A trader wears a hat displaying the name of U.S. President Donald Trump while working on the floor of the New York Stock Exchange (NYSE) in New York.

We're just about halfway through earnings season, and the results have been encouraging, with blended earnings up 7.1 percent for the fourth quarter and revenue up about 4.2 percent, according to Thomson Reuters.

The good news: the 2016 earnings recession is now over.

Now the hard part starts. The markets are anticipating double-digit earnings growth in all the major sectors throughout 2017. That includes an increase of 10.5 percent in the first quarter alone. The two largest sectors, technology and financials, are expecting earnings to increase 14 percent and 16 percent respectively, in the first quarter.

Is there any chance corporate America can deliver on the big expectations?

It's a tall order, and part of the problem with the markets in the last few days is that we may be entering a period when the market is settling into more realistic expectations.

Here's why:

1) The current quarter numbers, while up, are very uneven. There are expectations that revenue growth will be substantial in 2017—up more than 7 percent in the first quarter alone—but early signs are not encouraging. Tuesday alone, of 21 companies reported, 16 missed on sales.

David Aurelio, who tracks earnings for Thomson Reuters, noted that only 46 percent of those reporting are beating on the top line in the fourth quarter, well below the 59 percent historic norm.

"That tells you that expectations are a bit high," Aurelio said.

2) Corporations are being very conservative on 2017 guidance. Nick Raich, who tracks corporate earnings as the Earnings Scout, noted that of those that have reported and commented on 2017 earnings so far, only one in four are seeing first quarter estimates raised by analysts, less than the three-year average.

"After Trump was elected, people thought for sure we would see 2017 estimates turn higher, but they are not," Raich said. "The companies are still in wait and see mode to see if the Trump promises of lower taxes and infrastructure spending would really translate into higher earnings."

3) Traders are debating how much real earnings "oomph" will come from lower taxes. Initially estimates of a substantial earnings boost of 10 percent to 15 percent to the S&P 500 from lower taxes were based on rough calculations that the corporate tax rate would go from 35 percent to roughly 20 percent. Traders are now realizing that the picture is far more nuanced. Raich noted that the average corporation that has reported for the fourth quarter has an "effective" tax rate (what they really pay) of roughly 24 percent, with many paying rates even less than that. Only 25 percent are paying the maximum rate of 35 percent.

There's no doubt corporations will benefit from a tax cut. Earnings conference calls are full of generally positive references to tax cuts, like this one from Verizon on Jan. 24: "Whichever year is the first year it applies to, whether it applies to 2017 or whether it initially apply to 2018, we're definitely seeing it being a benefit to the cash taxes we pay. But given the uncertainty of the specifics of the plan, it's a little too soon to say exactly how much that could be."

There's the problem: warm and fuzzy commentary is not translating into any earnings increase, at least not yet. At the very least, those expecting a 15 percent bump in earnings just because of a tax cut may be expecting too much. And throw in more complicated discussions like border taxes, and you can see why traders are re-examining the whole issue.

Finally, there is a much broader macro question the market is grappling with: can the baton pass smoothly from easy monetary policy to easy fiscal policy? This is the central question. If it can, there might be a smooth handoff, and earnings will rise enough to justify current prices. How well that transition goes will determine if the rally can continue.

It really goes back to an issue that almost no one has stopped to consider: is this truly a self-sustaining economic recovery? Or is the global economy still on life support and dependent on central banks? Are phrases that have become famous in the last few years like "the new normal" and "lower for longer" truly consigned to the ash heap of history?