Climb the Wall of Worry

You may have heard the term “wall of worry.”

It’s what investors climb when everyone fears that the economy is so bad that the market will fall.

That’s exactly what’s been happening in 2023.

Endless forecasts of recession have scared investors away from putting money into the market. They’ve caused corporate managers to lay off workers and institute hiring freezes, and they’ve caused a national pessimism that has yet to lift.

Bearish sentiment is quite high. According to the most recent American Association of Individual Investors Sentiment Survey, 36.8% of investors are bearish. This is the 75th time in 80 weeks that the reading was above its 31% historical average.

Meanwhile, only 29.1% of respondents said they are bullish. That’s the 78th time in 80 weeks that the reading was below its 37.5% historical average.

The market certainly isn’t acting as if a recession is coming, however. The S&P 500 is up nearly 12% year to date, while the Nasdaq has soared more than 26%. The market tends to be a forward-looking indicator, and it’s tough to imagine it would be up so much if the economy were about to tank.

Throughout my career, I’ve talked to people who were holding off on investing, either because we were in a bear market and they were waiting for it to go up…

Because we were in a bull market and they were waiting for it to come down…

Because we were in a recession or one was coming…

Or a host of other reasons.

As I remind investors, there is always something to be worried about. The world has very real problems, and it seems these days, in many countries, clowns are running the governments and not taking a serious approach to solving those problems.

Fortunately, the free market is trying to address some of them.

Over the decades, there have been countless wars, crises (humanitarian, financial or political), scandals, crashes and all kinds of other catastrophes that have made us read the latest scary story or stay glued to our cable news program.

Here are three things you can do to climb the wall of worry and make money, rather than standing there looking up at it.

No. 1: Turn Off Cable News

No matter your affiliation, the political talk shows have one goal – to scare you into believing that the other side is going to make your life and the country worse. This won’t make you happier. And if you listen to it, it will cost you money.

These shows have been scaring the bejesus out of their audiences for a couple of decades now. And the market has gone up an average of 8.2% per year over the past 20 years. That period includes the presidencies of George W. Bush, Barrack Obama, Donald Trump and Joe Biden.

You probably were not a fan of at least one of them (maybe more). And though there were certainly bumps in the road and even a crash or two, the market rose throughout that time.

Ignore the blowhards who are trying to keep you scared. Instead, invest in American (and global) companies that are actually solving problems for their customers.

No. 2: Look at the Data

As I mentioned above, this country (and the world) has seen its share of calamities and atrocities over the decades. And yet the market has consistently risen.

Of course, it doesn’t rise every year. There are bear markets and rough patches fairly regularly. But over time, stocks rise.

Since 1922, the market has returned an average of 10.1% per year. That period includes the Great Depression, the Great Recession, World War II, the turmoil of the 1960s, a global pandemic and other very bad times.

And despite all of those things, for 100 years, we earned 10% per year on average.

No. 3: Listen to Warren Buffett

If you don’t want to listen to me, listen to the greatest investor of all time.

Warren Buffett famously said, “Be fearful when others are greedy and greedy when others are fearful.”

Investors are very fearful right now, but Buffett is buying stocks, particularly energy stocks. It’s usually a very good idea to follow him.

Buying stocks now means you’ll get decent valuations, strong dividend yields and low prices. And when others finally get greedy, you’ll be sitting on some great investments that you added to your portfolio when no one else would touch them.

Jump on that wall of worry as it continues to climb higher.