At the inception of Sharetrack, 12 short weeks ago, markets found themselves in a precarious position.

The excesses of what is now recognised as 2000's tech bubble were unwinding and fears of an outright recession in the US had become widespread. Calling a bottom in market valuations was proving to be a risky endeavour.

Today, while the international markets have not fully discarded their nervous tendencies, the bearishness of the early months of the year is becoming less pervasive. While the majority of corporate earnings reports continue to be downbeat in character, the outlook for the US economy is beginning to brighten.

Fragility may remain a feature of the Asian and euro zone experience in 2001 but, as far as markets are concerned, the US economy sets the tone for the world.

A company's fundamentals in terms of product, strategy and management will determine the relative performance of its shares within any one market. However, on an international comparison, the best performing stocks will be issued by quality companies operating within quality economies. There is little point in owning an excellent stock if it is highly exposed to a difficult economic environment. The economic outlook should provide the foundation for every sensible investment decision.

Ideally, investors want to invest in economies with ample growth to drive earnings ahead. However, growth which proves to be unsustainable and which leads to higher inflation and rising interest rates is undesirable. The best environment for investors is provided by pronounced but sustainable economic buoyancy. In keeping with the markets' fascination with bears and bulls, such an outturn is described as a Goldilocks economy where growth is neither too hot nor too cold.

Investors are forward-looking by nature and are already turning their attention to the outlook for the major economies over the next two years. The US economy seems to stand out as the best recovery play with the decisiveness of the Federal Reserve in cutting interest rates aggressively set to have a powerful stimulative effect on activity as we move towards the end of the year. Meanwhile, much of the rest of the world appears to be lagging the US economic cycle; additionally it is likely to be some time before anyone gets exuberant about growth prospects in core European countries and Asia.

There is one economy where growth is not a faint hope and which will comfortably top the developed world's league table again in 2001. Ireland, as it has for the past seven years, continues to offer one of the most promising operating environments for quoted companies.

Selecting the local market is half the battle. Choosing quality stocks should assure outperformance.

Colin Hunt is head of research at Goodbody Stockbrokers