to benefit greatly from the resumption of all pre-pandemic activities and the removal of these operating restrictions. We continue to encourage persons to vaccinate as further advances in this area should bode positively for a continued increase in economic activity and by extension the markets.

In March Russia’s invasion of Ukraine grew more intense, the Federal Reserve adjusted the benchmark interest rate in an attempt to cool down the economy and inflation accelerated. Markets are pricing in an additional 225 basis points of rate hikes by the Federal Reserve for the rest of 2022. Despite these factors the S&P 500 Index reported a positive return of 3.58% over the month.  The Energy and Utilities sectors led the market with returns of 10.4% and 10.6% respectively. The Consumer Discretionary and Financials sectors were the worst performers, returning -4.1% and -0.6% respectively. Investors have realized that companies are still profitable with some companies dealing with record inflation by passing on rising costs to their customers. Meanwhile the conflict between Russia and Ukraine continued to push energy prices upward with WTI Crude advancing from $95.72 in February to $100.28 at the end of March.

Unfortunately, the Ukraine crisis does not appear anywhere near to being resolved. Sanctions on Russia over the war in Ukraine are likely to further disrupt commodity flows. These sanctions are being placed to damage Russia’s economy and penalize President Putin for his aggressive actions. Uncertainty regarding the outlook for Russia’s energy exports and Ukraine’s grain exports is weighing heavily on the outlook for the global energy and agricultural sectors.

The Fed is expected to be aggressive going forward as it attempts to tackle inflation, despite any negative impact on economic growth and the stock market in the short term. Our overall outlook for economic growth remains positive in the long term as economic fundamentals remain strong and COVID restrictions are now fully repealed in most states. Investment in companies with strong cash flows and resilient earnings, and diversification across sectors and regions can lend to investor outperformance. 

Fund of the Month

Scotia U.S. Equity Fund

- Equity securities of U.S. companies

- Diversification across ETFs

- Medium to High Risk

Short term TTD rates again increased marginally over the month while longer term rates held fairly stable. The 1-year rate increased month over month from 0.40% to 0.61%, while the 10 year moved from 4.99% to 4.98%. This is the highest the 1 year rate has been in 17 months.

For the start of the year both the corporate and sovereign bond markets have remained dormant with no new issues yet coming to market. Year on year liquidity fell from $10.5 billion in February 2021 to $4.8 billion in February 2022.

US Investment Grade corporate spreads, as measured by the CSI BBB Index, increased slightly from 1.56% to 1.57% over the month of March. The US 10-year Treasury yield increased over the period, from 1.82% on February 28^th to 2.34% on March 31^st. During the past month the spread between the 2 year yield and the 10 year yield has been closing and the 3 year yield is now higher than the 5 year yield. An inverted yield curve is usually a reliable early warning signal for recessions. Furthermore, inflation remains elevated with the PCE price index (reflects changes in the prices of goods and services purchased by consumers in the United States) rising 6.4% in February, up from last year and in line with expectations.