The U.S. economy is not out of the woods yet so be cautious with your investments.

Talk about mixed messages! Alan Greenspan says the U.S. economic recovery may take longer than expected. At almost the same time, Treasury Secretary Paul O'Neill says the downturn ended in February and that evidence of the recovery should appear over the next six to 12 months.

Don't these guys read each other's scripts? Don't their aides talk? Hello down there!

What are we to make of this apparent dichotomy? I make of it that the tea leaves are still swirling in the cup and that no one in Washington is exactly sure what is going to happen next. That's apparently what the markets made if it too when they pulled back at week's end.

My strong inclination is to favour the Greenspan interpretation of events. He is the most plugged-in person in Washington when it comes to matters economic. He is also cautious by nature, as bankers should be. The Treasury Secretary, by contrast, is a former businessman (chairman and CEO of Alcoa). Although he had experience in his younger years in the Office of Management and Budget, his credentials for economic forecasting are nowhere near as impressive as those of Mr. Greenspan.

Moreover, the Fed Chairman's cautious approach was backed up by some worrisome statistics at week's end. First came the news that the U.S. Commerce Department's initial reading of economic growth in the first quarter was way off base. Instead of expanding at a 2% annualized rate from January to March, the U.S. economy grew at just 1.3%. That's still better than a recession, but pretty anaemic. Then came the news that durable goods orders fell 5% in April, an alarming drop that was only slightly tempered by the fact the Commerce Department made some changes in its reporting process.

The net result was a mixture of hope and fear in the markets: hope that Mr. Greenspan's comments signal yet another interest rate cut when the Fed meets again in June; fear that the weaker-than-expected statistics may keep corporate profits depressed for longer than expected.

For investors, the bottom line is yet another warning to be prudent in selecting securities. While I continue to believe the stock market bottoms are behind us, we should expect more turbulence for the next few months until the tea leaves settle and the outlook becomes clearer. Also, we are heading into summer, traditionally a weak period for stock markets with reduced volume that can result in unusually high price swings.

So this is not a time to take big risks. Stick with stocks that offer good fundamentals with limited downside. They will do well if the markets continue to rise, while cushioning your losses if we suffer setbacks in the coming weeks.