Issue No. 31

For the month ended February 2023 the TT Composite Index returned 0.16%, driven upwards by the All T&T Index. The All T&T Index returned 0.89% stemming from increases in Agostini’s Limited (AGL) of 10.98% and National Enterprises Limited (NEL) of 6.85%. The TT Cross Listed Index returned -2.36% over the month due to negative returns of -10.00% in JMMB Group Limited (JMMBGL) and -3.53% in NCB Financial Group Limited (NCBFG). Over the month 10 stocks increased, 11 declined and 4 held firm. Guardian Holdings Limited (GHL) released annual results during the month, reporting an improvement in EPS of 40.6% from $3.37 in December 2021 to $4.74 in December 2022. 

We expect a gradual appreciation in prices during 2023 as investor sentiment improves and companies report improved earnings.

For the month February 2023 the S&P 500 Index returned -2.61%. The market pulled back as investors feared the Federal Reserve may push rates higher for longer than previously expected. All sectors, except for Industrials, declined over the month. Communications and Energy were the laggards, falling by 6.8% and 7.4% respectively. Whilst inflation has declined in the past few months some underlying components indicate that improvement has been minimal. This has reinforced the view that the Fed needs to continue increasing rates in order to achieve the target inflation rate. 

The fourth quarter GDP was revised from 2.9% to 2.7% based on a downward revision to consumer spending and imports. Economists reacted to inflation data and economic updates by revising their 2023 forecasts for global GDP growth from 2.1% o 2.4%. Economic indicators were generally strong over the month. U.S.  Retail sales increased in January by 3%, the most in approximately 2 years, after falling 1.1% in the prior month. Consumer sentiment increased by 3.2% from 64.9 January to 67 in February. The unemployment rate declined from 3.5% to 3.4% in January, a five-decade low. Meanwhile consumer confidence fell from 107.1 to 102.9 due to drops in confidence for households aged 35-54.

Energy prices were lower month on month with WTI Crude decreasing from $78.87 in January 2023 to $77.05 at the end of February 2023. The re-opening of China’s economy, increasing jet fuel demand and oil embargos are expected to provide a boost to the energy sector in the short term.

In seeking market outperformance, emphasis is on areas of equity market which have historically shown low earnings volatility throughout economic cycles.

Fund of the Month

Scotia Money Market Fund (US$)

-High quality money market instruments and short-term fixed income securities

-Low 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%. 

Real GDP expanded by 6.6% year on year during the second quarter of 2022. Locally, core inflation jumped to 6.7% in December 2022 and food inflation increased to 17.3% from 6.6% and 13.8% respectively in November 2022.Growth in the non-energy sector registered at 10.5% whilst growth in the energy sector declined by 2.5%. Month over month liquidity decreased by 19.7% from $7.6 billion on January 31st, 2023, to $6.1 billion as February 28^th, 2023. So far in 2023 there has been an increase in issuances with multiple Government Agencies and a few corporate entities coming to market.  This trend is expected to continue as organizations take advantage of the current low rates. 

US Investment Grade corporate spreads, as measured by the CSI BBB Index, increased by 5.9% from 1.70% to 1.80% over the month of February. The US 10-year Treasury yield increased over the period, from 3.51% on January 31^st to 3.92% on February 28^th.  The 2-year and 10-year yield remains heavily inverted, the spread was at 0.90% at the end of February as the 2-year yield closed the month at 4.82%.  For the remainder of 2023 investors are pricing in three more 25bps hikes for a total of four hikes. Subsequent to sticky inflation and strong economic data the market now expects the policy rate to hit 5.5% by the middle of the year.