Issue No. 30

For the month ended January 2023 the TT Composite Index returned -0.66%, driven downwards by the All T&T Index. The All T&T Index returned -1.29% stemming from declines in First Citizens Group Financial Holdings Limited (FCGFH) of -3.75% and Guardian Holdings Limited (GHL) of -3.67%. The TT Cross Listed Index increased by 1.60% over the month due to positive returns of 11.93% in FirstCaribbean International (FCI) and 4.71% in JMMB Group Limited (JMMBGL). Over the month 11 stocks increased, 12 declined and 2 held firm. National Enterprises Limited (NEL), Scotiabank T&T(SBTT) and FCGFH all released annual results during the month. All three companies reported improved EPS with the EPS of SBTT increasing by 13.3% from $3.42 in October 2021 to $3.88 in October 2022.

We continue to anticipate a modest appreciation in prices during 2023 as investor sentiment improves. 

For the month January 2023 the S&P 500 Index returned 6.20%. There has been growing evidence that inflation has peaked, and investors grew more confident that a recession is not imminent. Inflation, measured by the consumer price index, fell by 0.1% in December, up a total of 6.5% year on year. The investing environment has transitioned from one overcome with higher inflation and lower earnings growth to one where inflation and interest rates are easing. All sectors, except for Consumer Staples and Utilities, increased over the month. Communications and Technology climbed the most, rising by 15% and 13.7% respectively. US Reports showed that GDP grew by 2.9% in Q42022, ahead of market expectations of 2.6% but below the prior quarter’s return of 3.2%.

The International Monetary Fund (IMF) raised its growth outlook for the first time in a year, forecasting 2.9% growth in 2023 compared to 2.7% in its October report. Other reported economic indicators remain mixed with Retail Sales declining by -1.1% in December, more than the consensus forecast of -0.9%. Consumer sentiment increased by 8.7% from 59.7 to 64.9, the highest reading since April 2022. The U.S economy added 517,000 jobs in January as the unemployment rate fell to 3.4%, its lowest level in 53 years. Meanwhile consumer confidence, an indicator of future developments of household consumption and saving, unexpectedly fell from 109 to 107.1, a two-month low. 

Energy prices were lower month on month with WTI Crude decreasing from $80.26 in December 2022 to $78.87 at the end of January 2023. The outlook for the energy sector remains positive based on the re-opening of China and the EU Embargo on oil which kicks in on February 5^th.

In seeking market outperformance, emphasis remains on traditionally defensive sectors, conservatively valued sectors, less economically leveraged sectors and individual companies with strong balance sheets and steady cash flows.

Fund of the month:

Scotia Caribbean Equity Fund (US$)

-Caribbean equities with a focus on downside appreciation

-Medium to High Risk

Yields were relatively flat at all points across the curve when compared to the prior month. The 1-year rate stands at 1.06% and the 10-year rate stands at 5.18%.

Month over month liquidity increased by 13.4% from $6.7 billion on December 31st, 2022, to $7.6 billion as January 31^st, 2023. So far in 2023 there has been an increase in issuances with multiple Government Agencies and one corporate entity coming to market.  This trend is expected to continue as organizations take advantage of the current low rates. 

Investment grade corporate spreads and high yield corporate spreads tightened slightly during the month. US Investment Grade corporate spreads, as measured by the CSI BBB Index, decreased by -8.60% from 1.86% to 1.70% over the month of January. The US 10-year Treasury yield decreased over the period, from 3.87% on December 31^st to 3.51% on January 31^st.  The 2-year and 10-year yield remains inverted, the spread was at 0.70% at the end of January as the 2-year yield closed the year at 4.21%.  In 2023 the market expects further small-scale rate hikes with investors pricing in a terminal rate in the 4.75%-5.0% range.