Barring any September swoon or October pre-election day panic, stocks have a good shot at being up double digits in 2016.
Of course investing is a relative game, and your own performance could be much better or worse than the Dow Jones depending on your personal stock and sector preferences.
This is precisely why I put a lot of time and effort into analyzing the relative performance of asset classes and sectors against the benchmark.
That’s the best way I know of to determine which markets are leading, which are lagging, and where the best buying opportunities can be found.
With that in mind, let’s take a closer look at some sectors that have been leading the stock market’s charge higher recently …
First, it’s worth noting that after a very long nap, Emerging Markets are outperforming the Dow and S&P 500 again.
As you can see in the graph above, the iShares MSCI Emerging Market ETF (EEM) recently broke out to a new high. And EEM has been outperforming the S&P 500 Index since the January low (middle panel, grey line).
Plus, money flows turned positive for emerging markets again in March (bottom panel) as investors consistently move into EEM, after 18 months of consistent outflows, a bullish sign.
Next, let’s look at a leading domestic sector: Technology.
Technology stocks have been consistently leading the stock market higher for several years now. You can see in the chart of the SPDR Technology Sector ETF (XLK) below how the grey relative strength line vs. the S&P has been steadily moving up and to the right since mid-2013.
But since April, tech stocks have stalled on a relative basis. Even though XLK broke out to new highs in July, the grey relative strength line (tech compared to S&P) has yet to do so.
This could be just a temporary pause, or a sign of a more fundamental shift in market leadership away from Tech, so stay tuned.
Finally, the Biotech sector was a stellar performer in 2014 and early last year. However, Biotech stumbled badly since mid-2015, falling more than 50%, mostly due to fears over price controls heading into this year’s election.
But now it looks like Biotech has turned bullish again on a relative strength basis.
Notice in the chart of the SPDR S&P Biotech ETF (XBI) above how the sector just broke out to new highs in price, and is now outperforming the S&P 500 Index at the same time.
This could be just the start of a bullish change in trend for beaten-down Biotech stocks!
Bottom line: Don’t get too wrapped up in the absolute performance of sectors and individual stocks you own. It pays to take a closer look at the relative performance compared to a key benchmark like the S&P or Dow to see at a glance if the sector or stock is leading or lagging the market.
So how about it; are you keeping up with the Dow Joneses so far this year? Which sectors have been your best performers in 2016? Let me know your picks and pans by joining the conversation below.
Because Hillary Clinton and Donald Trump are adaptive political animals, the only major difference between the presidential candidates has boiled down to taxes, according to an analysis reported by the Associated Press.
Republican Trump and Democrat Clinton have shifted their stances closer together on major issues like trade agreements and infrastructure spending. But the rich will face either a big tax hike by Hillary or a big tax cut by Donald, says the Tax Policy Center. With just their income tax proposals, Trump would boost the after-tax income of the wealthiest 1 percent by a little over 5 percent, says the non-partisan Tax Policy Center. Meanwhile Hillary’s plan would reduce the 1-percenters after-tax income by about 5 percent. Ironically, neither Clinton nor Trump, says the report, would have much of an effect on the taxes of the middle class or the upper-middle class.
Most American retailers have been slashing budgets and cutting employees in the face of sluggish sales. But Wal-Mart has done just the opposite – and it’s working. The super-seller reported a 1.6% sales increase for the past quarter, which marks gains for eight consecutive quarters.
Beating out Target and Macy’s, Wal-Mart has shelled out billions to increase employee wages, to make its stores more efficient and customer friendly and to boost its e-commerce profile. Based on this success, the company boosted its predicted annual profit per share from $4.00-$4.15 to $4.15-$4.35.
People are buying less chocolate in these health-conscious times. So Nestle is banking on a strategy to encourage candy lovers to pay more for their cocoa fix. The company, which makes KitKat, Crunch and Butterfingers, plans to sell high-end chocolate products, featuring less sugar, organic ingredients and exotic flavors.
The Money and Markets Team