What really matters to investors? Earnings or economics?

If you are like most investors, you dislike uncertainty.

The debt negotiations, the potential downgrade from AAA, and the most recent economic figures -- have given us plenty of uncertainty. But at least we investors have the luxury of being able to sell our shares today and buy them back tomorrow, right?

Business leaders don't have that luxury. They must invest with longer time periods in mind, and with scant opportunity to get their money back if conditions turn ugly. Is it any wonder then that leading indicators of business activity (durable goods sales, surveys of future expectations, and even unemployment) have looked more and more bleak in recent weeks?

Business leaders and US consumers both react to uncertainty by changing their spending patterns in the short term. High unemployment, declining real estate prices and high personal debt levels are all legitimate reasons for consumer spending to remain restrained. Unfortunately, much is riding on the consumer, since we account for about 2/3 of all US economic activity...

Contrary to US economic activity (which was already "slow" and is now merely "sputtering"), corporate earnings have held up rather well. Nearly 80% of earnings reports this quarter have met analysts' expectations. In other words, the economy is disappointing us, but earnings really aren't.

How does one reconcile weak economics with decent earnings?

Consider this: We consumers are more important to the US economy than we are to US companies. Domestic sales now account for less than half of the revenue of the S&P500. And most, if not all of the incremental growth for S&P500 firms is coming from overseas markets.

When China became GM's largest market, it told us that times have truly changed. The US market still matters, of course. But for many companies, other markets might matter more.

Perhaps as investors we should think a bit differently. Conditions might not be as dire as the headlines indicate.