The Market Is Climbing a Massive Wall of Worry
This is classic contrarian action, with high levels of bearish news and pessimism providing a foundation for hesitant buyers start to put more cash to work.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
Lower-than-expected Michigan Consumer Confidence numbers and higher-than-expected inflation expectations could not slow down the market Friday. It was a perfect week for the S&P 500 SPY and Nasdaq 100 QQQ, which were up each day after blasting higher on the China tariff news on Monday.
Positive trade news continues to drive the market. It was reported that the U.S. and the European Union broke an impasse that was preventing serious negotiations from starting. There is now increased hope that deals will start to fall into place regularly.
One of the most interesting dynamics at work in this market is that there is still a high level of pessimism. Market players are shaking off some of the worries about Trump’s tariff and trade policies, but there is still very elevated concern that the economy is going to slow substantially.
Ironically, poor consumer confidence, worries about inflation, and concerns about economic growth create a giant wall of worry for the market to climb. What happens is that investors are cautious, have higher levels of cash, and are more defensive. When the market continues to move up steadily, like it did this week, those hesitant buyers start to put more cash to work. The increased cash causes more market strength, which attracts more buying, as well as the fear of missing out.
As I noted in my opening article Friday morning, there are numerous Wall Street heavyweights who are very concerned about the likelihood of a recession. That level of skepticism creates very poor positioning, as does FOMO. It is classic contrarian action with the high level of bearish news providing a foundation for very strong action.
There are still plenty of folks who are convinced that something ugly lies ahead, but they have little choice but to join the party at this point and hope that they can escape when their predictions of doom start to look valid.
This is bull market action in large part because so many are worried and skeptical.
Have a great weekend. I’ll see you on Monday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
