I sat in the back of my biology course, plugging ticker symbols into Yahoo Finance. My professor was covering the nuances between different forms of bacteria. I was about to put in an order for shares of Goldman Sachs.
It was 2009 — markets were in turmoil. The world was ending. Markets were collapsing. And Goldman Sachs was done for — anyone could see that.
But I was a college student with a brand-new brokerage account, determined to make my small savings work for me.
Weeks earlier, my grandfather shared with me his favorite quote from Warren Buffett: “Be fearful when others are greedy and greedy when others are fearful.”
In 2009, I was a far cry from a market guru, but I knew it was a good time to be greedy.
I bought shares of Goldman Sachs just off its bottom and rode it to a large profit.
I ended up selling too soon, but that’s a lesson for another day.
From Fear to Greed — December’s Sell-Off and 2019’s Rally
Markets ended 2018 in a bloodbath. After months of interest rate hikes and U.S.-Chinese trade war escalations, the stock market caved under the pressure. December saw stocks fall 15%.
But then the storm clouds parted and everything looked like it was going to be all right. The chairman of the Federal Reserve, Jerome Powell, called off rate hikes. President Trump and Chinese President Xi Jinping agreed to a timeline for resolving trade disputes.
Everything was right in the world and stocks ripped higher. The S&P 500 Index rallied 18% from the new year to May. In the excitement, greed displaced all fear.
Ongoing Trade “Talks”
May 3 caught many investors off guard. China showed the first signs of disagreement with trade talks. Washington, D.C., took an aggressive stance. The two nations fell back into a game of one-upmanship. And markets sold off.
The S&P 500 shed 3.6%. The hardest-hit sector was information technology, which lost 5.5%. Consumer discretionary and materials both fell 4.6%.
Marijuana stocks were also routed.
The Horizons U.S. Marijuana ETF (NEO: HMUS) tracks U.S. cannabis operators. It fell 7.3% on the threat of a trade war.
The Horizons Marijuana Life Sciences ETF (Toronto: HMMJ) tracks a broader group of international producers. It fell 4.3%. Major Canadian cannabis producer Canopy Growth Corp. fell 7.7%. Aurora Cannabis tumbled 4.1%.
But these are Canadian companies operating in foreign markets. The U.S.-Chinese trade war has little effect on them. While some Canadian producers do have stakes in U.S. operations, they are not affected.
The sell-off was a result of risk tolerance. While an economic slowdown is bad for business, a trade war will have a muted impact on cannabis companies.
See Opportunity Where Others See Fear
When fear strikes the markets, higher-risk assets are the hardest hit. Investors looking for growth flock to safe-haven assets to shield their gains.
That gives investors with a longer-term view an excellent buying opportunity. We can buy the same great companies at discounted prices.
In the Real Wealth Strategist newsletter, we saw our strongest marijuana picks dip into our buy range during the market sell-off. That gave readers the chance to add to their positions during market weakness.
Many marijuana stocks are already beginning to move higher again. Savvy investors realized that the sell-off was overdone. They are jumping in to buy shares on sale!
Consider the Horizons Marijuana Life Science ETF (Toronto: HMMJ) to take advantage of the dip in prices.
Good investing,
Anthony Planas
Internal Analyst, Banyan Hill Publishing
P.S. You can watch my latest marijuana market update in the video below. Or click here to be redirected. And don’t forget to check out my YouTube channel. Click the subscribe button to receive a notification when I post new content every Tuesday.
