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The idea that people generally prefer consuming goods and services today rather than at some point in the distant future is a basic tenet of economic theory. Based on this, savers usually require positive real interest rates to forsake current consumption and hand over their money. Of course, borrowers can only pay positive rates if their investments generate real positive earnings, usually on the back of a growing economy. At a real interest rate of zero, however, investments which do not foster growth may look attractive.

Teaching children about personal finance, owning foreign assets, assessing the impact of tax extenders, and staying current on the Net Investment Income Tax are topics that many high net worth individuals must address in an on-going basis. Understanding the often highly complex issues and ever changing rules are challenging for even the most diligent individual.

Our January 2016 commentary suggested “…we are in a transition period between central bank-induced liquidity and eventual normalization of markets. This transition period has been and will continue to be a bit choppy…”

Brought on by concerns about the strength of the global economy and extreme investor pessimism, the volatile start to 2016 drove many equity markets near or into bear market territory. A subsequent rally began mid-February from severely oversold conditions as it became clear that the U.S. was not headed for a recession. As is common during volatile market environments, investors were quick to react to negative headlines, feeding the tendency to panic when things seem at their worst. In investing, however, it is important to avoid making emotional decisions.

The spillover of recent market volatility from China into the rest of the world reflects poor communication by Chinese authorities and a lack of transparency of their ultimate goals. The backdrop of global volatility is also reflective of rising fears of geopolitical risks, especially a Middle Eastern conflict. Economic growth indicators have also been somewhat soft. Despite the market fears and stock market circuit breaker, the global economy is likely to remain on stable footing and that the sharp drop in Chinese equities is due to localized structural, not global economic factors.

Last week was relatively quiet in terms of global economic data, with investors watching actions by central banks. The European Central Bank announced additional monthly asset purchases and cuts to interest rates, which President Mario Draghi believes will be sufficient to support economic activity. This week, meetings are scheduled for the Bank of Japan (BOJ) and Federal Reserve. The Fed is unlikely to change policy this month, but will likely see sufficiently positive economic data to raise rates in June.

U.S. equities are entering 2016 and approaching the seven-year bull market anniversary amidst market crosscurrents, however, macro and fundamental backdrops remain favorable for equities. Inflation, earnings, valuation, interest rates, and sentiment are all generally supportive of equity prices.

The easy investment returns enjoyed since the end of the financial crisis have succumbed to the pressures of elevated valuations, Federal Reserve tightening and oil price declines, which have created significant volatility, bearish sentiment and losses among investors. This changed investment environment has caused a wave of worries, with many wondering how to navigate the choppy waters of the marketplace and subdued economic growth.

Markets have had a very turbulent start to 2016, and the global economy faces a number of clear challenges. The implications of four interlinked issues—China, crude oil, credit markets, and central banks—are unsettling capital markets. The global economy faces several challenges, but it is continuing to grow, and there are reasons to maintain cautious optimism. A disciplined investment process is essential in the current environment.

During uncertain times, it is easy to get caught up in the latest headlines proclaiming a possible U.S. recession. Although many variables such as growth in hourly earnings or high yield spreads over Treasury bonds have been shown to “predict” recessions in advance, the slope of the yield curve remains a powerful indicator of what lies ahead for the U.S. economy. Using history as a guide and active monitoring of leading indicators (including what the yield curve is signaling), the analysis shows the U.S. economy will grow at a modest but uneven pace.