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The Wall of Worry

05/08/2022

Have you ever said . . . there is nothing to worry about?  Ever?? Worrying is what humans do, especially investors.  We worry . . . a lot!  Pundits joke that Wall Street is ALWAYS trying to climb a Wall of Worry.  Sometimes, the Wall is tall.  Sometimes, it is short.

There was a time, a mere 25 months ago, when we had no worries about Covid.  The “small” war in Afghanistan was winding down.  Sure, Republicans and Democrats were trashing each other, even impugning the integrity of both honorable and dishonorable people alike.  Sure, we were a grumpy people, made worse by social media.  But jobs were plentiful and inflation was quiet.  We didn’t know it, but hindsight suggests times were good.

Since then, we have suffered a terrible pandemic, killing over a million Americans . . . a million!  We do wonder and worry about how deadly the next Covid variant will be?  Unemployment soared quickly, before dramatically improving.  We survived an ugly election season, with the losing Presidential candidate demonstrating how a “sore loser” acts.  We witnessed barbarians storming our Capitol.  We were humiliated by our final exit from Afghanistan.  We experienced a scary four-week “flash crash” in the stock market.  (2/17-3/16/2020)  We “borrowed” TRILLIONS of dollars from our grandchildren.  We held our breath as the stock market dropped about 13% so far this year and watched helplessly as inflation re-ignited.  Finally, we witnessed the breakout of an especially brutal war in Ukraine, with echos of World War II, demonstrating “man’s brutality to man” is still inside us.

Clearly, the Wall of Worry is much taller now than it was two years ago.  So why is our stock market is still 20% above our market high prior to the pandemic?  The easy answer is that we “borrowed” our way out of a potential depression, but that ignores the inherent flexibility and efficiency of capitalism.  Nobody ever said that capitalism was fair, but it is efficient.

A contributing factor is that investment money flowed from foreign stock markets into the U.S. market, bidding up the price of our stock.  This was because the U.S. economy was strong entering the pandemic crash and that our Congress reacted quickly.  That money flow has not reversed yet and probably won’t in the near future.  Nonetheless, that is one more Worry for the Wall.

Remember — Capitalism rewards the patient . . .

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