Issue No. 50

September saw another month of declines for the Trinidad and Tobago equity market, with year to date returns now recorded at -13.28% (9M 2023: -9.2%). The T&T Composite Index posted a marginal dip in value of -0.73%, as gains generated from the TT Cross listed Index of 0.31% was tapered by the -1.03% decline of the All T&T index.

The TT Cross listed Index recouped some of last month’s losses due to the growth in GraceKennedy Limited (GKC), JMMB Group Limited (JMMBGL) and FirstCaribbean International Bank Limited (FCI) share prices of 7.46%, 2.0% and 1.45% respectively. 

The All T&T Index’s negative return during the month was fuelled by market volatility amongst major names. Trinidad and Tobago NGL Limited (NGL) fell a further -9.0% while First Citizens Group Financial Holdings Limited (FCGFH) contracted -7.31%. Trading activity on the TT Composite Index was derived from 27 securities being traded of which 11 stocks advanced, 15 declined and 1 traded firm.

Investors seeking to outperform in the local equity market can seek dividend paying stocks for stable income and focus on value investing in undervalued stocks, which can offer upside potential when the market rebounds. By maintaining a long-term perspective when investing in equities, investors gain from capital growth potential over time.

The FED made a significant move by cutting interest rates by 50 basis points, bringing rates down to the 4.75%- 5.00% range, marking the first reduction in rates since 2020. The Fed’s decision to ease monetary policy came as a response to a slowing labor market and moderate inflation, which has fallen closer to its 2% target. Following this aggressive cut the market has now responding to the anticipated size and pace of potential upcoming rate cuts in response to prevailing economic data. It is believed that there will likely be 2 additional rate cuts in 2024, which is expected to extend into 2025. According to the CME FedWatch tool, the probability of a 25 basis point cut in the November meeting stood at 62.9%, at the time of this report.

 In September, US equities soared to new record highs, following the optimism sparked by the Fed's rate cut decision. The S&P 500 Index was up 2.02%, closing the month at another all time high of 5,762.48, blowing past the median 2024 S&P strategist consensus of 5,600. The S&P 500 Index year to date returns now stands at 20.81%, significantly higher to the comparable 2023 period return of 11.68%. This growth is further supported by the ongoing AI optimism. During the month, 9 of the 11 sectors advanced, with the largest total return recorded by utilities, consumer discretionary and industrials.  Despite the continued run up in the market, Bloomberg projects a 12 month return potential of 10%.

Commodity prices were mixed in September. Oil prices tumbled -7.31%, moving from US $73.55 to US $68.17 per barrel, reflecting the deceleration in global oil demand growth offset by tensions in the Middle East. On the other hand, natural gas prices soared 37.42% to $2.923 while gold prices gained 5.25% during the month. Analysts are predicting that oil prices will range in the mid to high 70s over the next year.

The August GORTT yield curve saw an overall upward shift in interest rates, albeit at a slower pace. The 6-month rate stood at 2.80% vs 2.75% while the 10-year rate moved from 5.52% to 5.54%. The 1-year rate contracted for the first time since March 2023, moving from 3.74% to 3.65%, but still remains elevated compared to prior years. Investors continue to show a preference for shorter term instruments that deliver competitive returns. 

With the upcoming local elections in 2025, it is anticipated that the Government would seek funding through further bond facilities in the market, to support public initiatives.  As demand for these assets remain robust, the climbing interest rates environment continues to provide great investment opportunities for investors to reinvest at higher rates.

During September, fixed income markets continued its rally following the widely anticipated September FED rate cut.  The Global Investment Grade market, measured by the Bloomberg Global Aggregate Index, gained 1.70% while the US Investment Grade corporate spreads narrowed further from 1.25% to 1.22% in September.

Since the September FOMC meeting, the US inverted yield curve has normalized for the first time since early July 2022, as the two-year treasury yields fell below 10-year Treasury yields. The 10-year treasury yields moved from 3.91% on August 30^th to 3.81% on September 30^th while the 2-year yield closed the month at 3.66%, 0.25% lower when compared to August.  This shift indicates improved investor confidence in the future economic growth with a reduced concern about immediate recession risks. Consumer confidence, denoted by the University of Michigan Consumer sentiment grew to 70.1 from 67.9 after its downward trend since May 2024. 

Fund of the Month

Scotiabank Canadian Equity Fund (USD$)

- Equity Investments

- Medium to High Risk

- Capital Appreciation