Climbing the Wall of Worry
Climbing the wall of worry is the tendency for markets to rise despite always have something to worry about. And 2023 is no exception.
Media headlines today boldly announce companies making layoffs. But news about job openings seldom makes headlines. While recently we have been hearing about tens of thousands of layoffs, you may not be aware that there are currently 10.5 million jobs open, or 1.8 jobs per unemployed individual.1
We hear forecasts that corporate earnings will be down this year, and some investors may erroneously conclude that stocks must go down. But what we don’t hear is that historically there has been no correlation in the short term between earnings and stock prices.2 Even if we knew future earnings growth, we still wouldn’t know how the stock would perform.
Recent headlines have centered around the debt ceiling along with concerning predictions of what would happen if we were to default. And yet we have been here before. In 2011, the market fell precipitously as the default date neared, but after politicians got their act together, the market went on to create significant wealth for investors who stayed the course.
So What Will Happen?
There are so many different moving parts to the economies and markets that no one knows what will happen for sure. But we do know that markets can fluctuate significantly. We know that there are two sides to every story (and opinion). Therefore, the best course of action is to ignore the noise and ensure investment decisions are guided by your personal investment plan.
©2023 The Behavioral Finance Network
Past performance is no guarantee of future results. 1. US Bureau of Labor Statistics. Latest available figure as of Nov 2022. 2. Bloomberg, NYU Stern/Prof. Damodaran, as of 12/2/22. S&P 500 Index price and earnings series from 1955 to 2022. All data points shown are for December 31 of each year, except for 2022 which is December 2 data. Correlation (R2) was 0.02.