There's a record amount of cash on the sidelines, which should continue to fuel a big rally. There's currently over $2.4 trillion in money market assets. Money market funds now represent over 28% of the value of the Wilshire 5000, an extremely broad-based stock market index. Normally, money market assets represent only around 12% of the entire market. There's obviously plenty of cash in the sidelines, but getting this cash back into the stock market is the hard part.

The last time money market assets were higher than normal was in 1990. At that time, money market assets represented about 17% of the entire market. The result was that after the first Gulf War started, the stock market jumped 25% in just three months because it was fueled by the excess cash returning to the stock market.

In fact, 1991 was by far the best year ever for my Model Portfolios (+83.9% average gain according to The Hulbert Financial Digest). This time around, there's no doubt that there's plenty of fuel to propel the stock market higher for a long time. With a lot more cash on the sidelines than there was in 1991, I remain extremely optimistic that 2003 can also be an incredibly profitable year. All that's required for 2003 to be a record year are a few more sparks to ignite the overall stock market.

The spark that ignited the stock market rally several weeks ago was rising Treasury bond yields as Operation Iraqi Freedom began. As bond yields rose, nervous bond investors sold their bonds (rising bond yields cause bond values to fall) and headed for cover in the stock market.

The second spark was removing the uncertainty surrounding the war that kept many investors on the sidelines. The third spark will likely be improving business and consumer confidence, which will result in accelerating earnings growth later this year. Already consumer spending rebounded in March after a dismal February.

The final spark will be the passage of President Bush's economic stimulus package. Combined, all of these events are coming together to make 2003 potentially one of the best-performing years for the stock market in decades!

The plunge in business spending during the past three years happened because banks were reluctant to lend to businesses. Banks found real estate lending more advantageous, but now it's becoming increasingly difficult for banks to sustain high-volume real estate loans. The real estate market is softening, and many homeowners have already refinanced. So many banks parked their excess cash in Treasuries. However, since Treasury yields are drifting higher, banks are losing money there, too. So now banks are finally returning to business lending.

When the Federal Reserve hit the brakes a few years ago to slow the economy down, it effectively cut business loans and caused business spending to contract. While business spending stalled, consumer spending remained strong, largely due to the strong real estate market. Now that real estate is getting soft, real estate lending is slowing down. Banks have no choice other than to lend to businesses, so I expect that business lending will pick up and businesses spending will improve.

Now the Fed is trying to encourage banks to boost their business lending to help the economy. When business spending improves, new jobs are created. The economy lost over 300,000 jobs in February (including military reservists) and over 100,000 jobs in March. Although the unemployment rate didn't increase in March, it's imperative that business spending pick up to help create more new jobs. The Bush administration is also watching the employment situation carefully because if the economy doesn't resume creating new jobs, President Bush's popularity may fizzle very quickly.

A company that's in a great position to benefit from this stage of the economy is FTI Consulting (NYSE: FCN). FTI is a small Maryland-based company that specializes in bankruptcy advising, which is a highly profitable field. Business is booming at FTI. For the first quarter, sales jumped over 165%, and profits rose 255%. The company is forecasting earnings of $2.34 a share this year, which means it's trading around 20X this year's earnings. Also, this is a good time to buy since the stock will split its shares 3-for-2 next month. FTI Consulting is an excellent investment for aggressive investors looking for small-cap stocks.

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