As I looked through the charts this weekend, I saw a stunning departure from anything I witnessed in 2012, or even since the bottom in 2009, for that matter. What I saw was money coming in to new themes to supplant the old.
First, let me tell you what's working: Housing-related names, such as Weyerhaeuser (WY), Lennar (LEN), Toll Brothers (TOL), Sherwin-Williams (SHW) and Mohawk (MHK) carpets, are still going higher. Same goes for hospital plays like Tenet (THC) and Universal Health (UHS), Becton, Dickenson (BDX) -- they all look great, as do their acolytes. There's tremendous interest in the high-growth pharmaceutical names, as well -- ones like Celgene (CELG), Gilead (GILD) and Allergan (AGN). These have supplanted the slower-growth dividend plays.
The market remains gaga over names such chemical plays that are benefiting from lower feedstock, such as Westlake (WLK) and Georgia Gulf (GGC) and Eastman Chemical (EMN). This is a sign that the horrible action in the natural gas stocks is justified. The ancillary home plays, as well -- the cable companies and their content makers, such as Comcast (CMCSA), Time Warner Cable (TWC), Time Warner (TWX) and Discovery (DISCA) -- they are all red-hot.
But you know what is getting killed? Anything purely domestic -- with no international upside -- that can't be directly linked to housing or any of these other sectors. Venture into the utilities at your own risk. Try to buy a dollar store. Slow-growth foods? No thank you.
It's incredible how little money is coming in to those. But there isn't enough coming out to explain the rallies. That's purely sidelined money that had been waiting for the election and the fiscal cliff to resolve themselves. These investors clearly aren't daunted by the debt-ceiling talks, no matter how the media tries to scare people into thinking they should be -- including articles I am now seeing, shameless articles, about Social Security checks not being delivered. Can we spare the drama, please?
There are two themes, though -- two incredibly powerful themes that have joined the others I have been crowing about all year: agriculture and emerging markets.
The first we saw coming when Mosiac (MOS) didn't decline after reporting a terrible quarter. Then Monsanto (MON) unleashed a fantastic number and that sent the group soaring, including FMC (FMC) and now Deere (DE), with the latter looking a lot like it could go to $100. (Thanks fellow Real Money contributor Matt Horween for that observation.) The group looks like it is generating a huge head of steam even as others would say, "You missed it!"
But the other real eye-opener -- in fact, a total stunner -- is that, after a four-year hiatus that began with the Great Recession, buyers once again want in to emerging markets. Take a look at the charts. The trucking sector, for instance, benefits from North American Free Trade Agreement (NAFTA) and Mexican exposure -- an economy that has to be one of the strongest in the world. Then there are the freight forwarders and international financials, and just plain old industrials and techs, such as Eaton (ETN) or Air Products & Chemicals (APD) or Cisco (CSCO). These stocks have suddenly gotten gigantic adherents.
As well they should, when you consider it. If you have Europe, Asia and Latin America coming back, you have a lot to choose from. Don't forget who benefits from these comebacks. You have companies like Ford (F) and Magna (MGA) that set out to make a lot of money in emerging markets and Europe, and got whacked for it. That's over. You have companies like Emerson (EMR) and Danaher (DHR), which have worked hard to be international. The information-technology sector is working, as are the construction companies that are benefitting from what looks like a calming in the Middle East.
This is a remarkable and stunning move. The market loves the very companies it disdained six months ago, when it wanted to be a domestic seller of cereal or apparel. Now it wants the more overseas the better.
It's a remarkable turn -- and, to me, it's just in its infancy, and it has much, much further to go.