How High Is That Wall?
Well actually – not THAT wall. Not the border wall – we’re talking about the “Wall of Worry”. There’s an old saying that bull markets climb a “Wall of Worry.” This wall is constructed of negative news, headlines, and events that serve as a barrier to optimism and otherwise limit speculation in the US and Global markets. Since the Great Recession ended in 2009, this wall has included the Debt Crisis Aftershocks/Part 2 (2010), the European Debt Crisis (2011), the Taper Tantrum (2013), the Russia/Ukraine Crisis (2014), the Flash Crash (2015), Brexit (2016), the Election (2016 – Trump vs. Hillary was mutually assured destruction), and Trade Wars (2017-2018). Despite these events since 2010, the S&P 500 has an annual average return over 10%. Please don’t misunderstand, it is prudent to be prepared. Trade issues are not ideal and could cause unintended consequences, but sometimes the fear and what-ifs are worse than the reality.
In his best-selling book “David and Goliath”, Malcolm Gladwell describes how residents in London actually grew stronger during the relentless bombing raids by the Germans in World War II. Interestingly enough, this is exactly the opposite of what the “experts” of the day predicted. When the bombing started, Londoners were expected to live in a perpetual state of panic, chaos, and fear. Instead, as the bombs started raining down onto the streets of London in September of 1940, those not directly impacted by the bombings grew stronger and they were, in the words of Sir Winston Churchill, more “afraid of being afraid”. Ironically, this actually brought a spirit of calm and even resolve and hope to the populace and helped give way to the “Keep Calm and Carry On” mantra that lives still today (btw, can you imagine Churchill with Twitter?!)
Speaking of World War II (in what had to be a truly scary time!), did you know that $1M invested the month after the Japanese bombed Pearl Harbor (Dec 1941) and launched the US into war, would have grown to $2.5M by the end of 1945? More amazing, in 10 years, $1M would have grown to almost $5M!
Although in our present day we may not face daily physical bombings, we are inundated with frequently overhyped crises intended to attract attention and ultimately sell ads. There is no doubt we will have market sell-offs periodically, some of which may be severe. However, if we have a plan and can maintain behavioral discipline in those scenarios, we can be very successful over the longer term. Fear sells, but we can also prosper if we prudently manage these fears, while we climb the “Wall of Worry”.
As always, we are grateful for the opportunity to serve your families and businesses together.
Mitch & Destin