Last week, markets globally declined. The S&P 500 finished down with more than -1%. Investors continued to sell risk assets under pressure from expectations of weaker-than-forecast Q3 earnings. Trader sentiment comes as an additional drag. Their mindset is for a hard landing on the economy by the Fed, driven by struggling price pressures. The markets are in an extremely bearish environment. This can be interpreted as a positive signal. Often, when we have a mass swing in investor sentiment towards one of two extremes (optimism/pessimism) the slightest surprise, contrary to general expectations, can lead to a sharp reversal in index movements. Currently, such a positive catalyst could be inflation data or corporate earnings. The bullish reading in the latest Investors Intelligence report fell to 25.4% from 30% last week, marking the lowest since 2016. The American Association of Individual Investors' (AAII) reading for the bull-bear spread (bulls minus bears) was -40.8, the eighth most pessimistic weekly reading in the survey's 35-year history.
Bonds
The Bloomberg Aggregate Bond Index ended the week lower as bond investors continue to believe inflation conditions are likely to persist even amid the Fed's hawkish stance this year.
Raw materials
Amid ongoing concerns about energy supplies in Europe stemming from Russia's invasion of Ukraine, black gold rose globally. Metals also had a positive performance, breaking the negative trend.
Key moments for the upcoming week
Investor focus will turn to the non-farm payrolls (NFP) data due out on Friday. This data could show the extent to which the interest rate hike impacts the economy.
Several Fed officials will be making statements, and they could give investors an early signal as to what the likelihood is of another 0.75 basis point hike in November.
On Wednesday, we can expect volatility in the oil price as OPEC considers drastically cutting output with the idea of raising the price amid a rising dollar.
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