Is this a good time for long-term investors?
Recently, the topic of recession and whether the clouds are over the horizon is discussed very often. After a two-year rise without a stop, everybody is nervous that even the smallest imbalance could turn the markets upside down. The supply chain has not fully recovered yet from the numerous lockdowns caused by the worldwide pandemic. Historically looking, COVID-19 is the shortest recession in the USA. It lasted only two months but it still casts its shadows. In contrast, we need to remember the 2008 financial crisis. It was the result from the enormous recession that continued between 2007-2009, which was the longest in the modern history with a 4.3% decline in GDP. Because of the pandemic, the unprecedented incentives and the issues with the supply chain resulted in record inflation. The inflation was further fueled with a spike in gas prices because of the military conflict in Ukraine and the Russia’s imposed sanctions. All of this definitely provokes questions and worries about the near future and investment prospects.
The concerns:
Recently, the topic of recession and whether the clouds are over the horizon is discussed very often. After a two-year rise without a stop, everybody is nervous that even the smallest imbalance could turn the markets upside down. The supply chain has not fully recovered yet from the numerous lockdowns caused by the worldwide pandemic. Historically looking, COVID-19 is the shortest recession in the USA. It lasted only two months but it still casts its shadows. In contrast, we need to remember the 2008 financial crisis. It was the result from the enormous recession that continued between 2007-2009, which was the longest in the modern history with a 4.3% decline in GDP. Because of the pandemic, the unprecedented incentives and the issues with the supply chain resulted in record inflation. The inflation was further fueled with a spike in gas prices because of the military conflict in Ukraine and the Russia’s imposed sanctions. All of this definitely provokes questions and worries about the near future and investment prospects.
The concerns:
- The change in Fed’s policy. The central bank prepares the market for one stricter monetary policy. It includes an in-depth increase of the interest rates and a decline of the balance with nine trillion dollars – withdrawal of cheap money. This influences the stock market as a whole but the most sensitive will be the technology companies.
- The yield curve and its reversal. This is a key indicator for the economy’s situation. The indicator compares the profitability between 2 years and 10 years bonds. In a healthy economy, long-term bonds give higher profitability than the short-term ones. When the gap shrinks, as this is currently the case, because investors demand higher returns for shorter-term investments, this is a sign of uncertainty.
One balanced point of view:
- US’ economy continues to grow. Even though the expectations for the economic growth are lowered in 2022, the labor market is very healthy. Now, there are currently fewer unemployed comparing to 2019 which was before the pandemic began. These are the two solid reasons why the Fed feels comfortable with raising the basic interest rate. The definition of a recession in the US is two consecutive quarters of negative economic growth. We are still far from such a scenario.
In this situation, it is difficult to predict the bottom of the market, so the advice of the investment advisors of Compass Invest is to utilize the strategy of regular investment, which in the long run averages the price at which you “entered” the market, respectively for the whole investment.
Disclaimer: This information is marketing material and does not present investment consultation, advice, investment research, or investment recommendation. The information is valid as of the issue date of the marketing material and may alter in the future. The value of the units in the collective investment schemes changes over time and it could be higher or lower from the value at the time of the investment. No profits are guaranteed and risk exists for the investors to not receive the full amount of their investments. Investments are not guaranteed by a guarantee fund which is created by the country or another form of guarantee. Information on the performance of the financial instruments in the past is not a reliable indicator for future performance. Therefore, it is recommended for investors to acquaint themselves with the Prospectus and the Document with key information for investors before making a final investment decision. You can find these documents in Bulgarian on the website of Compass Invest - www.compass-invest.eu, and you can request and get a free paper copy at the office of the management company at: Sofia, ul. George Washington № 19, 2nd floor, during every business day from 9 am to 5 pm. Future results are subject to taxation, which depends on the personal situation of each investor and may change in the future. A summary of the rights of the investors is available at the following hyperlink in Bulgarian: here. The mutual funds, which are managed by Compass Invest, are actively managed without following an index. We would like to inform you that Compass Invest Management Company can make a decision to terminate the offering of funds on the territory of the Republic of Bulgaria. The investment in units of mutual funds, in addition to benefits, carries certain risks like: liquid, operational, interest, currency, and political risk, as well as macroeconomical risk, currency risk, concentration risk, etc. The full information about risks can be found in the Prospectus of the respective fund.
Disclaimer: This information is marketing material and does not present investment consultation, advice, investment research, or investment recommendation. The information is valid as of the issue date of the marketing material and may alter in the future. The value of the units in the collective investment schemes changes over time and it could be higher or lower from the value at the time of the investment. No profits are guaranteed and risk exists for the investors to not receive the full amount of their investments. Investments are not guaranteed by a guarantee fund which is created by the country or another form of guarantee. Information on the performance of the financial instruments in the past is not a reliable indicator for future performance. Therefore, it is recommended for investors to acquaint themselves with the Prospectus and the Document with key information for investors before making a final investment decision. You can find these documents in Bulgarian on the website of Compass Invest - www.compass-invest.eu, and you can request and get a free paper copy at the office of the management company at: Sofia, ul. George Washington № 19, 2nd floor, during every business day from 9 am to 5 pm. Future results are subject to taxation, which depends on the personal situation of each investor and may change in the future. A summary of the rights of the investors is available at the following hyperlink in Bulgarian: here. The mutual funds, which are managed by Compass Invest, are actively managed without following an index. We would like to inform you that Compass Invest Management Company can make a decision to terminate the offering of funds on the territory of the Republic of Bulgaria. The investment in units of mutual funds, in addition to benefits, carries certain risks like: liquid, operational, interest, currency, and political risk, as well as macroeconomical risk, currency risk, concentration risk, etc. The full information about risks can be found in the Prospectus of the respective fund.