Issue No.26

For the month ended September 2022, the TT Composite Index returned -2.36%, led downwards by both indices. The All T&T Index decreased by -0.82% with Angostura Holdings Limited (AHL) and West Indian Tobacco Company Limited (WCO) returning -5.96% and -3.06% respectively. The TT Cross Listed Index fell by -3.15% over the month as the negative returns of -3.04% in JMMB Group Limited (JMMBGL) and -7.41% in National Commercial Bank Financial Group (NCBFG) weighed on the Index. Over the month 6 stocks increased, 15 declined and 4 held firm. Endeavour Holdings Limited, which trades as a Small and Medium Enterprise (SME), released its quarterly results. The company’s EPS improved from $0.12 to $1.63 stemming from a gain on acquisition of Massy Properties Trinidad Limited.

COVID-19 related deaths and cases have continued since the reopening of the economy. As such, 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.

uring September the S&P 500 Index returned -9.34%, the index is down -24.77% for the year-to-date period ended September 30^th. Inflation, earnings growth of companies, the weaponization of commodities stemming from the Ukraine war and China’s strict COVID lockdowns all continued to weigh on markets. All sectors fell over the month, Materials and Utilities were the largest detractors registering declines of -12.5% and -12.2% respectively.

Second quarter GDP came in at -0.6% on an annualized basis in the final Q2 report, following a -1.6% decline in Q1. Economic data was mixed, month over month retail sales rose by 0.3% in August, year on year growth stands at 9.1%. On the other hand, the unemployment rate rose from 3.5% in July to 3.7% in August. Consumer sentiment was relatively flat at 58.6 in September compared to 58.6 in August. The Federal Reserve has maintained a firm policy to rise interest rates, hiking the rate another 0.75% in its September meeting. Officials have made it clear that additional tightening is needed to reinstate price stability. Without meaningful change in the inflation outlook it is difficult to project an improvement in the economic outlook. Economists now predict that the 9.2% global inflation rate will not return to 3.8%, the average inflation rate for the last 20 years, until late 2024.

Energy prices declined for the fourth month in a row with WTI Crude falling from $89.55 in August to $79.49 at the end of September amid persisting fears that slowing growth would soften energy demand. However, OPEC recently announced a 2 billion barrels a day cut in oil production which may cause an increase in oil and gas prices to levels seen earlier this year.

In seeking market outperformance, the emphasis is on cash flow reliability at an affordable price. The investment focus also remains 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 Growth and Income Fund  (TT$)

-Equity and Fixed Income Investments

-Medium-High Risk

Yields were generally higher across the curve when compared to the prior month. The 1-year rate increased from 1.10% to 1.11%, while the 10-year moved from 5.07% to 5.12%.

Month over month liquidity increased by 30.4% from $4.6 billion in August to $6.0 billion in September. 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. However companies are slowly reentering the market and we expect additional corporate issues in the next six months.

US Investment Grade corporate spreads, as measured by the CSI BBB Index, increased by 2.06% from 2.03% to 2.07% over the month of August. The US 10-year Treasury yield increased over the period, from 2.65% on July 31st to 3.19% on August 31st. Short term rates continued to rise ahead of long-term rates, the two-year Treasury yield rose above 3.5% during the final week of August, setting a 15-year high. During the month the Fed maintained its hawkish tone and expectations remain for higher interest rates hikes to battle inflation. Interest rate futures are currently pricing in rates in the 3.7-4% range by year end.