Stocks

Equity markets ended last week in negative territory after strong volatility. Last week's inflation data on the 13th showed that the Fed has a strong case to continue aggressive rate hikes through the end of this year. That led to a rapid sell-off in stocks even before Thursday's open. More interesting was the intra-session reversal during which the S&P 500 registered a sharp pullback and closed the day in positive territory. This is the fifth largest reversal in a single day in the history of the index. Investor sentiment, represented by the spread between "bulls" and "bears", is still extremely negative.

Last week's turbulence comes along with earnings season in the US. Fears that aggressive Fed policy will push the economy into recession are sharpening the focus on corporate profits. Also of interest to investors will be an update on the US housing market. The increase in borrowing costs has already led to a slight cooling in demand, further slowdown could weigh on mortgage-backed instruments (MBS). Earnings for S&P 500 companies are expected to rise 4.1% from the previous period. If proven correct, this would be the slowest growth since the final quarter of 2020.

Bonds

The bond market also suffered another disappointment last week. Higher CPI readings pushed up 10-year Treasury yields, which in turn pressured Treasury and corporate bond prices. For now, the 4% yield level seems to be a barrier and it is possible that we will see a slight recovery in bond prices this week.

What's coming up this week

This week, the focus will be on the reports of companies such as Netflix, Tesla and Johnson & Johnson. Investor attention will also be focused on the latest information about the housing market in the US.

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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.
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