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This is the ‘wall of worry’ that stocks have climbed to rally 271%
MarketWatch.com
Published: Aug 17, 2017

This may be the most sedated stock-market rally of our times.

Even as tensions heightened between the U.S. and North Korea and violence broke out on the streets of Charlottesville, Va., stocks took the alarming news in stride, continuing to scale the “wall of worry” in defiance of doomsday predictions of an imminent selloff.

“It seems like every day the headlines outside of the market get more and more frightening,” said Michael Batnick, director of research at Ritholtz Wealth Management, who illustrated the resilience of the market in the chart below.


As the graph shows, since stocks bottomed in March 2009, the S&P 500 index SPX, -1.54% has soared 271% to multiple records, meandering higher through the European debt crisis, Brexit, and the U.S. presidential election.

Batnick had originally published the chart in March but updated it Wednesday given the recent developments.

“This year has been the perfect reminder that political volatility does not necessarily translate into the stock market, with this being the quietest year since 1965,” he said.

The S&P 500’s daily trading range averaged 0.32% in the first half of the year, the narrowest in over half a century, underscoring the gap between market volatility and the political upheaval that has marked Trump’s presidency so far, according to Batnick.

Stocks finished modestly higher on Wednesday with the Dow Jones Industrial Average DJIA, -1.24% gaining for a fourth session in a row as investors shrugged off the latest imbroglio out of Washington.

Much of this tranquility can be attributed to strong fundamentals as the economy continues its steady pace of expansion along with robust corporate earnings. Optimism over President Donald Trump’s pro-business agenda, including promises of lower taxes and deregulation, has also helped to keep the market’s upward trajectory intact. Some of that euphoria has waned since the early days of Trump presidency amid a series of political setbacks such as the high-profile failure to repeal and replace Obamacare. But investors, to a large degree, still seem to have faith that the embattled president will deliver the tax reforms he had pledged.

Batnick, meanwhile, believes psychology deserves more credit for keeping stocks buoyant.

“Rising prices attract buyers and falling prices attract sellers,” he said.

Likewise, the analyst believes that when the end comes, it won’t be triggered by the usual suspects like elevated valuations.

“This is sort of a chicken and egg problem,” said Batnick, in response to a question on what will derail this market. “It won’t be a high cyclically adjusted price-to-earnings ratio or news coming out of Washington, the answer to that question is simply falling stock prices.”

http://www.marketwatch.com/story/this-is-the-wall-of-worry-that-stocks-have-climbed-to-rally-271-since-2009-2017-08-16