S&P 500 Closes Strong First Quarter with a 6% Gain

Greetings Friends,

The first quarter of 2017 is history.

Stocks across the globe were strong.

In the US, the S&P 500 was up +5.2%.

The Global Stock Market (VT) was up +6.5%.

Emerging Markets (EEM) were up +12.5%.

Take a look at the gains in the chart below.

spy 4-7-17

Those strong gains were led by some of our favorite stocks. These stocks below are widely held by my clients and they helped us have a nice quarter.

  • Tesla (TSLA) +41%
  • Facebook (FB) +22%
  • Amazon (AMZN) +19%
  • Netflix (NFLX) +16%
  • Boeing (BA) +15%
  • Google (GOOG) +7%

q1 stocks 4-9-17

Cannabis Stocks Were Also Hot in the First Quarter

Our cannabis stocks also delivered solid returns in the first quarter.

Overall, the North American Cannabis Stock Index was basically even for the quarter. This index is comprised of cannabis stocks from Canada and the United States. Take a look below.

mjic index 4-9-17However – Canadian cannabis stocks were stronger than their American counterparts.

The Canadian Cannabis Stock Index was up 11% in the first quarter.

canada cannabis index 4-9-17The US Cannabis Stock Index was down 11% in the first quarter.

us cannabis stock index 4-9-17That divergence didn’t come as a huge surprise.

Canada is a much friendlier country for cannabis.

Unlike the US, medical cannabis is legal at the federal level. And just last week, Canada announced plans to legalize recreational cannabis by July of 2018. Here is a link to a full report from BBC.

This is huge news for the global cannabis industry – including the US. Canada is about to become the first developed nation to fully legalize cannabis.

Fortunately, we were perfectly positioned to cash in on this news and Canada’s strong performance.

Our cannabis holdings are heavily weighted towards Canadian cannabis stocks.

Aphria (APHQF) is one of the largest Canadian cannabis companies. Shares were up +57% in the first quarter.

Aurora Cannabis (ACBFF) is also one of the largest cannabis companies in Canada. Shares were up +22% in the first quarter.

aph & acbff 4-9-17

What Should We Expect in the 2nd Quarter?
I am expecting global and US stocks to finish the 2nd quarter with a small gain.

As always, there will be challenges.

The S&P 500 looks expensive compared to historical norms.

Hope for quick corporate tax reform is fading after Affordable Care reform failed.

The Federal Reserve is trying to raise interest rates and sell bonds off its balance sheet. Neither of those things are good for economic growth.

And it’s obvious the global political climate is heating up. War drums are beating.

Here’s some good analysis on how war effects stocks and bonds.

This is going to be a hot summer politically. Stocks and bonds will be watching closely.

However, despite all these challenges, I am still optimistic.

Despite challenges, I still see plenty of reasons to be optimistic.

Global economic growth is set to accelerate in 2017.

Global GDP is expected to increase 2.7%, up from 2.3% in 2016.

Same story with the US. GDP is expected to climb 2.1%, up from 1.6% in 2016.

2.1% growth is nothing to write home about. But it’s still safely in positive territory and tells me there will be no recession this year.

I believe corporate tax reform will happen this year. That would be very good news for stocks.

And finally, maybe most important, S&P 500 earnings are set to grow for the first time in a year and a half.

This should be a nice year for earnings growth, and that is another big plus for stocks. Take a look below.

zacks earnigns growth 5-6-17

The Take Away

We’re off to a nice start this year.

Index funds are up. Blue chips are up. And cannabis stocks are up.

I am expecting volatility – but don’t sweat any of the short-term madness. Stay focused on the big picture. Use dips and weakness in the stock market to buy more shares.

Have a great week. I’ll be back in a few weeks with another update.

Your Investment Partner,

Mike

*Michael Vodicka owns shares of Aphria (APH).

This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.

ABOUT THE AUTHOR

Michael Vodicka

Michael Vodicka is the president and founder of the Vodicka Group Inc., a licensed investment advisor (Series 65) and a financial journalist.