The bounces of global recovery are leaving bruises in the U.S., but investors should look past the headlines and get ready to act, economists and market strategists say.

After a bruising week in which euro-zone debt woes from Greece sparked fears for the Spanish, Portuguese and Italian economies and continental-growth engine Germany appeared to run out of steam it was probably difficult to recall that the week started on a genuinely positive note.

On Feb. 8, David Bianco, chief U.S. equity strategist at Bank of America/Merrill Lynch, boosted his 12-month outlook for the benchmark S&P 500 stock index keeping his projection to 1275, 15 times the 2011 average earnings estimate for the index but elevating his 2010 and 2011 earnings estimates to $75 and $85, respectively, from $73 and $83, respectively. He also projected 2012 earnings for the index at $90 a share. He said the reason was promising businesses besides banks are doing better.

"The increase in our S&P 500 EPS estimates is from non-financials only," he wrote. "While we expected 4Q09 to come in higher than the bottom-up analyst consensus estimate going into the quarter, the non-financials are reporting results stronger than what we expected on both the top and bottom lines."

That news was soon overshadowed by the week of triple-digit swings in the Dow Jones Industrial Average, which actually closed out the week up 87 points. That gain came despite two heavy weights. First, market volatility swelled on uncertainty over a deficit rescue package for Greece from its euro-zone partners. And in Asia, a second precautionary move by the People's Bank of China on Friday requiring banks there to boost their capital reserves suggested greater government concern over a wave of loan losses stemming from a real estate bubble.

The euro-zone crisis caught Societe Generale global strategist Albert Edwards' attention in a Friday note. "A major divergence of views in the market at the moment concerns what governments should be doing with their outsized fiscal deficits," he said. "Economists seem to be polarized between those who think governments should be rapidly cutting fiscal deficits to avoid impending insolvency and/or a surge in bond yields, and those who believe this will be totally counterproductive and that deficits should stay very large," he said.

"My own view of developments, for what it is worth, is that any 'help' given to Greece merely delays the inevitable break-up of the euro-zone, he added.

That view wasn't universally echoed, but the troubling Friday indicator that German economic growth stalled in the fourth quarter made it clear that recovery could still be a halting, jerky process. The German government's Federal Statistical Office said fourth-quarter GDP was flat from the previous three months and identified exports as the only positive contribution to the economy.

Back on our own shores, forecasters were fairly sanguine about what happens next. Talk of the Federal Reserve Board needing to raise interest rates provoked some market jitters but not for Ethan Harris, BofA/Merrill's head of North America economics and coordinator of global economics

"One of the most popular myths surrounding monetary policy today is that the Fed faces a knife-edge choice between growth and inflation,' he wrote on Friday. "Like most macro-myths, the knife-edge argument has an element of truth: the Fed does need to transition from easy to tight monetary policy before inflation picks up. The myth is that the Fed has to perform this switch quickly. The reality is that inflation is a long-lagging indicator and the Fed can wait until the economy and capital markets are healed before tightening. The Fed's 'balancing beam' is about three years wide."

Strategas Research Partners chief economist Don Rissmiller on Wednesday offered a long list of reasons why we are now in a cyclical recovery, among them strong earnings and revenue performances from high-quality companies; general strength in consumer confidence, business confidence and housing data; and the simple fact that the policies that have generated the floors in housing and confidence, such as tax credits, foreclosure relief and checks to consumers are still in place. Some, such as the Fed's purchases of mortgage securities, are easily extended if necessary.

"We continue to believe that we are in the 'recovery' phase of the cycle, driven by capital spending," he wrote. "While firms may be reassessing how and where they invest financial capital, there s little to suggest that the physical investment plans for equipment and plants in the U.S. have been significantly impaired."

Nowhere in his report, or anyone else's, did it say this phase would be smooth and seamless.