The outlook for inflation, oil and commodity prices is generally improving. The housing market, although still in turmoil, is behaving logically. Inventories of unsold homes are large. In response, housing permits and starts are at record lows, and home prices have fallen. With lower prices and declining mortgage rates, housing sales are starting to show signs of life, which over time will clear inventory out of the system.

On another front, our government has broken new ground in its efforts to solve the nation’s financial problems, and I believe it will continue to provide needed liquidity, particularly as the specter of inflation and stagflation recedes. I’m far from being a Pollyanna and I certainly recognize the brisk headwinds and crosscurrents we face. In fact, when this turbulence settles down, I believe the pace of economic activity will be slower. In addition, investment results almost certainly will be lower than the double-digit annual returns that some investors may have come to expect during the past 15 to 20 years.

When will this end? No one can predict market turns with certainty. Perhaps the best example is offered by one of the darkest moments in our nation’s history. In April 1942, we were at war and we were losing. Germany had overrun France. Our Pacific fleet had been crippled at Pearl Harbor. Inflation was rampant. Companies faced wage and price controls and excess profit taxes. In that bleak month, with no clear or compelling reason, the market simply reached the bottom of a long downturn and started to rise again. By the end of June 1943, the Dow Jones Industrial Average had gained 54%.

The emotions of the moment always distract us from our purpose. Knowing that, I sincerely believe that staying the course is the right plan.