December 2018 Commentary

Well, the dust has settled and Forge First has concluded a great year with each of our funds providing solid net returns to our investors. The S&P 500 on the other hand suffered one of its worst months ever, finishing down 9% for December 2018. This of course could have been much worse if not for the heroic rally that brought stocks back from their lows on Christmas Eve, at which point US stocks were down 14.82% on the month. By comparison Canadian stocks fell a paltry 5.75% over the month (9.5% down at their worst, also Christmas Eve). This sort of startling volatility is the result of a great divergence in opinions within the financial arena at a time when liquidity has become increasingly scarce. The disagreement is palpable and characterized by the violent moves both up and down.

Is this nothing more than a harsh correction or were the September highs the end of the bull market?  And yes while it is worth pointing out that US stocks did briefly hit the definition of a bear market last month, declining 20% from their highs, the question we’re asking, and aim to decipher, is whether there’s a further 20% downdraft or is the next move, be it up or down, more modest in nature.

Continue Reading…