Over the last year, investors have had a lot to deal with, including continued bull market excitement and hints of bear market corrections. The up-and-down nature of equities in 2018 has the S&P 500 in dangerous territory – where it sits at the precipice of logging its first yearly loss of over 1% since 2008. Even 2011 and 2015, which were “down” years by all accounts, never saw a 1% drop (or more).
One of the major causes for this is the deflation of the tech sector, which continues to leak value as FAANG stocks (which largely accounted for the market’s 2018 gains) fall, recently underperforming the market in a major way. The iShares U.S. Technology ETF IYW is down almost 13% since early October, and a further plunge seems very possible.
And even though tech is out of the picture (at least temporarily), there’s still reason for investors to be hopeful – at least in a few key sectors that look set to erupt in 2019.
Marijuana
Many investors would still consider investing in cannabis companies as a speculative move, and some might even have issues buying stock in corporations that are associated with what is still a federally illegal substance. But the truth is that even after the “pot stock boom” (and rapid decline since August), it looks like marijuana stocks are heating up again to the point of being the next Wall Street darlings.
Writing off pot stocks right now would be a huge mistake, especially for investors who feel like they missed out on the first major run that began for many companies in mid-2017.
Don’t forget, even though marijuana still isn’t legal on the federal level, a recent Gallup poll found that roughly two in three Americans support full legalization. The recent legalizations in several states barely made an impact, and the Canadian legalization arguably caused cannabis stocks to drop when companies couldn’t catch up with demand.
But now we’re seeing indications that the selling may be over, and the troubles faced over the last few months served as a great “test-run” for pot producers facing full federal legalization in the United States. Constellation Brands (NYSE: STZ) just increased its stake in the industry’s biggest producer, Canopy Growth Corp. (NYSE: CGC) with a $4 billion investment, and Cronos (NASDAQ: CRON) managed to attract the eye of tobacco giant Altria (NYSE: MO), who have acquired a staggering 45% share of the company.
Even though Canopy Growth Corp. and Cronos have both been extremely volatile, they’ve partnered with two of the biggest “vice industry” titans – both of whom aren’t investing simply on a lark, but because they expect explosive growth once weed becomes legal, particularly in the two companies they’ve backed. With trade tensions on the rise and many other industries primed to fall, investors could do far worse than investing in a burgeoning sector that’s still in its early stages.
Gold
What a segue, right? Pot stocks to boring old gold. I apologize, I had to lead with the exciting stuff first.
Even though gold might not get your blood pumping like the cannabis industry does, the fact is that gold looks ready to glitter once again after plummeting since mid-April of this year. In a world where uncertainty runs rampant (both in economies and equities), investors have already begun to turn back to the safety of precious metals, as silver and copper also have enjoyed a nice recovery over the last few weeks.
As usual, though, gold is the star of the show – having risen roughly 5% since early October – and it dragged up a few mining companies in the process, particularly Barrick Gold (NYSE: ABX) and AngloGold Ashanti (NYSE: AU), which are both up an impressive 20% over that same period.
To add fuel to the fire, inflation shows signs of increasing, stoking inflationary fears across the market. Nervous that long-term bonds and other traditional “safe-haven” assets could be negatively impacted by rising inflation, investors are turning to gold once again – as evidenced by the recent recovery.
Gold’s long overdue for a nice run anyway, regardless of any economic instability, and appeared woefully oversold for months. Now that the “weak hands” have shaken out, and a few months of progress back up have been logged, the climb back to 2012’s all-time high price per oz could be starting right now. Add to that the ongoing trade war, plus a Fed chairman that’s insistent upon raising rates, and you’ve got a dream scenario for gold bugs across the board.
