NEW YORK (CNNMoney.com) -- Well, it looks like there will be no Microhoo after all. Microsoft and Yahoo seem less likely now to merge in light of yesterday's news.

But there's still a lot of merger activity going on that should keep investors happy.

Belgian brewing giant InBev has made a $46 billion takeover bid for Anheuser-Busch (BUD, Fortune 500). And the Budweiser maker might do a deal of its own to fend off InBev - it is reported to be talking with Mexican beer company Grupo Modelo.

Verizon (VZ, Fortune 500) is buying wireless company Alltel for more than $28 billion, including debt. Hewlett-Packard (HPQ, Fortune 500) is scooping up EDS (EDS, Fortune 500) for $12.6 billion.

So the mergers and acquisitions market, despite all the dreary news about the economy and Wall Street, is still alive and well. That's likely to continue in the second half of the year.

"Corporate balance sheets are underleveraged so this is a perfect environment for deals even though all the headlines make you think the world is going to end," said Robert Profusek, a partner in the merger and acquisitions group with law firm Jones Day.

His firm worked on two high-profile deals that were announced this month - XTO Energy's (XTO, Fortune 500) $4.2 billion purchase of privately held Hunt Petroleum and J.M. Smucker's (SJM) $3.3 billion acquisition of the Folgers coffee business from Procter & Gamble (PG, Fortune 500).

In both cases, large public companies, and not private-equity firms, were the acquirers. Profusek said he sees more so-called strategic mergers taking place in the next few months since it is getting tougher for private-equity companies to raise debt to fund deals in these volatile credit markets.

Profusek argues that since many companies outside of the banking sector have ample amounts of cash and low debt loads, they are going to be more likely to look to mergers as a way to grow their businesses.

Others agree.

"I wouldn't be surprised to see more M&A. With valuations this attractive, if companies have the wherewithal to make deals, they can get done," said Bill Stone, chief investment strategist for PNC Wealth Management.

"For the right deal, companies can get funding put together. As a whole, companies outside the financial sector are in extremely good shape as far as their debt levels. Rarely have companies been in this good shape in an economic downturn," Stone added.

It also helps that the private-equity firms are not as able to outbid public companies these days.

"For larger deals, private-equity firms have been negatively impacted by the retrenchment on the debt side. And the view is that with private-equity less able to pay big premiums, strategic players are in a better position to make deals," said Jeffery Bistrong, managing director and head of the technology group for Harris Williams & Co., an investment bank focused on deals involving mid-sized companies.

Bistrong said that he expects more deals in the red-hot energy sector, as well as in tech and in healthcare. Profusek also thinks a lot more energy and healthcare deals are likely, as well as more mergers in infrastructure.

Other factors that may fuel mergers are the weak dollar and the upcoming presidential election.

Profusek said he's surprised that more European companies have yet to take advantage of the strong euro to make bids for American firms. But the InBev offer for BUD could be a sign of more cross-border takeovers to come.

"We should see more non-U.S. deals of U.S. companies because of the dollar," he said.

As for the election, there is has been some speculation that mergers may face tougher antitrust review if Obama wins. But Bistrong said that he doesn't think that will really be the case.

However, he sees more mergers taking place in the third and fourth quarters because he believes that corporate taxes are likely to be higher under either an Obama or McCain administration than they are currently.

"There is general consensus among our clients that regardless of who wins, taxes will go up. So that has been driving deals."

Add all that up and you can make the case for stocks to rally in the second half of the year.

And as I've stressed in several recent columns, there isn't a disconnect between what happens on Wall Street and what happens on Main Street. Stocks aren't just for rich people in an era where 401(k)s and discount brokerages are prevalent.

Anything that big companies can do to strengthen their position in the global market is a good thing since it eventually could lead to more job growth, wage gains and higher consumer confidence.

"Mergers usually are a harbinger of better things overall in the economy," Profusek said.

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