Why this market is climbing a wall of worry.
We've all heard the saying that stock markets climb a wall of worry, and the wall can't have looked more forbidding than it did at the start of March.
With the global economy teetering on the edge of collapse, and desperate governments pumping hundreds of billions of pounds into flailing banks, it looked like the only way for equities was down.
If you had been asked to predict whether the FTSE 100 would hit 2500 or 5000 by November, you would almost certainly have bet low. Wrong!
The subsequent stock market rally must surely rank as one of the fastest and most unlikely in history. Investors didn't just have to scale a wall of worry, but fear, despair and panic as well. And they did it at breakneck speed.
You're my worry wall
And my point? In recent weeks, the consensus has grown that this astonishing rally has overshot itself, it has steamed way ahead of the real economy, and It's Time To Be Defensive Again.
As evidence, the sceptics cheerfully present us with yet another forbidding wall of worry. It isn't difficult to do. I can think of scores of reasons why the rally has gone too far, and may shortly run out of steam.
Here are some of them.
Another brick in the wall of worry
The real economy hasn't recovered to anything like the same extent as the stock market, particularly in the UK, where GDP is still shrinking. This year's rally is due to multi-billion dollar government stimulus plans, soon to be phased out.
The stimulus plans may have also stoked an asset bubble, particularly in global stock markets. And when they are withdrawn, central bankers will have spent all their fiscal ammunition, rendering them helpless in the face of any further financial calamities. It will take years of tax increases and public spending cuts to top up their financial armouries, impeding growth.
Not to mention the fact that the global imbalance of trade, particularly between Asia and the West, has yet to be addressed. China is still relying on Western consumers to fund its breakneck growth (and keep the Communist Party in power), but Western consumers aren't the spending force they were.
The big banks still aren't lending to businesses, starving them of capital. People are losing their jobs.
Oil is up 80% this year. If the price rises further, we could be in big trouble.
We're all doomed! I don't think so.
So who's worried?
That's one great big wall of worry, but if you look closely, there are plenty of economic footholds to cling onto.
First, the FTSE 100 has just hit a year high, defying those who felt this year's rally had peaked.
Barclays is planning to restart dividend payments next month, after enjoying a record-breaking year. OK, it's only 1p a share, but it's a start.
Policy tightening is a long way off and interest rates are likely to stay low for several years, which is likely to mean more money diverted into equities. Why get 1% on your savings when solid companies such as No-brainer stock Admiral, which has a forward dividend yield of 6%?
China powers on. France and Germany seem to be over the worst. Russia is growing strongly. Even the US is picking up.
The UK maybe last off the blocks, but at least its housing market hasn't collapsed, while property repossessions have been much lower than expected. Unemployment actually fell in September, even though it rose over the quarter. Corporate insolvency also dipped in the third quarter.
The Bank of England hasn't ruled out extending quantitative easing even further. Inflation still seems under control.
Central bankers have avoided many of the mistakes that led to the great depression, at least so far. I would expect markets to keep climbing at least until interest rates start to rise significantly, and people can get some kind of return on cash. That day is some way off.
So for every brick of worry, there is also a slab of good news.
How I learned to stop worrying and love the boom
And most important of all, stock markets seem robust. They defied the superstitious by navigating those famously treacherous months of September and October, and for all we know, might be girding themselves for a final surge to the end of the year.
If that happens, I don't want to miss it.
I've been worrying since the end of August, and to be frank, I've bored of it. Worrying too much doesn't just give you unsightly lines on your forehead, it can be bad for your portfolio.
You will have plenty of unsightly lines if you were too worried to invest in March, April, May, June and July, when markets were climbing, or sold a chunk of your portfolio to sidestep the September setback that never came.
The worried well
The wall of worry will always be there, but nobody knows which loose brick, if any, will bring the edifice crashing down on our heads. So swallow your fears, keep on climbing, and remember that in the long run, we will all still be worried about something.
