Negative sentiment runs high among investors. But we see several fundamental reasons for optimism and the markets are beginning to respond accordingly.

With recession risks receding and Europe taking steps to support credit markets, the stage is set for equity markets to rally over next few months.

The US economy is fine, but the EU’s ongoing sovereign-debt crisis is the biggest wild card for global equities.

Stick to our three-pronged investment strategy in these uncertain times.

With the US consumer focused on saving and paying down debt, the US economy will grow at an annualized rate of roughly 2 percent over the next several years.

In a volatile market like this, dividends are more important than ever.

The US economy likely won’t recover from its recent shocks as quickly as it did after the Sept. 11 terrorist attacks. But US consumers and businesses remain highly flexible and resilient in the face of economic shocks. Economic growth will remain subdued, but the odds still favor the US avoiding recession in 2011 and 2012.

The best preparation for the unexpected is a portfolio of high-quality companies.

The recent market panic has taken a significant toll on many investors’ portfolios, and economic risks have risen. But panics of this nature tend to be short and to wear themselves out–eventually, cooler heads prevail, and the market refocuses on fundamentals.