Yesterday financial markets across the globe reacted negatively today to Standard & Poor's downgrade of long term debt issued by the United States. Last Friday S&P lowered the rated from AAA to AA+ noting that the recent budget agreement failed to address the government's debt situation. Asian markets opened down and were followed by markets in Europe and the United States.

Despite the unprecedented downgrade, the United States is far from alone in its need to address its excessive national debt levels. The European Union has several members, including Ireland, Greece, Portugal, Italy and Spain that are struggling with debt levels that are unhealthy relative to the size of their economies.

To some extent today's stock market's reaction reflects investors' dissatisfaction with the general state of the US economy. The nation is burdened with an unsustainably large debt and its elected leaders have not demonstrated an ability craft an agreement that will result in a long term solution to the problem. At the same time, economic growth is waning, unemployment remains persistently high, and inflation is creeping into the broader economy.

The stock market is a place in which investors sometimes overreact to news out of fear, panic, and desperation. Yesterday was a good example. The broad market, measured by the Standard & Poor's 500 index, dropped by over 6%. Does that mean that the stocks which comprise this index were suddenly worth less than they were last Friday? No. It means that sellers overran buyers and drove the prices of these large companies down.

Cascade Wealth Management remains committed to the time-tested long term strategies of proper asset allocation, diversification and maintaining low costs. Our clients' portfolios, while down over the past few weeks, have not suffered the temporary losses that the selloff in the U.S. stock market would imply.

What should investors do in the midst of all of this volatility? I would suggest following the advice of Burton G. Malkiel in his opinion piece in yesterday's Wall Street Journal, "Don't Panic About the Stock Market." Malkiel, professor emeritus of economics at Princeton University is co-author of The Elements of Investing, a book I highly recommend. He encourages the investors to "stay the course." So do I.