The U.S Securities and Exchange Commission (SEC) is closely monitoring and evaluating the extreme price volatility of certain stocks trading recently in order to protect investors, and to maintain fair, orderly and efficient markets.
Short selling is a strategy in which investors borrow a security, sell the security and then buy it back to return to the lender. Short sellers bet on, and aim to profit from, a fall in the security’s price.
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For the month ended January 2021, the TT Composite Index gained 0.44% whilst the All T&T Index fell slightly by -0.11%. Earnings releases across the various sectors showed depressed revenues stemming from reduced operations in 2020. The TT Composite Index has been driven upwards by the TT Cross Listed Index, which has begun to rebound from 2020 lows. The Cross Listed Index increased by 1.61% in January 2021 with GKC, JMMBGL and NCBFG up 1.30%, 3.13% and 2.83%, respectively. Local companies National Flour Mills and Trinidad Cement Limited continue to outperform the market, posting positive returns of 16.28% and 50% for the month. In the first half of 2021 we expect a flat to negative market performance as the local business environment remains challenged and COVID restrictions persist. There has been some improved sentiment surrounding the energy sector in 2021, which bodes well for the local economy. However investors must remain cognizant of new strains of COVID-19 and potential issues surrounding vaccine rollouts.
US Equities markets experienced volatility as investors reacted to speculative trades by retail investors, mainly those using popular website Reddit, in names such as GameStop and AMC Theaters. A few hedge funds experienced double digit losses, however most were able to navigate the Reddit-fueled trading frenzy with minimal losses. So far there has been a ‘V-shaped’ recovery in the US economy due to fiscal and monetary support. Companies that benefited from the work from home trend and that had strong recurring revenue outperformed in 2020. During January the market was led upwards by the Energy, Communications and Consumer Discretionary sectors which returned 6.4%, 4.8% and 3.2% respectively. Only three sectors declined over the period as market confidence increased. The IMF expects the US economy to grow 5.5% in 2021 based on expectations of vaccine related activity and policy support. So far this year Congress is already taking steps to pass another COVID relief bill. As long as the economy remains well below the Fed Committee’s target of full employment and stable 2% inflation the Fed signalled it will continue to provide accommodative measures to supplement growth, which we see as a tailwind for equities.
Local Fixed Income
Short term TTD rates remain low. The 1 year rate fell to 0.22% in December from 0.42% in November. The rate has fallen 2.07% in a one year period. Rising liquidity and limited investment options led to 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 face further pressure from increased liquidity in the system which currently stands in excess of TT$10.7BN.
International Fixed Income
US Investment grade corporate spreads, as measured by the CSI BBB Index, rose by 2.50% over the month, pushing bond prices lower. Yields were slightly higher on the long end, with the US 10 year yield rising to 1.07%. Treasury yields are not expected to rise materially as they are tempered by the longer term growth outlook and low inflation expectations.
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