#MarketingCommunication

The financial markets started 2023 on an optimistic note. Equities, bonds and alternative investments generally rose – with global equities appreciating sharply more than 7%, and posting the second strongest January rally in the past 30 years. The advance was propelled by China’s re-opening after dropping its zero-Covid policy in late December, and by signs that inflation is easing from its autumn highs in several major regions. In equities, emerging markets outperformed their developed counterparts, and in fixed income markets, bond yields fell (meaning that prices rose). 
US equities made robust gains. The technology index NASDAQ rose by 10.7% in January, its best start to the year since 2001. The broad S&P500 rallied 6.2%, posting its first positive result in January for the last four years. The industrial index Dow Jones scored a more modest gain of 2.8%. Across the S&P500, consumer discretionary and communication services were the top-performing sectors, as they added 15% and 14%, respectively, while traditionally defensive areas like utilities, consumer staples and healthcare were the weakest, falling around 2.0%. For now, investors remain focused on inflation – which cooled for the sixth successive month in December. The headline consumer price index (CPI) dropped to 6.5% from 7.1% mainly due to energy and food cost moderation. The combination of ebbing inflation, stronger-than-expected GDP growth and better-than-expected corporate earnings, led investors to position for slower rate rises from the Federal Reserve from here.
Inversion in the US and European yield curves became more pronounced as investors anticipated a softening in central bank monetary policies in light of the improving inflation news. 10-year yields in developed countries fell by 20-30 basis points over the month which led to positive returns for defensive fixed income. Falling credit spreads, especially for high yield, were an additional return boost for credit.
European equity markets also outperformed as the milder winter alleviated energy shortage concerns and inflation showed real signs of decline. Top performing sectors included risk-sensitive areas of the market such as information technology and consumer discretionary. Real estate also enjoyed a rebound after poor performance in 2022. Within consumer discretionary, European luxury goods stocks were particularly strong following the news of China’s economic reopening. Energy was the weakest sector while defensive areas like utilities and healthcare also underperformed. The annual inflation rate was 9.2% in December (compared to 10.2% the previous month). The highest contribution to falling inflation came from food, with energy in second place as natural gas prices remained below their elevated levels of 2022. European Central Bank President Christine Lagarde warned that further interest rate rises would still be needed to return inflation to the 2% target.
Stocks in Bulgaria also recorded good positive returns in the first month of the year, although not as pronounced as on international exchanges. In January, began the trading of shares on the BEAM market of three companies - ITF Group, MFG Invest and Mellifera, which raised a total of BGN 8.1 million at the end of the previous year. Among local companies, the best performer was cable manufacturer EMKA AD, whose price rose by nearly 22% over the past month, and the worst - real estate company Sopharma Property REIT, whose share price fell by 8.5%.