A large container ship blocked the Suez Canal for days in March, impacting 12% of global trade. The incident will likely result in large losses for the commercial insurance and reinsurance market.
Volatility refers to the amount the value of a security or index goes up and down. If the price goes up and down frequently over a short amount of time it shows high volatility. Low volatility means the price remains very stable.
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|Nat Gas (HH)
For the month ended March 2021, the TT Composite Index gained 0.58%, led upwards by the All T&T Index which increased by 1%. The share prices of AGL and GHL increased by 9.7% and 17.04% respectively as investors took note of relatively good YoY results, and corporate actions such as acquisitions. Other financial results released during the month were generally negative as PHL, WCO, AMBL and NGL all reported YoY declines in profits. The Cross Listed Index declined by -0.23% in February 2021 as JMMBGL and NCBFG fell -2.70% and -3.95%, respectively. Negative sentiment persisted in the market with 15 stocks declining, 8 increasing and 3 holding firm. We do not expect a significant change in company performances until a large segment of the population is vaccinated and restrictions are lifted. The IMF has projected growth of 2.1% for T&T in 2021, assuming a successful vaccine rollout and improvements in energy production and prices.
The US economy is expected to grow by 8-10% in the second half of 2021 vs a year prior. This growth will stem from increased economic activity driven by fiscal stimulus and vaccine roll outs. Access to multiple vaccines in the US has now significantly increased the speed and the size of the rollout. At present, 33% of the US population have received at least one vaccine shot and 19% are considered fully vaccinated while the easing of restrictions and multiple stimulus packages have improved consumer confidence.
In March, the ISM Services Index rose from 55.2 to a reading of 63.7. During March the market was led upwards by the Utilities, Industrials and Consumer Staples sectors which returned 11.9%, 8.9% and 8.1% respectively, while all 10 sectors reporting positive returns. Investors are positive on the outlook for the economy given an expected surge in consumer spending and digital demand. Market volatility is still likely moving forward as several risks remain, including the emergence of new variants which may curtail business activity. Also, other countries are vaccinating at a much slower pace than the US leading to slower and more uneven global economic recovery.
Local Fixed Income
Short term TTD rates improved over the last month. The 1 year rate moved to 0.54% in March 2021, up from 0.48% in January 2021, but is still well below September’s rate of 2.08%. Limited investment options led to a high demand for government securities throughout 2020 and in early 2021. Corporate issues remain scarce and no change is expected in 2021, despite the low interest rate environment. We expect short term rates to trend higher in the short term in spite of high system liquidity, which currently stands in excess of TT$7.5BN.
International Fixed Income
US Investment grade corporate spreads, as measured by the CSI BBB Index, fell by 0.22% over the month. Rates were higher across the curve with the 10- year hitting as high of 1.74% on March 31st. Markets expect trillions in fiscal relief and accommodative monetary policy will spur inflation, which led to a sharp rise in rates YTD. Another factor which may push inflation higher is pent up savings, as consumers may spend excess savings from the last year as the economy reopens, causing prices for goods and services to move higher.
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