Posted by stocker on September 3, 2010 in Stock market basics | Short Link

What is the “wall of worry” in the stock market. You hear stock analysts throwing that term around on TV and radio shows and anyone who is a beginner might have no idea what they are talking about.

Right now there is a lot of bad news about the economy. I mean a REAL LOT OF BAD NEWS. Unemployment has gone up to 10% under Obama and stayed there. The government is spending money at rates like we have never seen before. This country is deeper in debt in every way than it ever has been before. In short, there is a lot to worry about.

Yet stocks aren’t going down and it seems like they even want to go up. All the bad economic news I just described is the wall of worry and it is a very big wall right now. But if stocks end up today (9/3/2010) like it looks like they will, it will be the third straight day that they have gone up. Any bit of good news about the economy or jobs seems like it is enough to send the market up.

When stock investors ignore bad news or general pessimism about the market or economy and bid stocks higher, that is when it is said that the market is climbing the wall of worry. Its like there is bad news and the market should be going down and yet it defies gravity and goes up.

You can go out and buy the Stock Market For Dummies book and learn all the basics and fundamentals there are. But no common sense principle or any set of fundamentals can explain why, in the face of so much economic bad news, people are still willing to bid the market up and part with their money.

This is what makes the stock market very interesting for many people. A good investor is in tune with not only what stocks are doing well but also with what people are thinking about those stocks. Often time what people are thinking is even more important than the nuts and bolts of a companies inner workings.

If people like a stock or what a company makes (like Apple for instance), sometimes that alone is enough to keep it going higher. If people want to buy they sometimes will buy, no matter what is happening to the economy. The wall of worry is when there is seemingly enough bad news and a lot of experts predicting bearishness to push the market down. And yet it stealthily keeps going up, usually slowly. Is that what we are seeing here? It sure looks like people want to buy stocks and are just waiting for any little bit of good news as an excuse to buy.

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