NEW YORK (CNN/Money) - An investor who just returned to Earth from a year on Mars would probably be frothing at the mouth to put his money to work in the United States, where the world's largest economy is well into a solid recovery after one of the mildest recessions on record.

After all, stocks have taken a huge beating the last two years, and several signs point to respectable if not spectacular economic growth this year and next. So how come U.S. investors are not quite as bullish as our Martian tourist friend?

Two words: corporate profits. And oh yeah, Enron and accountability. And whoops: the Middle East. OK, seven words, not two.

"All the pieces are in place to generate healthy economic growth for the balance of the year," said Sung Won Sohn, chief economist at Wells Fargo & Co. "But so far, political and economic uncertainties have overshadowed the strengthening in corporate profits."

"The markets themselves are in sort of a show-me kind of a mood," said Subodh Kumar, chief investment strategist at CIBC World Markets in Toronto. "They're saying with respect to earnings, we'll believe it when we see it."

Certainly, the news on the economic front has been encouraging. The economy grew at its strongest pace in more than two years in the first quarter, and while growth is expected to slow in the second half, many forecasters are still calling for gross domestic product to rise at least 2 to 3 percent for the year. GDP is the broadest measure of the nation's economy.

Perhaps more importantly, productivity is soaring. The measure of how much Americans produce per hour posted its biggest gain in nearly 19 years in the first quarter, meaning companies can sell more goods and services without having to boost wages -- something that typically bodes well for corporate profits.

"The productivity gains have been stunning," said Sohn, who adds that consumer spending will probably hold up fairly well and that there are even signs spending by businesses is set to come out of its two-year slump.

Elsewhere, there is mostly good news on the economy. Consumer confidence has steadied. Industrial production has grown for three straight months. Inflation remains a distant threat, in fact wholesale prices actually fell in April. And while unemployment hit 6 percent last month -- the highest in nearly eight years -- it remains significantly lower than the peaks that followed the two previous recessions -- 10.8 percent in 1983 and 7.8 percent in 1992.

In addition, the Federal Reserve could very well end up holding interest rates steady for several more months, and possibly a good deal longer, before it starts raising them again in a bid to ward off the inflation that may come with higher growth. The central bank cut rates 11 times last year, but has held rates steady at each of its three meetings so far this year.

So why are the investors so skittish?

Second-quarter profits at companies in the Standard & Poor's 500 index are expected to rise 6.8 percent, on average, according to First Call, which tracks profit forecasts on Wall Street, followed by a 26.7 percent jump in the third quarter and a 39.8 percent gain in the final three months of the year. For all of 2002, earnings are expected to grow 14.6 percent before rising 19.5 percent next year.

The problem is, businesses themselves don't seem sure that earnings growth will be that robust, even with easy comparisons to the sharply lower profits posted during last year's recession.

Corporate profits fell about 12 percent in the first quarter -- the fifth straight quarterly drop, marking the worst stretch for Corporate America since 1970, when Richard Nixon was president.

But forget all that. And forget too that the first-quarter performance was worse than the 7 to 9 percent drop stock analysts had been expecting.

The problem is that the guidance from company executives for the current quarter "was kind of murky," said Larry Wachtel, veteran market strategist at Prudential Securities. "The next couple of months are going to bring us a long, hot summer for the markets," he said.

"Stocks in this recovery have performed far worse than the last three recoveries," said former Fed economist Lara Rhame, now with Brown Brothers Harriman. "You really have to ask yourself, as a whole, what the markets are seeing out there."

Rhame sees a fairly solid recovery with economic growth of 2.5 to 3 percent this year, buoyed mainly by consumer and government spending fueled by low interest rates. "But business sentiment is still extremely weak," she said, meaning companies are hesitant to start hiring while the outlook, from their perspective, at least, is unclear.

Why are companies so reluctant to spend? Largely because of excess from the spending boom of the late 1990s, when gains in tech stocks and the growth of the Internet helped make the stock market into something of a national sport.

That means profit growth could actually be weaker than what forecasters are seeing.

"The question is when will the earnings recovery begin and how strong will it be," said Hugh Johnson, chief investment strategist at First Albany Corp., who thinks it won't start in earnest until the third quarter and could be weaker than many are saying.

Investors are paying now for dependable earnings, he said, from small companies with predictable niche businesses, for example, or utilities and consumer companies like food, grocery and automakers. They're not just looking at price-to-earnings ratios but comparing those to the companies' earnings growth rates.

It remains to be seen if the economy will be strong enough to boost profits and convince investors the good times are back. After all, with growth and profit forecasts such as they are, normally Wall Street would have been partying some time ago.

"If you're going to bet on economists and strategists on one hand, and the markets on the other, take the markets every time," said First Albany's Johnson.