Issue No. 27

For the month ended October 2022, the TT Composite Index returned -2.06%, led downwards by both indices. The All T&T Index decreased by -2.46% with Republic Financial Holdings Limited (RFHL) and Angostura Holdings Limited (AGL) returning -5.01% and -4.44% respectively. The TT Cross Listed Index fell by -0.66% over the month as the negative returns of -10.31% in JMMB Group Limited (JMMBGL) and -4.57% in Grace Kennedy Company (GKC) weighed on the Index. Over the month 9 stocks increased, 14 declined and 2 held firm. Trinidad Cement Limited (TCL) and West Indian Tobacco Company Limited (WCO) both released quarterly results. TCL’s EPS improved from 7.4 cents to 31.3 cents in the nine-month period ended September 2022 whilst WCO’s EPS declined from 33 cents to 22 cents in the three month period ended September 2022.

During September the S&P 500 Index returned 7.99%, its first positive month since July. The index is down -18.76% for the year-to-date period ended October 31^st as high inflation persists and the Fed hikes rates aggressively. Markets rebounded on better that expected quarterly earnings for companies and hopes that the Fed might begin to slow the pace of interest rate increases. All sectors increased over the month, Energy and Industrials were the largest contributors registering growth of 22.7% and 12.9% respectively. 

Third quarter GDP rose 2.6% on an annualized basis, following a -0.6% decline in Q2. Retails sales were flat in September, following a 0.4% increase in the previous month. The unemployment rate fell from 3.7% in August to 3.5% in September. Consumer confidence fell by -5.17% from 107.8 in September to 102.5 in October. The Federal Reserve has maintained a firm policy to rise interest rates, hiking the rate five consecutive times. Without meaningful change in the inflation outlook it continues to be difficult to project an improvement in the economic outlook. Inflation is expected to rise 0.6% in October and 7.9% year on year. Additionally, strict COVID lockdowns in China are leading to economic slowdown and prolonged supply chain disruptions globally.

Energy prices climbed with WTI Crude increasing from $79.49 in September to $86.53 at the end of October. Tensions remain between Saudi Arabia and the United States following OPEC’s decision to cut production by 2 million barrels a day. In October the US government released 165 million barrels from the Strategic Petroleum Reserve, leaving 405 million barrels for emergency measures.

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 cyclically sensitive and have balance sheets which are minimally exposed to a further rise in borrowing costs. 

Fund of the month:

Scotia Fixed Income Fund  (TT$)

-Fixed Income Investments 

-Low-Medium Risk

Yields were lower on the shorter and longer end of the curve when compared to the prior month. The 1-year rate decreased from 1.11% to 1.04%, while the 10-year moved from 5.12% to 5.10%.

Month over month liquidity was relatively flat, increasing by 3.6% from $5.5 billion in September to $5.7 billion in October. 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, decreased by -3.57% from 2.24% to 2.16% over the month of October. The US 10-year Treasury yield increased over the period, from 3.83% on September 30^th to 4.05% on October 31^st. The 2 and 10-year yield remains inverted, the spread was at 0.44% as the 2-year yield closed the month at 4.49%. Investors are hopeful that the Fed will taper the pace of policy adjustments to 50bps in December followed by 25bps in February.