Our current view of the market is cautious .

We are nervous about the potential for losses but also unsure of the probabilities of those losses occurring.

The consumer remains financially healthy, but the US economy is growing at a slower rate. Employment is stable, though decelerating, and growth in orders for capital goods has stopped. Equity markets should see limited growth from current levels due to several factors: struggling international markets, additional weakness in emerging markets, and mixed corporate earnings.

The economy has several weak spots and the Fed is likely to ease as Chairman Powell has clearly stated that he is committed to maintaining market stability. Inflation has been limited by structural issues and remains below the Fed’s target. Slower global growth favors the US dollar which should remain stable.

International growth has stabilized. Several economies have seen the effects of softening trade flows. Latin America suffers from weak oil prices and several Asian economies have yet to recover. However, the Eurozone economy has improved from last year. Global bond yields and inflation are both very low and US Treasuries continue to yield more than most countries.

The market strategist Peter Bernstein once wrote, “Fear of harm ought to be proportional not merely to the gravity of the harm, but also to the probability of the event.” Today, the probability of catastrophic harm may be low but there are underlying issues that suggest that we should be cautious. No matter what the state of the economy happens to be, good investing depends on good risk management.