From the Wall Street Journal’s bit on Cleveland Fed President Sandra Pianalto’s speech:

With the economy on “a firmer footing,” she said, U.S. corporate leaders seem inclined to continue investing in equipment and software despite such worries as turmoil in the Middle East, the Japanese earthquake and the sovereign debt crisis in Europe. “On this firmer footing, these shocks are hitting us, but it seems like we’re more resilient and able to absorb these shocks,” she said.

I am not sure that we should find this resiliency surprising, despite the seemingly perpetual fears of market participants.  I believe that all US recessions, at least post-WWII, are attributable directly to domestic disturbances  – monetary policy and/or domestic financial crisis – or oil price shocks.  Arguably, the Asian Financial Crisis was close via the Long Term Capital Management fiasco, but no cigar, as the US economy powered ahead until the tech bubble collapse (a domestic story).

Hence, I have been hesitant to put much economic concern on Japan and Europe – the transmission mechansims appear too weak to appreciably change the US outlook.  One can suggest that financial crisis in Europe will filter back through to US institutions, but I think this would have been more likely two or three years ago than now.  Back then, we could credibly believe that a US financial institution could fail.  Now, however, I am pretty sure the financial sector has an explicit government guarantee.  Financial exigency clauses will come into play sooner than later this time around.

I am concerned about the potential for a sharp rise in energy prices to knock the wind out of consumers this year, but also recognize that the increase refelcts improving growth prospects.  See spencer’s note at Angry Bear on this point.

None of this is meant to imply that the US economy is without warts; nothing could be further from the truth.  Only that the primary risks are internal demand and energy shocks, not other external shocks.