Here at the height of summer, with no hurricanes gathering over the oceans, I know you'd rather be golfing or boating or relaxing rather than pondering Iraq and Israel and Lebanon and the pain of a sinking stock market. But the parade of bad news the past few weeks has been so unrelenting that it's time for an honest assessment of the economy and where it's going and what that implies for your investments.

First, hear this: There's no recession in the offing, at least not this year, even with surging oil prices. The government will announce its preliminary second-quarter economic growth results in two weeks. Growth is certain to slow markedly from the first quarter's 5.6% rate, but it should still come in around 3%. That is decent. True, it's the direction of the trend, not only the number, that gets the worriers worked up. If key segments of the economy, such as home purchasing or retail sales, look weaker than expected, you'll read some downbeat headlines.

But even if the growth rate is 2.5%, that's a long way from a recession. Key U.S. companies, such as Caterpillar, 3M and General Electric, are doing well, selling gobs of materials and equipment to buyers all over the world and reporting good profits. Their stock prices have been stagnant, but not the businesses. U.S. export growth is surprisingly strong-exports of goods are up 11% (adjusted for inflation) from a year ago. The trade deficit, if you don't count oil, has been roughly flat for two years.

Besides, slower growth has its blessings. It's likely to be just what it takes for the Federal Reserve Board to stop raising short-term interest rates sooner instead of later. A rate pause won't spark a serious stock market rally by itself, but stocks will have trouble advancing until the Fed's intentions are clear. A slower economy will also help consumers breathe easier. You'll see fewer adjustments to adjustable-rate mortgages, credit cards, and other debt obligations.

And if you were offered a choice, you would want to pull for interest rates, rather than gasoline prices, to fall. Say you drive 1,500 miles a month and get 25 miles to the gallon. A 30-cent increase at the pump costs you $18. But if you owe $300,000 on an adjustable-rate mortgage and the rate resets from 5% to 6%, the extra monthly pain is $180-ten times as much.

Standard & Poor's chief economist David Wyss, who sees the economy slowing in the second half of 2006 but not backsliding, scoffs about using the stock market as a broad economic indicator. "I'm not one of those economists who thinks the market tells us where the economy is headed," he said last week. He has some calming words: "You know, if the economy grows 2.5%, that's not a bad number compared with the developed world. You'll still have your job, and while your wealth won't increase as fast as you'd like, you and most of us will still be doing well."

Wyss predicts that the Fed will increase rates perhaps one more time, in August, and even that boost is not a sure thing. At any rate, the peak is near. Then, seven months typically elapse between when the Fed quits tightening and when it first cuts rates, heralding a cycle of easier credit. During those seven months, stocks and bonds can bounce around a lot, but the economy normally holds steady. Then, if a new rate-cutting pattern is really at hand, it's time to rethink your investments. Some thoughts:

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