There has been an overriding question raised during our investment committee meetings over the past several months “what’s changed?”  and to this point the answer continues to be a resounding “nothing”.

The U.S. and China went tit for tat during the month of August as both sides introduced a new round of tariffs. Economic data came in somewhat weaker than expected and once again, the U.S. treasury bond market “inverted” and thereby flashed another recessionary signal.

Recession fears have been tilting investor sentiment for the past two years making the lon

Last month we referenced the continued-up trend in the Canadian and U.S. stock markets for the month of June as being driven by the expectation of a more accommodating monetary policy from Central Banks, along with a fear-of-missing-out mindset on the part of investors.

A melt up defined by Investopedia “as a dramatic and unexpected improvement in the investment performance of an asset class, driven partly by a stampede of investors who don't want to miss out on its rise, rather than by fundamental improvements in the economy.”

Almost like clockwork, both Canadian and U.S. stock markets began to sell off the first of May lending some credibility to the adage “Sell in May and Go Away”. Was this a self-fulfilling prophecy or just the byproduct of an overbought market, hypersensitive to trade war headlines and President Trump’s Twitter feed?

CIBC reported earnings that follow an all to familiar pattern. Management warned of slower growth through the remainder of 2019, added more than $1.5 billion in loan loss reserves and generally raised fear that CIBC contagion would spread across the entire Canadian banking sector.

There’s an old saying that the stock market climbs a wall of worry and Q1 2019 seems to reflect just that.  Based on early 2019 investment statements, one would find it hard to believe that just a few short months ago stocks had suffered one of their worst declines in this decade. Economic concerns may still be a worry, but for now they seem to have taken a back seat to a solid stock market rebound.

To understate the obvious, it was a challenging fourth quarter for financial markets. Investor sentiment shifted daily from bullish to bearish. Equity markets sliced through most technical supports like a hot knife through butter. The S&P 500, Dow Jones Industrial Average, Nasdaq 100 and Russell 2000 fell intraday into bear market territory, loosely defined as a correction of 20% or more from the most recent highs (see figure 1), ending the year with the worst December performance since 1931.

December 31st marked the end of a disappointing year for most investors, with nearly all assets except for cash and government bonds booking losses.
Despite a strong recovery from the sell-off experienced earlier in the year, the S&P 500 gave it all back and then some in the month of December. The index declined -10.24% from top to bottom for the worst December since 1931, and closed 2018 down -6.24% in the red for the year for the first time since 2008.