Issue No.23

For the month ended June 2022, the TT Composite Index returned -2.20%, as both the All T&T Index and the Cross listed Index continued to register negative returns. The All T&T Index decreased by -1.25% with Unilever (UCL) and First Citizens Group Financial Holdings (FCGFH) registering the lowest returns. The TT Cross Listed Index fell by -5.12% over the month as the negative returns of -6.12% in Jamaica Money Market Brokers (JMMBGL) and -5.99% in National Commercial Bank Financial Group (NCBFG) weighed on the Index. During the period L.J Williams Limited (LJWB) released their annual results. LJWB’s EPS fell by 4.8% from $0.31 to $0.27 in 2022. Over the month 9 stocks increased, 15 declined and 1 held firm.

The T&T Government recently  removed the COVID-19 test requirement for persons entering the country. It was also announced that the Government intends to remove the mask mandate from mid-July. Shortly COVID-19 related restrictions will no longer be in place, making way for a large boost in economic activity. We continue to encourage persons to talk all health precautions as further advances in this area should bode positively for a continued increase in economic activity and by extension the markets.

During June the S&P 500 Index tumbled -8.39% over the month as fears of a recession permeated the market.All sectors declined with Energy and Materials leading the way lower, falling by -18.6% and -15.1% respectively. It is forecasted that Q2 GDP fell by more than 2%, this follows a Q1 decline of 1.6% with two quarters of consecutive GDP decline being the traditional threshold for declaring an economic recession. Furthermore, consumer confidence dropped 4.4% from 103.2 to 98.7 in June, a larger decline than expected. Global inflation has continued to surge, mainly due to supply side shocks resulting from lingering pandemic effects and the Eastern European war. The Federal Reserve raised interest rates by 0.75% in June and has warned that a hike of at least 0.50% can be expected in July policy meeting. Investors now predict that the policy rate will end the year above 3.0%. The Fed chairman has stated that the central bank will continue to raise interest rates until there is clear evidence that inflation is on the decline, even at the expense of economic growth. As a result, economists have again reduced U.S. growth expectations for 2022, down to 2.7% from the 3.8% estimated at the beginning of the year.  

Commodity prices cooled for the first time in months with WTI Crude declining from $114.67 in May to $105.76 at the end of June. OPEC members have agreed to raise production by 648,000 barrels a day in July and August which is equivalent to less than 1% of daily global demand. The recent decline in energy prices should have a positive impact on inflation metrics going forward.

In seeking market outperformance, the investment focus has shifted towards stocks and sectors which are less leveraged to the business cycle, that can absorb the risk of higher raw material and labour costs and have balance sheets which are minimally exposed to a further rise in borrowing costs. 

Fund of the month:

Scotia Money Market Fund (US$)

- High quality money market instruments

- Capital preservation

- Low Risk

Short term and medium-term TTD rates were higher over the month while long term rates were flat. The 1-year rate increased from 0.92% to 0.98%, while the 10-year held relatively steady moving from 4.98% to 4.99%.

Since the start of the year both the TTD corporate and sovereign bond markets have remained relatively dormant with just two corporate issues coming to market. Month over month liquidity however decreased markedly from $4.6 billion in May to $2.8 billion in June.

US Investment Grade corporate spreads, as measured by the CSI BBB Index, increased by 17.12% from 1.82% to 2.13% over the month of June. The growing expectations for a higher rates has stymied demand for bonds with yields across the curve higher in June. The US 10-year Treasury yield increased over the period, from 2.84% on May 31^st to 3.01% on June 30^th, after reaching a 1 year high of 3.47% on June 14^th. Year over year the headline inflation rate increased by 6.3% for the second consecutive month, down from a gain of 6.6% in March. The Fed targets a 2% average inflation rate over time and has signalled its intention to aggressively use monetary policy action to achieve this.