It is hard to believe we are already in July and more than halfway through 2016; although, down here in steamy Miami summer arrived some time ago with its usual combination of heat and humidity.

The first half of 2016 was notable for how bizarre the world has become over the past couple of quarters. The 10-year treasury bond is sporting record low yields of under 1.4% and actually returned more than double the appreciation of the S&P 500 in the first half of the year. The S&P 500 almost returned four percent if you include dividends.

This is nothing compared with Europe where half of the Eurozone's $6.4 trillion in sovereign debt currently has negative yields. The pound sterling seems to hit multi-generational lows against the dollar on a daily basis since the outcome of the Brexit vote blindsided investors on June 23rd. The IMF continues to downgrade its global growth forecast and the United States looks like it is set for its nastiest presidential contest in my lifetime.

So given that backdrop, where should you as an investor allocate your money in the second half of 2016 to outperform the overall market? Let's start with what I think should be significantly underweight within your portfolio.

Energy:

Crude had a great run over the past four months, almost doubling from its lows in the mid $20s a barrel in February. However, oil has established a fairly hard resistance level at just over $50 a barrel and has failed every time it has tried to broach that mark in the recent weeks.

The strengthening dollar on the back of Brexit is a significant headwind to almost all commodity prices as well. Drilling will start back up in the shale regions if crude gets near $60 and the global demand picture is hardly encouraging at this point in time. For this reason, I will continue to be significantly underweight the energy sector within my own portfolio.

American Multinationals:

The strong dollar has been a major reason earnings have declined for four straight quarters on a year-over-year basis within the S&P 500. The second quarter should stretch this quarterly “profit recession” to five in a row when second quarter earnings reports start to trickle in. Given how much the dollar has gained against the pound, Euro, and Yen in recent weeks, those winds are not dying.