We are in the middle of earnings season, and by most accounts, results have been good. Of the 233 S&P 500 companies that have reported, 68 percent of them have beat their earnings estimates, which is above the historical average. So why isn't the market trading higher?
There are two key reasons, in my view. The first is that expectations have been scaled back so dramatically. This means that even though companies are beating expectations, this is not exciting investors, because the bar has been set low.
Second, investors clearly anticipate that the Federal Reserve will soon scale back asset purchases, and that has caused some folks to take profits off the table. Many investors think the Fed is the only thing holding this market up, and whether this is right or wrong, that it is the perception.