The day of the "flash crash," I was asked at an executive seminar in Jersey City, N.J., what impact Greece would have on equity markets. I replied, "It should all be over by Wednesday."
And it was as markets fully recovered by Wednesday; however, truth in advertising requires I report that I took the podium after the
Dow Jones Industrial Average
had fallen more than 250 points owing to Greek worries, but prior to the computer-trading blitz that created the now famous "V"-shaped pattern of stock prices in just about an hour.
My BlackBerry turned off, no one alerted me to the panic unfolding on Wall Street.
Now that stocks have made up all their lost ground, what's next?
Long-term doubts about the efficacy of the Greek bailout, huge U.S. budget deficits and monetary ease, and oil gushers notwithstanding, we are in for one heck of a ride the balance of this year.
A moderate recovery -- 3% gross domestic product growth -- and much more robust growth in Asia are good for the profits of large U.S. multinationals.
companies earn about half their profits abroad, and the economic recovery is strongest in China where U.S. companies are quite well-positioned.
Seventy-seven percent of the S&P 500 companies that have reported first-quarter earnings have outperformed analysts' estimates.
Add low inflation and a favorable interest rate environment into 2011.
For all the chatter about the
injecting too much liquidity and instigating inflation, consumer prices, less petroleum products, remain remarkably tame for now. And gasoline prices are now expected to decline for the summer driving season.
The Fed can focus on boosting employment and wait until early next year, or even later, to address price stability. It will likely hold short rates near zero until 2011, and international investors seeking safe haven in the dollar will keep U.S. long rates low through the end of the year as well.
Corporate bonds are finding ready buyers again, and investors will continue to accept lower premiums for risks on long-term company debt than in 2009.
Dow Investment Ideas
Top 10 Dow Dividend Stocks
All of that will drive U.S. private money off the sidelines and back into U.S. equities.
Doubts about Chinese and other Asian stock and real estate markets will drive smart foreign money to the companies that can exploit Asian growth but are insulated from the vagaries and potential missteps of state-directed capitalism in China and elsewhere.
U.S companies with significant market presence in China and elsewhere in Asia will attract big foreign capital inflows.
Manufacturing is expanding again, and these businesses have learned how to get by with a lot less labor. Manufacturing profitability should improve strongly.
Like it or not, President Obama's new health plan is law and that removes much uncertainty for the pharmaceutical, health devices and insurance industries.
Robust innovation continues in the pharmaceutical, microelectronics, consumer device, auto, and materials industries.
For all the epitaphs written about American engineering leadership,
, and other U.S. companies continue to lead.
is the poster child for American industrial recovery, and
is poised to gain market share too, without the usual pricing gimmicks.
The market value of U.S. intellectual property continues on a straight path north, significantly raising the intrinsic values of many U.S. companies.
Residential construction is stabilizing. Non-bank financial services are doing even better.
Investment banks may need better regulatory moorings, but American financial engineering remains a value harvesting machine.
The ride may be bumpy but the Dow is headed for 12,000 by the end of the year and 13,000 in 2011.
Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.