Major US market indices ended the week lower on the back of higher CPI (Consumer Price Index) readings. Inflation and Federal Reserve policy remain the main themes for 2022. At the same time, lower commodity prices could help economic growth, mostly by easing consumer spending and supporting corporate profits.Amid global challenges, developed international stocks (MSCI EAFE) as well as emerging markets (MSCI EM) finished the week lower. Developed international stocks retreated on fears of a recession in Europe. In addition, the European Central Bank remains firm on its decision to raise interest rates amid a potential slowdown. Emerging market shares retreated on fears of an economic slowdown affecting future demand for Chinese goods in addition to the increased number of COVID-19 cases in China.
Bonds
The Bloomberg Aggregate Bond Index ended last week in positive territory as the yield of 10-year US treasuries fell below the level of 3%. High-yield corporate bonds, tracked by the Bloomberg High Yield index, lost few positions along with stocks.
Raw materials
Natural gas prices rose sharply for a second straight week as the commodity reported this June as its worst month in more than three years. The U.S. Energy Information Administration reported last Thursday that domestic supplies of natural gas increased less than expected, pushing up natural gas prices. In addition, the major metals - gold, silver and copper - finished down for a fifth week in a row.
CPI (Consumer Price Index)
In June core inflation rose by more than 9% year-on-year. This is happening above consensus estimates. The main drivers are last month's large increase in energy prices and the increase in transport costs. Excluding food and energy, the CPI rose nearly 6% year-on-year. This is slightly slower than May's pace. The Federal Reserve is likely to raise interest rates later this month by 0.75%, especially as the labor market remains sufficiently strong.
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