The Look and Feel of Canadian Venture Market Bottoms (From 1981 to 2014)

The Look and Feel of Canadian Venture Market Bottoms From 1981 to 2014

Special thanks to Dajin Resources for sponsoring. Also, information on market bottoms compiled by Ron Loewen.

In December 2014, the deteriorating market for metals and a suddenly floundering oil price pulled the resource-heavy TSX Venture Index to an all-time low.

Big board indices such as the S&P 500 are still reaching new highs each week, yet this is the second longest bear market since 1932 for gold stocks according to Barron’s Gold Mining Index (BGMI).

While it is difficult to discern if today’s market is truly the absolute bottom, the similarities in media headlines, the tone of discussion, and overall sentiment are reminiscent of bear markets past. That is why, in this infographic, we look at some of the major headlines at market bottoms over the past 35 years including those from the most recent downturn.

When it comes to companies such as those that make up the TSX Venture, it can be incredibly hard to judge fundamentals as there are no earnings or steady revenue growth for most companies. As a result, these markets are driven by greed and fear even more so than other sectors.

It’s important to be a contrarian and to go against the herd mentality. This doesn’t mean going against the grain no matter what, but it means thinking and acting with conviction based on fundamental market truths – regardless of what other people say.

We know that markets, especially those tied to natural resources, tend to be highly cyclical. With the large capital investments and timelines required to advance projects, massive supply challenges must be corrected in subsequent cycles. This can lead to either a rush to buy or sell, and therefore bull and bear markets.

We also know that investor sentiment is largely a psychological phenomenon that can be tied highly with emotions rather than fundamentals. The media can be a big part in echoing or reinforcing this sentiment.

Take a look at the headlines in bear markets bottoms over the last 35 years – do you think we’ve reached a similar place yet in this cycle?