Issue No.24

For the month ended July 2022, the TT Composite Index returned 0.68%, led upwards by the All T&T Index. The All T&T Index increased by 1.41% with Angostura Holdings Limited (AHL) and Ansa McAl Limited (AMCL) registering the highest returns of 17.86% and 5.25% respectively. The TT Cross Listed Index fell by -1.65% over the month as the negative returns of -0.91% in Grace Kennedy Limited (GKC) and -4.19% in National Commercial Bank Financial Group (NCBFG) weighed on the Index. During the period First Citizens Group Financial Holdings Limited (FCGFH) and GraceKennedy Limited (GKC) released their quarterly results. FCGFH’s EPS grew by 6.2% from $1.93 to $2.05 in the nine-month period ended June 2022 and GKC’s EPS increased by 2.6% from $3.63 to $3.73 in the six-month period ended June 2022. Over the month 9 stocks increased, 14 declined and 2 held firm.

The T&T Government recently  removed the mask mandate for all public spaces. Major public events have since began and the economy is now considered fully reopended. 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 July the S&P 500 Index climbed 9.11% based on better than anticipated company earnings. All sectors increased with Industrials and Technology increasing by 11.6% and 11.7% respectively. Consumer sentiment improved 3% from 50 in June to 51.5 in July as over 70% of companies reported better than expected earnings results and the Federal Reserve Chairman took on a more dovish tone. The Federal Reserve raised interest rates by 0.75% in July for the second month in a row. Investors now predict that the policy rate will end the year above 3.00% following 3 additional rate increases. It is estimated that Q2 GDP was -0.9% and GDP for the full year 2022 is expected to be 2.0%.  According to the National Bureau of Economic Research the United States is now in a recession given its two consecutive quarters of negative growth. Volatility has eased in the last month, the prior month’s events such as the Russia-Ukraine war, rate increases by the Fed, higher than expected inflation and China’s zero tolerance policy caused unusually high volatility.

Global inflation has surged beyond 11% this year, weighing on purchasing power and investor sentiment.
However, commodity prices declined for the second month in a row with WTI Crude declining from $105.76 in June to $98.62 at the end of July. According to OPEC’s oil market outlook global demand growth is expected to exceed supply for the next year which will likely lead to an increase in energy prices in upcoming months. 

In seeking market outperformance, the investment focus towards 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 US Equity Fund (US$)

- Equity securities of U.S. companies

- Diversification across ETFs

- Medium to High 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 4.99% to 5.00%.

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 increased slightly from $2.8 billion in June to $2.9 billion in July.

US Investment Grade corporate spreads, as measured by the CSI BBB Index, decreased by -4.73% from 2.13% to 2.03% over the month of July. The US 10-year Treasury yield decreased over the period, from 3.01% on June 30^th to 2.65% on July 31^st as economic data showed signs of a slowing economy. The difference between the 10-year treasury yield and the 2-year treasury yield inverted as the 2-year yield moved to 2.88%. Year over year the headline inflation rate increased by 6.6%, up from a gain of 6.3% in May. The Fed continues to target a 2% average inflation rate over time.