I suppose that someone could take a crack at trying to explain the relationship between the economy and the movements of the financial markets. But it isn't me.

I used to believe that if a company makes good products, has good management and is profitable, that the value of their stock should increase. I suppose that over the very long term that would be true. At least that's what Benjamin Graham said in his classic 1951 book, Security Analysis.

But these days the price of individual companies and the overall market moves in inexplicable ways. There are all kinds of reasons--market segment changes, performance versus expectations, rumors, bad non-financial news, surprises, and so on and so on.

Having said that, I am of the firm belief that no company, industry or market will consistently perform differently than the direction of its underlying economy. If the economy of the countries in which the companies or markets "live" is weakening, over time the value of investments in those companies or markets will also decline. As evidence of that, I would wager that not one single equities analyst or portfolio strategist is currently issuing opinions saying that investments in U.S. companies, industries or markets appear to offer good opportunities at the current time. One can argue that such opinions are short-term in perspective, but I don't know of anyone who is suggesting that the U.S. is presently a great opportunity for investment..

In my opinion and using the lexicon of Wall Street, now seems to be the time to underweight stocks and overweight high quality fixed income securities and cash.