The S&P 500 Index finished positive in a shortened trading week, led by the utilities and materials sectors. In addition, the financials and consumer staples sectors had a positive week and also outperformed the market average. The energy sector was the biggest loser relative to all others as oil prices (West Texas Intermediate) fell over 4% for the past week and over 10% for the one month period. Emerging markets ended lower as COVID-19 cases soared in China, prompting the government to continue the lockdown and mass testing.
Bonds
Investment portfolios are facing some stormy headwinds this year. Increased and persistent inflation has led many central banks to move into restrictive monetary policy territory. Equity and bond markets retreated as investors set their expectations for higher interest rates this year. Bonds typically act as a volatility limiter in portfolios and move in the opposite direction to equities, providing a buffer against stock market losses. The rapid rise in interest rates, however, squeezed bonds and as a result they suffered the biggest sell-off since records began in 1926, so this time they failed to provide their typical diversification benefits. Some analysts believe the Fed will stop raising interest rates in the first half of 20223. If this happens and the Fed changes its monetary policy stance, the bond market will be in a very good position.
Commodities
Oil and natural gas prices ended the week mixed for the second week in a row. We expect natural gas prices to see increased volatility through the end of 2022 and into 2023 due to concerns over reduced supplies given the crisis in Eastern Europe.
What to watch in the week ahead?
Friday's U.S. jobs report for November will be the main focus for next week as investors continue to hope that the Federal Reserve will slow the pace of rate hikes soon. Fed Chairman Jerome Powell's mid-week speech will be closely watched. Eurozone inflation data will also be in focus, as will PMI data from China amid concerns about a resurgence of COVID cases there.
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