SPDR S&P 500 (SPY)
SPDR DJIA (DIA)
iShares Core High Dividend (HDV)
Vanguard Dividend Appreciation (VIG)
Vanguard High Dividend Yield (VYM)
iShares MSCI Edge Minimum Volatility USA (USMV)
iShares 20+ Year Treasury (TLT)
iShares iBoxx $ Investment Grade Bonds (LQD)
The S&P 500 Index and Dow Jones Industrial Average once again climbed to new all-time highs. A rally of more than 10 percent is in the cards, with initial upside targets as high as 2400 for the S&P 500 Index. Dividend funds rallied along with the market, even as investors searched the rally for bargain stocks.
The Nasdaq and small-cap Russell 2000 are enjoying more moderate rebounds. iShares Russell 2000 is within about 5 percent of its old high. Mid-caps, as measured by iShares S&P 400 (NYSEARCA:MDY), are already at a new high.
Bond prices have yet to slide as might be expected amid a stock rally, possibly due to the bull run's early nature or overseas central bank activities. We'll have to wait and see how these assets perform, but given the run-up in 2016, a correction would not surprise in the least.
After securing a two-third majority in the upper house of parliament, investors expect Japan's Prime Minister Abe will unleash a stimulus of at least 10 trillion yuan. A visit by former Federal Reserve Chairman Ben Bernanke also ignited speculation that the Bank of Japan will unleash the second arrow of Abenomics, quantitative easing. The BoJ triggered a 50 percent devaluation of the yen following Abe's election in 2012, but gave up close to half of those gains in 2016 as the BoJ opted for negative interest rates instead of expanded quantitative easing. The Nikkei rallied and the yen weakened on Monday and Tuesday before taking a breather on Wednesday.
Many bond funds are trading at or near all-time highs, including the group shown below. We're seeing a small pullback, matching the dip seen in TLT and LQD. Funds leaning towards high yield, such as FFRHX and THOPX, have not experienced the pullback because investor optimism is driving down the spread between high-yield and investment grade bonds.
Defensive utilities and consumer staples underperformed last week, while materials, financials and industrials were the best performing sectors. SPDR Materials (NYSEARCA:XLB) has 10.5 percent of assets in Dupont (DD) and Dow Chemical (DOW), both of which recently climbed.
Friday's strong jobs report propelled financials. Speculators have yet to significantly adjust their rate hike expectations, but economists are starting to talk about a September increase.
Semiconductors and Internet stocks also outperformed. Over the past week, iShares PHLX Semiconductors (NASDAQ:SOXX) climbed more than 6 percent. Micron Technology (NASDAQ:MU) and Nvidia (NASDAQ:NVDA) both rallied more than 10 percent on the week to pull the sector higher. Stocks such as Intel (NASDAQ:INTC) and Texas Instruments (NYSE:TXN) were up about 6 percent.
Although the broader healthcare sector is still about 15 percent below all-time highs, FSPHX and FPHAX both climbed to new 2016 highs last week. FPHAX also broke out to a new 2016 high as big pharma recovers, helping lift the performance of the sector.
iShares MSCI Emerging Markets (EEM)
Emerging markets broke out to a new 2016 high last week and are close to setting a new 52-week high. The sector has now formed an inverse head-and-shoulders pattern. If the pattern completes, it could carry the stock to near $44 per share, which is the top of EEM's trading range this decade. The rally so far has generated primarily in natural resource producers riding the commodities rally, such as Brazil, Russia and South Africa.
SLX and KOL broke out to new 52-week highs, signaling the commodities rally may be ready to take another step forward. Weak trade data out of China did not slow the rally, instead investors are betting on more stimulus from the Chinese government.
Gold prices pulled back in the past week. The $1300 level is support and on the upside, $1400 is the next level for the bulls to tackle. Thus far mining shares have not followed the gold price lower and like KOL and SLX, are trading close to its 52-week high.
Oil prices tumbled about 4 percent on Wednesday following a lower-than-expected inventory decline. More importantly for the market, gasoline and heating oil inventories are rising, signaling future demand could drop. A potential bright spot is the early emergence of La Nina, which could spell colder than normal weather across much of the northern United States this winter. In the meantime, however, oil prices may struggle to recover the $50 per barrel level.
Fidelity Low-Priced Stock (FLPSX)
FLPSX has another 5 percent to go before recovering its all-time high set a year ago. Similar to EEM, this chart also shows an inverted head and shoulders. It will complete when FLPSX climbs above $49.5 per share, and the upside target would be $56 per share, a gain of 14 percent from Tuesday's close.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.