By Ben Dickey

The U.S. economy is continuing to expand as we move into the second quarter. The initial read on first quarter GDP was 2.7%. Sequestration and the payroll tax increase have not dramatically affected the economy so far.

For the fourth year in a row, problems overseas are threatening the U.S. economy. For the last three years, fears of a euro-zone financial collapse scared investors both here and abroad. This year the euro-zone’s recession is lasting longer than anticipated. Also, the Chinese GDP came in at 7.7% growth in the first quarter, a little under the 8% forecast.

However, debt levels in Asia are increasing to new highs. World lenders are fueling a boom in short-terms loans to the increasing middle class. The middle class in Asia is expected to grow by approximately 100 million people per year.

In addition, the Bank of

By Michael Arold

Going into May, US stocks are trading at all time high. The last two months have been quite unusual. As I wrote in my March report, negative sentiment and investor’s expectations for a pullback could further fuel the rally.

And it did. Quite surprising, however, has been recent outperformance of defensive sectors. Utilities, consumer staples and healthcare stocks usually outperform in declining markets. I underestimated the ability of these industries to push up US stocks.

One of the reasons was that small investors started to return to equities, but have been doing so in a conservative way. Demographic developments could be a factor, as the Wall Street Journal recently pointed out: Baby boomers are more likely to invest in income-generating stocks.

Overall, US equities continue to receive Fed support since the central bank pumps over $80 billion into the markets each