Over the past week, the markets were torn between two major forces. On one side were disappointing earnings results from mega-cap technology companies and signs of softening economic activity. On the other side were rising hopes of a Fed policy easing and a momentary decline in bond yields. All of this led to a large divergence between the Dow Jones Industrials Average and the Nasdaq, where the Industrials Index rose 5%, while the Technology Index rose just 1%.
Corporate earnings were the focus of investors last week as 164 S&P 500 companies, or nearly 50% of the index's market cap, reported results. In particular, the spotlight was on tech giants, exerting a strong influence on the markets as a whole. Alphabet, Microsoft, Meta, Apple and Amazon together accounted for 20% of the index and on average their shares fell 9% on the day earnings were released.
Nevertheless, at the moment, the initial GDP estimate for the third quarter shows that the US economy is recovering well, erasing the decline in the first half of the year. On an annual basis, GDP grew by 2.6%, slightly above expectations of 2.4%.
The bond market ended the week higher, helped by the fall in yields. This rise in prices of fixed income instruments was dictated in part by investors' expectations that the pace of Fed tightening would ease.
Commodities ended the week higher. Since the beginning of the year, natural gas prices have been very volatile and there has been a drift into extremes. Sentiment in the US has shifted from concerns about tight supplies amid the geopolitical landscape to worries about less demand for heating fuel given forecasts for warmer weather.
What to watch for this week
Expectations are for a fourth consecutive 75 basis point increase after the Fed's two-day meeting ends on Wednesday. Investors are also hoping for a softening tone from the central bank regarding future monetary tightening.
Nonfarm payrolls data will also be released on Friday. A key indicator of the stability of the US labor market. This data combined with the sentiment from Wednesday's press conference will determine the short-term sentiment in the US markets.
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