Issue No. 36

For the month ended July 2023, the TT Composite Index advanced 2.59%, driven by gains generated by both Indices. The TT Cross Listed Index returned 7.71% led by the recovery in NCB Financial Group Limited (NCBFG) share price of 27.78%. The All T&T Index gained 1.27% as National Enterprises Limited (NEL), Guardian Holdings Limited (GHL) and ANSA McAL Limited (AMCL) generated positive returns during the month of July of 12.36%, 8.29% and 6.90% respectively. Over the month, 11 stocks increased, 11 declined and 2 held firm. 

During the month, West Indian Tobacco Company Limited (WCO) and National Flour Mills (NFM), both released its half year financials ended June 2023. Despite, WCO generating a 6-month EPS of $0.40, a 33.33% decline from June 2022, the company is expected to pay $0.26 dividend per share on August 29^th, 2023. NFM delivered improved results quarter on quarter, producing a 6-month EPS of $13.49 compared to the negative earnings reported in June 2022 period. 

Despite the overall contraction in the local market, the resilience amongst the earnings data released thus far provides some attractive equity valuations for investors. 

The US market, denoted by the S&P 500 Index, ended July higher, advancing approximately 3.5% month on month. The growth came as the strength of the US economy persisted despite higher interest rates by the Fed. Growth was generated across all sectors, Energy and Financials delivered the biggest swings this month, climbing 9.2% and 7.0% respectively, while Health Care delivered the lowest month on month growth of 0.6%.

As anticipated, the US Federal Reserve (FED) raised rates 25 bps to 5.50% at its July committee meeting, in its continued fight to taper inflation. This marks a 22 year high for US interest rates and the 11th hike since March 2022. After raising interest rates, the FED noted its optimism for the US economy, citing it is no longer forecasting a recession in 2023.

US inflation, as measured by US CPI YoY Index, declined from 4.0% in May 2023 to 3.0% in June 2023. Additionally, the US added 187,000 jobs in July, less than the estimated 200,000 jobs and the unemployment rate fell to 3.5% in July vs a forecasted 3.6%. With reduced recession risk, resilient market data and stronger earnings outlook for the largest technology-related companies, market consensus has revised upwards the end of year target on the S&P 500 closer to 4700.

Energy prices increased 15.79% month on month, with WTI Crude climbing to $81.80 at July 2023 from $70.64 in June. This increase followed the Organization of the Petroleum Exporting countries (OPEC) announcement on June 4 to extend crude oil production cuts through 2024. The projected fall in global oil inventories is likely to continue to put some upward pressure on crude oil prices within the short to medium term. 

In seeking to outperform the market, the investment strategy   continues to be focused on areas of the equity market which are expected to outperform as momentum builds, keeping in mind asset picks that have shown historically low earnings volatility. 

On the June GORTT yield curve, yield increases were seen across the curve when compared to the prior month, with the short to mid-term end of the curve displaying the greater movements. The 1-year rate increased from 1.37% in May to 1.40% in June whilst the 10-year rate stood at 5.20%.

Month over month, liquidity remained healthy, increasing 11.18% from $6.3 billion in May to $7.0 billion in June. For the year thus far, the market saw GORTT, GORTT agency and corporate issues, as investors continuously seek fixed income assets to preserve capital in a volatile investing environment.

We expect additional GORTT/GORTT agency issues for the remainder of the year.

US Investment Grade corporate spreads, as measured by the CSI BBB Index, decreased from 1.72%. to 1.65%. The US 10-year Treasury yield increased over the period, from 3.81% on June 30^th to 3.97% on July 31^st. The US treasury curve remains inverted with a 0.91% spread between the 2-year yield and 10-year yield points at the end of July. The curve is expected to remain inverted within the medium term as the FED’s primary focus is on fighting inflation.

Fund of the Month

Scotia Global Equity Fund (US$)

-Global Equities

-Medium to High Risk

- Capital Appreciation