This rebalancing favors high quality, dividend-paying stocks, and should become an increasing trend into year-end, as well as into the first month of the new year. Further buoying stocks in the near term should be additional quantitative easing by the world’s central banks (i.e. lower interest rates), the economic benefits from the huge drop in energy prices, and another economic stimulus package from the Obama administration.

Consistent with these thoughts, I think the US economy will likely experience its worst numbers in the current quarter. Indeed, driven by the worsening economic statistics, my firm's economist, Dr. Scott Brown, had to lower his GDP forecast for the fourth quarter of 2008 to negative 6%. I realize I'm just guessing, but my sense is that 2008's fourth quarter will mark the nadir of the economic malaise, with the GDP numbers becoming less austere in the coming quarters and then turning positive by the fourth quarter of 2009.

If this scenario proves anywhere close to correct, investors should consider this quip from Ernie Ankrim, Chief Investment Strategist at Russell Investments:

“Many people have lost a great deal of wealth. If they need income now, they may have lost the option to hold risky equities or investments without further distress. I don't chide anyone for getting sufficient cash together for the next year. You have to live.

"People with a longer horizon -- at least 3 years -- would do well to consider retaining some exposure to the market. I remember the period of January 1973 through September 1973, when the markets went south by 47%. My father-in-law swore off equities for the rest of his life. He kept to it and lost out on a lot of potential returns over the years.

"Getting overly conservative -- and most investors are doing so -- is also very risky. This is especially true when the yields to the safest assets are close to zero, while the dramatic explosion in injected liquidity may well bring us inflation concerns after we're through this recession.

"Protection against inflation almost always requires taking more risk (like in stocks or riskier bonds) than the most conservative investments. Real buying opportunities are found when everyone else is selling. There are also opportunities outside of the riskiest assets; Investment-grade bonds are on sale, as well.