Know what to pay attention to and what to ignore.

That's the advice of MFS Investment Management Chief Investment Strategist James Swanson, who believes the U.S. economy is already 28 months into a recovery that the news media is failing to recognize and report.

"The U.S. business cycle, while moderate, is now going from strength to strength," Swanson said.

"The average business cycle since World War II has lasted about five years, from recession to recession," he said. "The recession officially ended June 30, 2009, so we're 27, 28 months into this. We're not quite at the halfway point. We're getting there. We're sort of in mid-cycle, if history is any indication."

Thus, putting the tepid stock market and fears of the collapse of the European Union aside, Swanson points a number of factors indicating recovery mode. These include: consumer resilience, record corporate profits and attractive P/E ratios, all of which, he believes, make for an optimistic outlook for 2012.

"Spending will be boosted by pent-up demand among consumers and companies seeking to replace everything from cars to software," he told a media briefing at the close of the year in New York.

"The combined forces of a free market, population growth, easy money and S&P 500 corporate cash flows at all-time highs-will keep this business cycle turning in 2012," Swanson said.

"The third quarter of 2011 was the seventh quarter in a row that companies beat Wall Street's expectations," he noted. "Annualized sales averaged 11.5%-three times GDP."

What's more, he added, profits and cash flow continue to rise and costs are well contained.

The net result will be capital expenditures in: equipment, information technology, software, factories, infrastructure and transportation. Added to this, Swanson said, will be higher dividends and stock buy-backs in 2012-with labor improvement inevitably following.

"For the past two cycles, we've had profits coming in and capital expenditures by businesses running below normal," he said. While companies are still stunned by the near freezing up of the capital markets in 2008, they cannot continue to sit on this record cash forever, Swanson said.

As for the question of whether the "the U.S. economy can motor through just on corporate strength," Swanson continued, "the argument here is, the U.S. consumer is dead. That's utter rubbish. The U.S. consumer is the most resilient thing on the planet. Big box retail sales are running 4% higher than a year ago. The average credit score for an American is 695 now, the highest since 2006."

Thus, while MFS is largely optimistic on the economic performance of the nation in 2012, the resolution of the debt crisis in Europe and the likelihood of it falling into recession are the two biggest wild cards, Swanson said. Thus, MFS is recommending investors still play it safe in high-quality, defensive, technology and dividend-paying stocks.

"The margins of technology stocks are three to four times what they were 10 years ago, and many are now paying dividends. Betas are falling. They have no debt but do have excess cash. So technology companies are behaving more defensively," Swanson said.

Due to MFS's positive outlook on corporate profits, the firm is also positive on high-yield bonds, which, it says, are offering equity-like returns without the volatility.

"The door is open for new financing, defaults are running close to zero, balance sheets are better and cash flow is still coming in," Swanson said.

For the long-term, don't forget emerging markets, added Thomas Melendez, manager of MFS's international portfolios. "There's a change taking place in the dynamic between the developed world and emerging markets," Melendez said. "Emerging markets are now self-sustaining, good at discipline, and not in the same situation as the developed world.

Don't overlook China, either.

"China will become the world's largest economy sooner than we think-probably in 20 years rather than 50. It's a changing of the guard that's of concern for America," Melendez said.

Lee Barney writes for Money Management Executive.