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Market Comment January 2019 -How the Grinch stole 2018

This year has been a trying one for investors, and it is natural during such times to want to chuck this whole investing game and seriously consider keeping your cash under the mattress.

How bad was the year? It was a year where seemingly nothing made money. To illustrate, we took closing prices of December 28th for some broad indexes and asset classes and compared them against their 2018 highs. Universally, there was drawdown, sometimes violently. Consider first the most familiar North Ameria indices:

Dismal across the board, these results put us firmly in "correction" territory (down 10%-plus) and within spitting distance of a bear market (down 20%-plus), at least for the tech-heavy Nasdaq composite index.

Moving further afield, you can see that the market misery is widespread. You could even make the argument that North America has been the outperformer.

At least investors have been able to take refuge in bonds, gold, marijuana, and cryptocurrencies, right?

Over in marijuana-land, it is about as clear an example of "buy the rumor, sell the news" as you are ever going to find. As measured by the Horizons Marijuana Index ETF, believers in Mary Jane's power to heal a portfolio are down by nearly half since Oct. 16 -- one day before official legalization in Canada. Nope. Bond losses were to be expected in a rising rate environment, given that rates and pricing are inversely related. The poor gold bugs are well off the local high, though, with today's price not appreciably different than spring 2010.

The less said about Bitcoin and all the myriad other "coins" the better. The underlying blockchain technology might indeed change the world of finance, but the big financial companies and payment processors will ultimately benefit the most. Tune in after a decade.

There has truly been "no safe ground to go to" in 2018. Perversely, we take that as a positive. It does not mean that markets cannot continue to grind down for a while, but such public sentiments suggest that we are into the capitulation stage of the market malaise. This bodes well for 2019 and beyond -- the recent market drops, painful though they might be in the here and now, are creating opportunities we have not seen in years.

Happy 2019!

We are looking forward to having you onboard next year!

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