Market Health

Trends to Watch for 2019

A friend and I were doing a bit of holiday shopping when we stumbled upon a sign that read “Psychic Readings” in glowing neon.

I chuckled. I’ve yet to meet a psychic with any gifts that weren’t better explained by simple cold-reading tactics.

But I noticed something odd just a few inches below the sign. There was a second sign – without the neon flair – that read: “If you’d like to see someone, we can be here in 15 minutes.”

Huh? I immediately turned to my friend…

“You know, if they’re so psychic… shouldn’t they know if someone’s coming? They should be here before someone arrives!”

It’s easy to critique charlatans who prey on the naiveté of others. But it got me thinking.

There’s something appealing about the art of prediction. And as investors, we rely on our sense of foresight to guide us in our investment decisions.

We have some stake in gaining insight into tomorrow’s biggest trends. So allow me to try my hand at the crystal ball.

Here are some trends I see for 2019…

1. Panic selling will continue… but will bottom out in the coming months.

In fact, I believe this has already started, as we’ve begun to see extreme fear take over.

The Dow Jones Industrial Average, S&P 500 and Nasdaq indexes have all reached 52-week lows and are all in correction territory (a loss of 10% or more from their highs).

And those losses were aggravated by the Fed’s Wednesday announcement that it was raising the federal funds rate by 25 basis points and lowering its GDP growth estimates for 2018 and 2019.

GDP growth this year is expected to hit 3% – down very slightly from the previous 3.1% estimate. For 2019, the Fed lowered its estimate from 2.5% to 2.3%.

Naturally, investors freaked out immediately following the announcement. Here was their reaction in real time…

I recently covered the impact that crowd psychology plays in the market and why it’s leading to an overreaction in the current sell-off.

As I said previously, I think there’s more game time ahead of us in this bull market – the ongoing correction aside.

But I wouldn’t be surprised if the extreme fear investors are feeling continues for another month or two. Therefore, I would focus heavily on seeking out value plays in sectors with excellent growth prospects.

On that note…

2. Cannabis stocks will rebound… BIG!

I believe the cannabis sector is set to see a strong rebound in the near future. And here’s why…

The sector is exploding with revenue growth right now, even as stocks are experiencing vast devaluations. (The correction in cannabis stocks is an inevitable hangover after months of high-flying momentum.)

But in 2019, I believe investors will sober up.

Keep in mind that Canada just unleashed a massive legal cannabis market that has yet to find its full potential. And the market’s biggest cannabis players – like Canopy Growth Corp. (NYSE: CGC), Aurora Cannabis (NYSE: ACB) and Aphria (NYSE: APHA) – are still relatively young companies.

Then there’s the U.S. cannabis market, which recently had a milestone victory in the passage of the 2018 Farm Bill, legalizing hemp production nationwide.

The bill is a major boon to hemp-based CBD producers and promises to ignite yet another potentially huge market in North America (expected to hit $21 billion by 2022).

I believe cannabis stocks are exactly where long-term investors should want them to be: nice and cheap.

For example, consider the Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF), which tracks the performance of medical cannabis stocks.

It’s seen nearly half its value wiped out over the past three months alone, thanks in part to broad market pessimism.

But on the technical side, it also just reached a key buying moment…

The relative strength index is an indicator that’s used to gauge when a stock or index is overbought or oversold. And the ETF just hit “oversold” levels.

That’s generally an indication that prices are set to rebound (at least in the near term). And it could suggest that now’s a good time to start building a long-term position.

I expect a rebound in this sector once investors brush off the dust from the current correction and begin to think sensibly again about the opportunity before them.

Of course, I could be wrong…

I’m no psychic, after all.

Good investing,