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.