Investors have suffered several bouts of raw nerves recently, but the global economic outlook seems much too good to keep them anxious indefinitely.
"Economic conditions underlying financial markets are either good, or they are improving, nearly everywhere in the world - an extraordinary confluence of positives," according to the top economists at Merrill Lynch & Co.
With bad news so hard to find, it is not surprising that markets have been celebrating, said chief economist Donald H. Straszheim and senior international economist John Praveen in previewing worldwide business conditions for 1997.
Underlying it all, inflation around the world is likely to hit a 25-year low. "There is nothing more important to the health of the financial markets and to the world's economies than a low inflation rate," they said.
Moreover, that trend is unlikely to be reversed soon, they said, because of a host of factors ranging from the collapse of Communism and rapid developments in technology and communications to vigilant central bankers.
Meanwhile, the world's largest single economy - the United States - is in its best fundamental shape of the past 25 years. "The markets understand," said Mr. Straszheim and Mr. Praveen.
Merrill economist Bruce Steinberg described U.S. business conditions as "too good to be true, but true." Inflation is at a 31-year low, the unemployment rate at a 23-year low, and the budget deficit at a 22-year low as a percentage of gross domestic product.
Tight labor markets risk an uptick in inflation and interest rates, with the possibility that corporate earnings could be hurt. But so far, "labor costs are still rising at their slowest pace in probably 50 years," he said.
"The next recession," Mr. Steinberg said, "is nowhere in sight."
At the same time, the major economies of Europe, Latin America, and the Asia-Pacific region also are expected to grow at healthy clips next year, with inflation remaining low.
Led by China and India, the booming Asia-Pacific nations could see an amazing 8.2% jump in economic output next year, according to Merrill economist Nicholas Kwan.
Japan, the region's limping giant, is finally enjoying a slow recovery in its prospects.
Latin American nations are harvesting the fruits of the difficult transitions they've made to more private economies during the past dozen years and, continuing to recover from 1995 recessions, could grow by 4% next year.
The surprising British economy could also hit 4% growth next year, with Canada a bit behind. The United States and Germany should post modest but steady 2% increases in output.
Still, interest rates, already low, should fall further next year, the Merrill economists think.
Merrill's proprietary global composite measures of short- and long-term interest rates "are both down sharply over the last year," they said.
"Except for a brief period in late 1993 and early 1994, long rates have not been this low since the late 1960s," they said. "And short rates have not been this low since 1972."
Tracing rates across maturities from short to long, "the developed-world yield curve is now over 200 basis points positively sloped, an important plus for economic prospects during 1997," they said.