On the southern U.S. border, our leaders in Washington are proposing to spend a lot of money to take care of new undocumented residents under 18. These are new voters and workers, who can get free a education at University of Texas.

At the same time, the U.S. Federal Reserve continues to reduce bond purchases, and small individual investors can’t get yield anymore. Fed stimulus supports the stock market and may stop until unemployment reaches 5.3% in my opinion.

With uncontrollable spending on our borders, little yield from bonds, and the Federal Reserve’s printing presses running to inflate our dollars, the only game in town is equities. When current bondholders realize they hold a losing hand, they may rotate their money into stocks in my opinion.

Meanwhile, earnings season is upon us again. Earnings growth this year could be in the 10% to 12% range, according to my analysis. This may encourage CEOs to invest in new plants and equipment and this may lead to more jobs and eventually more product sales.

There appears to be a rotation by investors into inflation-sensitive assets like gold and away from bonds. Small caps have higher trading momentum than large caps in my opinion. Good sector plays are gold, energy, and utilities, according to my analysis.

The investments are presented for discussion purposes only and are not a reliable indicator of the performance or investment profile of any composite or client account. Past performance is no guarantee of future results.