Markets ended last week in positive territory, a good start to 2023. The factors that determine sentiment remain unchanged. These are inflation, rising interest rates and of course not least geopolitical uncertainty. Against this backdrop, the US employment figures were announced last week. We are currently in a phase where good news can be interpreted as bad news for the market and vice versa. It is because of this feature that equities came under some pressure earlier in the week past data pointing to a steady increase in employment and a reduction in jobless claims, equities then rallied, supported by weak wage growth. Anything that could lead to a pause in rate hikes or a slowdown in inflation will be interpreted positively by the market and vice versa.

As earnings season approaches, the focus will begin to shift to corporate profits. With 7 of the 11 sectors in the S&P 500 currently forecast to see earnings contraction, this will make overall index growth very unlikely.

Bonds

U.S. high-yield bonds outperformed U.S. investment-grade corporate bonds as well as U.S. equities in 2022, although all three markets suffered large losses.

Commodities

Both oil and natural gas prices fell this week. Warmer-than-expected weather in Europe caused natural gas to sell off. Moreover, natural gas prices in Europe are now hovering around their lowest level since before the Russia-Ukraine conflict. Base metals, including gold, silver and copper, ended the week mixed.

What's ahead this week

US inflation data and the start of corporate earnings season will be the highlights of an otherwise quiet week on the economic calendar. December inflation data will help influence the size of the Federal Reserve's next rate hike, while corporate earnings will provide important insight into the health of the economy amid concerns about a potential slowdown. UK GDP, Japanese inflation and eurozone data will also be in focus.

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