The total wealth of American families is now at a record high. The Federal Reserve said U.S. household net worth rose to almost $85 trillion dollars. That's being driven by a rise in the stock market and home values, which increased more than 4% in March from the previous year, according to the S&P/Case-Shiller index.

But the first quarter also showed consumer spending was sluggish. “People are feeling wealthier but their incomes haven’t really increased and typically income increases is what increases spending,” said Joe Duran, the founder and CEO of United Capital, an investment management firm.

Since, “the banks aren’t allowing them to use their homes like a piggy bank, like they did the last time, net worth went up in 2006, 2007,” noted Duran. “For most Americans, their savings are in retirement accounts, that money is locked up and growing, but not able to get taken out,” he said, and that is another reason why consumers spending wasn't higher in the first quarter.

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For his clients, who are looking to invest their money, Duran believes the Emerging Markets (EEM) is a potentially interesting satellite idea, but not for the portfolio’s core. “As long as there’s this much money in the system, volatility is going to go down and you’re going to have more growth in the emerging markets,” said the investment manager.

As for where to avoid, Duran suggested to stay away from small caps because, “in a rising interest rate environment which we’re about to get into, what you find is smaller companies have less flexibility.”

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