The second half of the year is off to a positive start for major US indices. Big tech companies have taken the lead. The rise is due to a pullback in raw material prices. As inflation remains the focus of investors, such a drop in prices is immediately reflected positively in the markets. Lower commodity prices would support economic growth, consumer spending and corporate profits.
Developed markets felt some pressure at the end of the week as the conflict in Eastern Europe continued to add uncertainty. The ECB remains steadfast in raising interest rates despite a potential economic slowdown. In June business services in China expanded at their fastest pace in almost a year. Uncertainty surrounding Covid-19 remains. Those infected with Covid in Shanghai are increasing at a faster rate compared to the last three weeks.
Bonds
The Bloomberg Aggregate Bond index ended the last week lower. The yield on 10-year US Treasuries is back to around 3%. High-yield corporate bonds had a strong week, supported by a rally in stocks.
Raw materials
Natural gas prices rebounded sharply this week, but June remains one of the weakest months in more than three years. The major metals, gold, silver and copper, ended the week in red territory for the fourth week in a row.
What's next for the markets this week
After a relatively quiet start of July and a rise in the major indices, we are in for an intense week that will bring some volatility.
The main topics will be the inflation (CPI) data, with analysts expecting an acceleration. If they are right, the Fed will continue to sit on the hot seat, and US markets will be put to yet another test. The other leading topic is the second quarter reports. The first will be the banks and several key companies that are part of the S&P 500. The leaders this week will be JPMorgan Chase, Morgan Stanley, Wells Fargo, Citigroup. Banks traditionally open earnings season given their global outlook on economic activity. They are also in the spotlight this year given interest rate trends on the one hand – rising rates tend to benefit financial companies – and the looming threat of a recession on the other, which often leads to difficulties in the financial sector.
Key companies: The focus will be on Delta Air Lines' report to see if worries about recession, inflation or accumulating travel delays hamper the post-pandemic recovery. Taiwan Semiconductor's earnings came after a strong June earnings update, but amid concerns that the semiconductor bear cycle has begun.
If you are interested in the investment opportunities which Compass Invest JSC can provide to you, please contact us for a free financial consultation according to your personal financial situation here - https://bit.ly/3OZyRdW
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, 19 George Washington Str, floor 2, 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 Management Company Compass Invest 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.
Risks:
Despite benefits, the investment in shares of mutual funds brings certain risks like:
1) Market risk with the following components: a) interest risk related to a decrease of the value of the investment due to a change of the interest rates levels b) currency risk related to a decrease of the value of the investment, denominated in a currency which is different from BGN and EUR c) price risk related to a decrease of the value of the investment in the case of unfavorable changes of the market’s prices;
2) Credit risk – related to a decrease of the value of the position in the case of unexpected events with a credit nature which are related to the issuers of financial instruments, the counter side of exchange and OTC transactions, as well as countries, in which they operate;
3) Operational risk – from errors or flaws in the system of the organization
4) Liquidity risk – in case of forced sales of assets under unfavorable market conditions;
5) Concentration risk – in case of incorrect diversification of exposures to groups of related clients, from the same economic branch, geographic area, etc.
6) Position risk which is related to the change of price of a certain instrument in result of factors related to the issuer or in case of a derivative instrument – related to the issuer of the base instrument;
Additional information for the risks can be found in the Prospectus of the respective fund, which is available here: www.compass-invest.eu