Issue No.21

For the month ended April 2022, the TT Composite Index returned -0.95%, 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 MASSY Holdings Limited (MASSY) and Ansa Mc Al Limited (AMCL). The TT Cross Listed Index fell -1.41% over the month as the negative returns of -6.33% in First Caribbean International (FCI) and -1.48% in Grace Kennedy limited (GKC) weighed on the Index. During the period Guardian Media Limited (GML) and GraceKennedy Limited (GKC) both released their year end financial results. GKC’s EPS improved by 31.7% from $6.28 to $8.27 in 2021 whilst GML’s EPS moved down from $0.12 to $0.10. Over the month 12 stocks increased, 11 declined and 2 held firm.

Business operations throughout the country have boosted since the removal of major COVID restrictions.  The International Monetary Fund expects real GDP in T&T to grow by 5.5% in 2022 based on the anticipated recovery in domestic economic activity, as well as increased energy production and higher energy prices. 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.

During April the S&P 500 Index plummeted by -10.79% over the month. All sectors declined apart from the Consumer Staples sector which rose by 3%. The Communications and Technology sectors were the worst performers, returning -14% and -12.2% respectively. Several factors drove this severe market pull back. The Russia-Ukraine war remains unresolved, and the U.S. continues to implement economic sanctions against Russia. There are now growing fears that Moldova’s breakaway region may be drawn into war and Russia has halted gas deliveries to Poland and Bulgaria.  Investors were also concerned that lockdowns in China will lead to a global economic slowdown and prolonged supply chain disruptions. The Chicago Board Options Exchange volatility Index (VIX) climbed by over 70% in April as market volatility skyrocketed. Volatility is expected to continue over the short term whilst investors determine the impact of the above.

The conflict between Russia and Ukraine and reduced oil supply from Iran has pushed energy prices upward with WTI Crude advancing from $100.28 in March to $104.69 at the end of April. The Federal Reserve remains focused on bringing inflation down, and has investors now bracing for a rate hike of 50bps, the largest since 2000. The Fed also announced that from June it will begin quantitative tightening, allowing over $40 billion of mortgage-backed securities and Treasuries to roll off its balance sheet. Though we are in a stage of correction in the markets our overall outlook for positive economic growth remains intact as economic fundamentals remain strong and COVID restrictions are mostly fully repealed. There has been some concern surrounding the sustainability of earnings growth, however investment in companies with strong cash flows and resilient earnings, and diversification across sectors and regions can lend to investor out performance.

Fund of the month:

Scotia Fixed Income Fund

- Fixed Income securities

- Income and modest capital gains

- Low to Medium Risk

Short term and medium-term TTD rates increased marginally over the month while longer term rates held stable. The 1-year rate increased month over month from 0.61% to 0.71%, while the 5-year moved from 3.78% to 3.87%. This marks a new high for the 1-year rate in the past 12 months.

Since the start of the year both the corporate and sovereign bond markets have remained relatively dormant with just two corporate issue coming to market. Year on year liquidity fell from $8.1 billion in April 2021 to $3.9 billion in April 2022.

US Investment Grade corporate spreads, as measured by the CSI BBB Index, increased from 1.57% to a one year high of 1.79% over the month of April. The US 10-year Treasury yield increased over the period, from 2.34% on March 31^st to 2.93% on April 30^th.  Concerns around rising inflation, its impact on economic growth, and rate hike expectations have led to a sharp sell off in bonds year to date, with the Bloomberg Investment Grade Corporate Bond Index reporting its worst 4-month performance in over 40 years. Central bank officials have reiterated expectations for a faster drawdown of policy accommodation via increases in the target rate and a reduction of the balance sheet which is expected to continue to place upward pressure on yields, and downward pressure on bond prices.