Enthusiasm (read euphoria) for anything and everything AI related has eclipsed the focus on interest rates. The financial media are positively giddy, as are investors in Nvidia, which is up 59 percent year to date. Investors in other stocks are more subdued. While the S&P 500 through last Friday is 6.7 percent this year, the equal-weighted S&P (symbol RSP) is up a modest 2.6 percent.

Stocks and bonds hit the skids after the January CPI and PPI numbers were released. After these reports investors counting on the Fed to lower rates had to reconsider. Before cutting rates the Fed will want to first make sure the January numbers were not the start of a trend. That will take a few months

For now rates will stay where they are, give or take a little, as the Fed waits for numbers. If that means savers will continue to receive five percent in a money-market fund, fine. Five percent is more than any Treasury issue yields.

Preferred stocks — Little noticed, other than by those who own them, preferreds have been rising for months. Why? Investors expecting rates to fall this year have been nailing down good yields while they can and as you were advised to do in this column. There are even better days ahead as rates decline, which is what the Fed still foresees.

We have been through periods in recent years when investors acted as if the current trend — whether rates were falling or rising — would last forever. So when bonds fell last year and rates rose they acted as if rates would never decline. Then reality took hold.

With interest rates falling slowly or for that matter rising a bit there is still a case for stocks, one based on earnings growth in a benign interest rate environment with a boost from the roll out of AI this and AI that across the economy. And there is still $6 trillion in money-market funds, some of which will be invested in stocks.

Bottom line: I like what I like, especially in healthcare stocks, preferreds and increasingly financials and energy, all for reasons I frequently mention here. If you are trying to outperform the market then more than a third of your portfolio needs to be in a handful of technology stocks. That’s scary. But most stocks are on pace to match the market’s historical annual return of 10 percent. That sounds good to me.

David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.