McCarthy said: "We were beaten by a very good side. They're as good as I've seen this season in this league. We did all right to keep it to two and worked very hard.
"But Watford were quality and sometimes you have to hold your hands up and admit you were beaten by the better side. Some people seem to have a problem doing that."
Ipswich are currently 18th in the Championship, just three points clear of the relegation zone.