Markets were extremely dynamic last week. Lower than expected US inflation data offered some relief for investors and the Fed. The published data gave room for expectations that a disinflationary trend could be seen in the coming year. The core consumer price index (CPI) rose 7.7% from a year earlier, the smallest annual increase since January and down from September's 8.2% pace. Importantly for the Fed, the core index, which excludes food and energy, slowed more than expected. The good news about the easing of inflation pressures was mirrored by equities with: a strong rally, a sharp fall in bond yields and a weakening of the dollar against a basket of currencies. All of this shows us that it is inflation that remains the main driver of markets. Sentiment is largely determined by indicators such as CPI and the Fed's future strategy.

If the disinflation trend persists and the focus shifts away from this theme, we are likely to see a sharp decline in bond yields and strong support for the technology sector and other growth segments. Thursday's market reaction supports a similar view with the NASDAQ rising 7%.
Value investing (dividend income) continues to have an edge over growth equity investing, where the main source is capital gains, but less aggressive central banks and peak 10-year bond yields may lead to a better balance between the two investing styles.
What to watch in the week ahead
There will be a host of US data releases this week, but the most important will be retail sales. These will give some indication as to whether the Fed's aggressive rate hikes are working and starting to cool the economy.
The UK government will finally announce its new budget plan and investors will be paying close attention after the market crash triggered by September's "mini-budget".
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