The US stock market had a solid run in September. Out of three benchmark indexes, Dow Jones Industrial Average appreciated the most, by 1.95%. The S&P 500 inched up by 0.96%, while the NASDAQ Composite ended the month 0.55% in the red. At the same time, the NASDAQ Composite is still significantly ahead of its peers in year-to-date terms. Since the beginning of 2018, the tech-heavy index has surged by almost 15%, while the S&P 500 and Dow Jones are up by 8.09% and 6.58%, respectively.
It’s interesting to mention that both Dow Jones and S&P 500 hit new all-time highs last month, despite mounting uncertainty surrounding trade with China and lack of breakthrough in talks with Canada.
There was some positive economic news in September. The month started with upbeat non-farm payrolls data, which indicated the addition of 201,000 jobs in August, versus the expected 191,000 and up from the previous month’s 147,000 figure. At the same time, the unemployment rate remained unchanged at 3.9%, slightly higher than the expected 3.8%. Investors were also excited in the days ahead of the Federal Open Markets Committee meeting on September 25 and 26. As expected, the FOMC inched up the federal funds rate by 25 basis points to between 2.00% and 2.25%. This marked the third interest rate hike in 2018. In addition, the Fed took a more “hawkish” tone in the statement, pointing out the strong labor market and solid growth in household spending and business investment. The Fed expects to raise rates to 3.125% at range midpoint by the end of 2019 and to 3.375% for the following two years.
In line with the last several months, the main issue in investors’ spotlight last month has been trade. The escalating trade dispute with China took a new step in September after President Trump imposed 10% tariffs on $200 billion worth of inputs from China on September 17. Beijing promised to retaliate with tariffs against $60 billion worth of American products. In response, Trump said that China is using the tariffs to influence the upcoming midterm elections in November and to undermine him in front of his supporters.
However, the disputes with China took a back seat last month. After the US reached a deal on trade with Mexico at the end of August, the eyes were on its negotiations with Canada, which, if successful, would’ve resulted in a new trade deal replacing NAFTA. The deal was finally reached in the evening of September 30, hours ahead of the deadline. The new agreement is called the United States-Mexico-Canada Agreement and it touches many important points, such as the US dairy farmers’ access to the Canadian market, car manufacturing, labor, and other topics.
Amid strong economic data and continuous growth exhibited by the stock market, it seems that Financial Advisors are feeling more confident in looking at micro- and small-cap stocks. According to TrackStar, InvestingChannel’s official newsletter capturing and analyzing the trends of Financial Advisors, the top two most searched tickers among Financial Advisors last month were: Pangaea Logistics Solutions Ltd (NASDAQ:PANL), Firsthand Technology Value Fund Inc (NASDAQ:SVVC), which have market caps below $160 million. On the third spot was Companhia Paranaense de Energia ADR (NYSE:ELP), a Brazilian utility company with a value of $600 million. Overall, among the five most-searched tickers, only one, BioTelemetry Inc (NASDAQ:BEAT), has a market cap higher than $1.0 billion.
However, in this article we are going to stay away from the most-searched micro-caps, and instead will talk about an industry that seems to have captured the attention of Financial Advisors last month. The industry is cannabis and in September, two cannabis stocks ranked among the 20 most searched: Canopy Growth Corp (NYSE:CGC), which ranked on the 11th spot and Tilray Inc (NASDAQ:TLRY), which was the 15th most-searched ticker. Both companies gained a lot of ground in the last couple of months as the entire industry is seeing many positive catalysts, the main of which is the full legalization of cannabis in Canada on October 17.
As the legalization approaches, many companies are excited to get access to a larger market. And its not just marijuana companies. In the last couple of months, we have seen several large alcohol producers in the US invest in Canadian marijuana companies in order to develop cross-industry products. For example, in August Molson Coors Brewing Co (NYSE:TAP) reached a deal with Hexo Corp (OTC:HYYDF) to develop cannabis-infused beverages.
Canopy Growth Corp (NYSE:CGC) also got a $4.0 billion investment from Constellation Brands, Inc. (NYSE:STZ), which gives the latter a stake of 38%, which is the largest deal of this sort in the cannabis industry’s history. Canopy Growth has been one of the early players in the marijuana space, quickly establishing itself as a leader not just in Canada, but internationally. The cash infusion from Constellation Brands, Inc. (NYSE:STZ) is expected to boost its global ambitions. In exchange, Constellation Brands, Inc. (NYSE:STZ) ensures that it won’t miss out on global opportunities from the growing cannabis market.
Tilray Inc (NASDAQ:TLRY) was bound to capture the attention of Financial Advisors. Since the stock went public in July, it jumped sevenfold, surprising even most optimistic investors in the cannabis space. Last month, Tilray Inc (NASDAQ:TLRY)’s stock topped $300 at one point, which gave it a valuation of $28 billion. However, it quickly descended from those levels as the rally was unsustainable. Tilray Inc (NASDAQ:TLRY) is an emerging company and its growing capacity is lower compared to Canopy Growth Corp (NYSE:CGC) or other large growers like Aurora Cannabis or Aphria. The company did get some positive news in September that it would distribute its CBD 100 product to several hospitals in Australia.
In this way, between the two cannabis stocks that were in the spotlight of Financial Advisors in September, it seems like Canopy Growth Corp (NYSE:CGC) deserves more attention since it is a well-established company that is also one of the top marijuana cultivators in Canada. On the other hand, Tilray Inc (NASDAQ:TLRY)’s growth seems to be powered more by hype surrounding the developments in the industry rather than anything else.