In the fourth quarter of 2018, the S&P 500 crashed down by 20%. The NASDAQ and the Dow Jones did even worse. All told, in 2018, the U.S. dollar outperformed 93% of global assets for the year, because most of them were down. The snap-back has been swift and powerful, just like the drop itself. The stock market continues to close down the gap, getting back to its all-time high. 2018 is totally different than 2019 – there is no shortage in dollars and there’s no reason to bank on additional tightening.
2019 is so profitable that as of this time, stocks are having their best year in history.
Check out the average return of the stock market in its ten best years and you’ll see that the 2019 year-to-date return is already 70% on an annualized basis:
If the current year-to-date trajectory of the S&P 500 were to continue through the rest of the year, the annualized return would be more than 69%, which would make 2019 the best year ever in the history of equity market indices.
The stock market is very different from the underlying economy: both the International Monetary Fund and the World Bank have revised down global growth forecasts multiple times this year. China, the U.S., Europe, and other major economies will continue to grapple with slow growth for the foreseeable future. But of the three, China and Europe are hated and cheap – the opportunities are outside of the U.S. in the years ahead.
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The IMF (International Monetary Fund) just released its World Economic Outlook, and its title is “Growth Slowdown, Precarious Recovery.” In the report, the IMF issued its 4th downgrade to its 2019 global GDP growth forecast in nine months, with the estimate that it will slow to 3.3% this year.
Markets can continue to run higher as long as opportunities for yield, growth and appreciation outweigh the risks involved; but we’re very close to a situation where the employment is so tight and wages are pressured up so drastically that companies will start laying off personnel.
I’m not purchasing more shares in the S&P 500 at this time. I haven’t done so since late December, when it was down drastically. I invest in select components of the index, but as a whole, I only increase my position in the index after 5% drawdowns – and we haven’t seen one this quarter.
The sugar high of U.S. and China fiscal stimulus will wear off and the persistent issues that truly limit productivity in our world will put an end to the bull market.
The simplest and most important tool the politicians will use is the one they’ve been holding off on using for a very long time: federal cannabis legalization. It’s supported by over 60% of the American public, has plenty of backing in Congress, and the President revealed his stance when he recently signed pro-hemp legislation via the Farm Bill.
Instead of using federal funds to combat cannabis use, they can instead collect billions of dollars in much-needed tax revenues, which can then be used to fund infrastructure projects that would provide plenty of jobs and thereby bolster the economy.
The government has forecasted outstanding workforce gains in the legalized cannabis sector – more new jobs in the cannabis industry in three years than other major sectors of the economy will see in a full decade:
The U.S cannabis industry could pump nearly $80 billion annually into the nation’s economy by 2022 – a staggering figure.
As the decade-old bull market in stocks enters its final phases, central banks will persist with their attempts to stimulate the economy with money printing.
Cannabis will prove critical to the 3rd decade of this century!
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