Earnings are strong, the U.S. economy is improving, and Europe's no longer dominating headlines. So why aren't more people in the stock market?
Greg Fleming, president of Morgan Stanley Smith Barney, thinks investors are still mindful of what happened in 2008 and are remaining cautious.
"When you look at the first quarter you have the (S&P 500) up 12 percent in one quarter, and despite that volumes have stayed down. Investors have stayed cautious" and are keeping more of their money in cash than one would expect at a time of an improving economy, Fleming told CNBC Thursday. "The reaction of investors is different this time than in most times in the past."
The head of the brokerage joint venture of Morgan Stanleyand Citigroup told CNBC’s "Squawk Box" he can understand their caution.
"There's enough that happened in this cycle, given the challenges after [the 2008 financial crisis] that everybody got cautious," he said. "I think time and the U.S. economy continuing to slowly pull out, which I believe it is, will help a lot."
First-quarter earnings "have clearly been on the positive side" for most of the companies that reported, he said. In addition, some of the major headwinds that worried the market six months ago seem to have eased.
The threat of a double-dip recessionin the U.S. is "pretty clearly off the table and the [Federal Reserve ] reinforced that yesterday" when it raised its economic outlook, Fleming said.
Fears of a potential hard economic landing in China "so far has not materialized. It’s still 8 percent-plus GDPgrowth," he added.
As for the euro zone, "roughly $1 trillion in liquidity later there’s still a step forward, a half-step back," he said. While there are still "major challenges in Europe," the "situation is materially better."