The major reason for this was the fact that many people in the US felt that the country had been forced into World War I for no good reason. They believed that the war had cost the US money and lives even though it had nothing to do with the US. Therefore, they wanted to avoid another war at all costs.
In the 1920s, these Americans wanted to avoid getting forced into another war. They wanted to isolate themselves from the rest of the world so as not to have that happen again. This was the major reason for the isolationist sentiment that arose during the 1920s.
I think that there could be a variety of answers offered up for this question. In my mind, I think that the United States pursued isolation because it was convinced that the horrors of World War I could not be experienced again. Even though that the United States did not suffer as badly as the European nations, it was still a shock to see war on this level. Many Americans became convinced that interfering or intervening in European affairs was the reason why the war happened. Europe was seen as a hotbed of rivalries and intensities where only bad could result. This is the reason why there was staunch opposition to President Wilson's ideas put forth in the Treaty of Versailles, in particular the establishment of the League of Nations. At the same time, a decimated Europe left America to be the center of the world's attention and the 1920s "Jazz Age" feel helped to create an inward draw that made intervening in world affairs or protecting democracy abroad "uncool." The pervading self- interest that was such a part of the 1920s from a social point of view helped to create a sensibility that made individual pursuits in terms of wealth, social status, and engaging in consumerism helped to enhance the individualistic view of the United States, making political isolationism an extension of such a selfish mentality. To put it in the most mundane, Americans were much more content to frequent speakeasies and drink "hooch" than stress about the perilous conditions of democracy in war- ravaged Europe. Isolationism became the political manifestation of "the Jazz Age."
The US was isolationist in this period, in that it carried on the tradition of not entering into binding security pacts. In other areas, the US was far more involved in international politics than in previous decades.
In Mesopotamia (modern day Iraq), Britain and France vowed to keep a closed door on the country and refuse other countries access to the increasing amount of oil being discovered. Standard Oil Company of New York along with US government officials began a process of years of negotiations to challenge this position, eventually leading to the American company taking control of 23.75% of the Turkish Petroleum Company in 1928. While the British did eventually work behind closed doors to void this deal, American government participation to bring it about in the first place goes against the idea of American isolationism in this period.
Following the discovery of oil in Iraq, American companies, again with US government officials, negotiated to be the sole power to be granted permission to drill for oil in Iran. This deal also ended in failure, because it relied on transporting the oil through the Soviet Union to the US. In exchange for permission to transport oil through their country, the Soviet Union wanted official recognition of their government which the Secretary of the Interior refused to grant. Again, although this ended in failure, it is another instance that goes against the belief of the US being isolationist.
In Europe in the early 1920s, the issue of German reparations to the victorious powers was a key issue and one that was important to the US. The Germans paying reparations allowed Britain and France to repay their debts to the US incurred from the first world war. However, Germany did not want to pay the reparations leading to a hyper inflationary crisis in Germany, and the French to send it's army into the Ruhr valley. To resolve the situation, Charles Dawes drafted and implemented a plan in 1924, known as the Dawes Plan and approved by the US government. The Dawes Plan reduced the amount of reparations Germany had to pay the Allies to 2.5Billion Marks over the next fifty years as well as providing 2Billion US Dollars in loans to help boost the German economy. Five years later in 1929, this was built upon with the Young Plan when it became apparent that the Germans did not want to pay over such a long period of time, and again reduced reparations payments by 20%. The willingness shown here for the US to get involved in European affairs again counts against the belief the US was isolationist.
One of the principle concerns of the US government of this time was the cost involved in a naval arms race. The US had drastically increased its naval capabilities during the First World War, moving from 4th largest fleet to joint first with Britain. In 1922 the Government began talks at what became known as the Washington conference, where global naval powers came together to limit and reverse the naval arms race. The result of the conference was three treaties; the Five Power Agreement between Britain, US, Japan, France and Italy where each pledged to keep their navies at 5:5:3:1.67:1.67 respectively, the Nine Power Agreement where all involved pledged to uphold the integrity of China, and a separate agreement between the US, Britain, France and Japan to respect each others interests in the Pacific. In 1927 a conference was called in Geneva to build upon the Five Power Agreement and stop a naval arms race which had begun with smaller category ships. While France and Italy did not attend, the US, Britain and Japan again pledged to keep smaller ships at the agreed ratio of 5:5:3. In 1928, the US responded to France's repeated appeals for a security pact. The US did not want to sign a pact with France whom had been rebuffed repeatedly. To satisfy the French need for security, the US government called all governments of the world to agree to what became known as the Kellogg - Briand Agreement. All but 5 world governments attended, and pledged to make war illegal. All of these US led agreements can be seen as a concerted effort by the US to be involved in world affairs, instead of acting isolationist as previously believed.
Latin America has always been a strong sphere of influence for the US, and during the 1920s this was no different with large US participation in the region. During this period the US; maintained garrisoned troops in Haiti, Nicaragau and the Dominican Republic, controlled the politics of Cuba as well as being involved in a decade long negotiation over oil rights in Mexico. By 1929 US investments in Latin America had doubled from $1.26Billion to $3.52Billion, exports to the region had tripled in value and now represented 20% of total exports by the US. US involvement in the area wasn't unchallenged however, the US faced strong denunciations at the Havana conference 1928 from the Latin countries, in particular Mexico and Argentina, who resented US high handedness in the area. The US delegation ably defended the government position, preventing an anti-US decision. In the end, the US abandoned the Roosevelt Corrollary of the Monroe Doctrine, and instead sought the agreement of other Western Hemisphere states when the US did decide to meddle. It can be seen from the US interest in Latin America that these actions go against the belief that the US was isolationist.
In the 1920s the US can only be considered isolationist in that the US governments refused to be constricted by binding security agreements with other powers, instead preferring agreements which bound all powers as well as itself. Throughout the period the US consistently sought to undermine British global supremacy, as well as defending it's own position gained after the First World War. The US can be seen to have followed a policy of independent internationalism.