If the U.S. economy is so rosy, where are the bulls?

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After a 30 per cent rally in U.S. stocks last year, caution is the operating mantra among most market watchers in 2014. But the overall view on the economy is another matter: Here, optimism is breaking out just about everywhere you look.

The latest bout comes from Paul Dales at Capital Economics, who argues that previous mid-year disappointments – flowing from the euro zone crisis, the U.S. debt ceiling crisis and the fiscal squeeze due to lower government spending – that have slapped upbeat economic predictions are unlikely to prevail this year: "The upshot is that the headwinds are fading at the same time as the tailwinds are strengthening," he said in a note.

Among the fading headwinds: The chances of a euro zone meltdown have diminished, he thinks it is unlikely that Democrats and Republicans will squabble over the debt ceiling ahead of mid-term elections in November and the fiscal squeeze will be smaller this year.

As for the tailwinds, Mr. Dales sees three of them: one, accelerating jobs growth bodes well for consumption; two, the housing recovery remains on track, despite rising mortgage rates; and three, this year could see a pickup in business spending, with November's gain in durable goods orders suggesting a rebound in investment in equipment.

Add it up, and he believes the economy will grow 2.5 per cent this year, followed by 3 per cent growth in 2015, which isn't too shabby.

Strategists at Pavilion Global Markets also sound upbeat. But they narrow their discussion to the U.S. consumer, who should benefit this year from a winning combination of rising home prices, lower gasoline prices and more relaxed credit conditions.

"By easing credit to prospective mortgage borrowers, the rent-buy price equilibrium can normalize," they said in a note. "That's particularly good news for the 35 per cent of U.S. consumers who are not homeowners and whose financial obligations have risen over the past few years."

The problem for investors, though, is how to translate decent economic activity and a healthier consumer to stock market gains. The S&P 500 rose nearly 30 per cent in 2013, largely in expectation of these fading headwinds and rising tailwinds, leaving 2014 looking like a year of consolidation at best.

And as I pointed out on Thursday, the improving economy isn't providing much of a boost to corporate earnings: Companies have been busily lowering guidance ahead of the start of the fourth-quarter earnings season, which starts next week.

Meanwhile, there aren't many apparent bargains if you look at sectoral moves since the S&P 500 hit its pre-financial crisis high in October 2007. Since then, the S&P 500 has risen 17 per cent, but consumer discretionary stocks have risen 76 per cent, health-care stocks have risen 52 per cent, consumer staples have risen 51 per cent and tech stocks have risen 36 per cent.

Financials are still the biggest laggards, despite an impressive recent rebound: They are down 36 per cent from the S&P 500's pre-financial crisis high. Other laggards include telecom stocks, utilities, energy stocks and materials – but their connection to a pickup in consumer spending isn't easy to see.