Today is July 1st. You know what that means, right?
It’s time to review the market’s second quarter and year-to-date performance…
You might recall that in my Wealth Daily article called “Bernanke Guarantees These Investments are Winners” from December of last year, I gave you my top 10 investments for 2013.
Here they are, verbatim from my report:
- Housing – and everything associated with it, like timber
- REITs
- MLPs – especially oil and gas pipelines
- Gold and silver – the Fed is doubling its bond buying, which should dilute the dollar, further raising the risk of inflation again
- Mining stocks – both large and junior miners have been beaten into the dirt with the Venture Exchange down 50% in two years… this group is hated, which makes it attractive as a contrarian investment
- Utilities – borrowing costs are low, so utilities will continue to enjoy a large spread
- Gun stocks – for obvious reasons
- Biotechs – the aging of America is a boon for this industry
- Agriculture
- High dividend-paying stocks – like Pfizer, Verizon, and AT&T
Next week, I’ll go through each of these investments, examine a macro vehicle like an ETF, and then dig deeper into specific investments The Wealth Advisory has taken a position in.
For instance, the homebuilders ETF (XHB) is up 10.6% for the year. But KB Home (KBH: NYSE) is up 24% for the year. That’s a big difference.
But before we go through these sectors, let’s see how the major indices have performed this year…
As usual, we’ll start with the Dow Industrials.
The Dow ended 2012 at a level of 13,104.
Based on Friday’s close of 14,909, the Dow is now up 13.7% for the year. That’s pretty darn good.
The Dow has outperformed both the NASDAQ and the S&P 500, which ended the second quarter up 12.7% and 12.6% year to date, respectively.
Now, for you Dow Theory disciples, let’s look at the Dow Transports.
The Transports are up a staggering 16.3% YTD.
Railroads and trucking stocks are in a major uptrend. Railroads get the headlines because Warren Buffett owns Burlington Northern railroad — but it’s been trucking stocks that have outperformed…
Old Dominion Freight Line (NASDAQ): ODFL), for example, is up 21% for the year. And Kansas-based YRC Worldwide has crushed it. Take a look at their chart:
YRCW is up 326% year to date!
Now, transportation stocks are important because one of the core underpinnings of Dow Theory is “confirmation.”
Under Dow Theory, a major reversal from a bull to a bear market (or vice versa) cannot be signaled, or confirmed, unless both indexes — the Dow Industrials and Transports — are in agreement.
For example, if one index is confirming a new primary uptrend, but another index remains in a primary downward trend, it is difficult to assume that a new trend has begun…
However, if both indexes are hitting new highs, then it’s safe to say we’re in a bull market under Dow Theory.
Here’s a five-year chart of the Dow Industrials and Dow Transports. As you can see, both are trading in tandem with one another…
In other words, they are confirming each other.
It’s a beautiful dance in which either partner knows the next move of the other.
Based on the chart of these two major indexes, I expect the market to resume its bull run.
The Dow Transports are outperforming everybody, but it’s a specialized index, comprised of only transportation stocks like railroads and trucking.
The other major index that’s performing well is the Russell 2000. It’s up 15% for the year.
The Russell 2000 contains the best small-cap stocks in the United States.
Let me be clear: If small cap stocks are rising, this means speculation has returned to the market.
No market can go higher unless there’s a robust amount of speculators.
As I write this, the Dow has returned above 15,000 after experiencing a 7% sell-off.
So we have small-cap stocks rising higher…
We have Dow Theory being confirmed…
And the best-performing sector today is biotechnology, with the NASDAQ Biotechnology Index up 4.5% today.
Speculation is back. The risk trade is back on.
The market is going higher.
Forever wealth,
Brian Hicks
Check us out on YouTube!Brian is a founding member and President of Angel Publishing. He writes about general investment strategies for Wealth Daily and Energy & Capital. For more on Brian, take a look at his editor’s page.
