Early earnings season action, with strong results and weak stock performance, show that profits alone won't drive this bull market higher any longer.
Instead, investors still have to contend with a slew of other issues — geopolitical, economic and valuation — that could drown out what should be an otherwise robust time for the corporate bottom line.
"All of this is a little bit of the wall of worry, which is pretty high" said Rob Lutts, president and chief investment officer at Cabot Wealth Management. "We should be having a better attitude toward the markets today, but people are still nervous and concerned."
As it stood Friday, the first wave of first-quarter reports from banks saw respectable beats against the top and bottom lines. Three of the four biggest U.S. banks reported — JP Morgan Chase, Citigroup and Wells Fargo — along with PNC. Yet the sector as gauged by the SPDR S&P Bank ETF was off 1.2 percent in early afternoon trading, with all of the banks that reported off at least 2 percent. The major averages see smaller losses, with the nearing breakeven.
To some extent the group was a victim of sky-high expectations, and internal numbers that caused investors to question the health of core bank operations.
But there also was more at play.
Traders may have been loath to go into the weekend long the market at a time when President Donald Trump is threatening to rain bombs on Syria and Wall Street still doesn't know whether the U.S. and China are in the early days of a full-blown trade war. There's also the looming specter of special counsel Robert Mueller's investigation and the constant drumbeat of unrest in the nation's capital.
"A very big part of it is the pace of changing news coming out of Washington is very unsettling," Lutts said. "This is something investors are very uncomfortable with. You would think they would start to adapt to it, but one minute we're going in this direction and the next we're changing."
Investors would be wise to dismiss the noise and focus on corporate fundamentals, said Michael Kresh, president of Creative Wealth Management.
"The overhang of daily political tensions and nonsense coming out of the White House is causing people to become more nervous, but that doesn't change the fundamentals of the market," Kresh said. "We're still coming in above [earnings] expectations. So the issue here is if we subtract the noise, which is noisier this year than we've been exposed to, we have to look at what's actually happening."
"If we come in at the end of the year with a net 8 percent return, everybody should be ecstatic," he added.
The math seems to make sense: Earnings are expected to rise 17.1 percent in the first quarter and 18.4 percent for the full year. Mid-to-high single-digit gains don't seem unreasonable in such an environment.
Yet the bar has been set so high that it will be a challenge to impress.
"If we get through a week or two without jitter-inducing headlines ... the market may just be ale to take a deep breath and climb higher," said Quincy Krosby, chief market strategist at Prudential Financial. "It's very interesting to see this market struggle. You may not want to go in long over the weekend."