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HOW HIGH IS THAT “WALL OF WORRY”?

7 April 2010 by Cullen Roche 7 Comments

It’s one of the favorite terms used by market commentators – “stocks climb a wall of worry”.  You could easily argue that the “wall of worry” has been quite high over the last 12 months as investors appeared convinced that the global economy was imploding last March.  Since then investors have steadily climbed back into stocks and out of cash and bonds as worries have slowly begun to subside.

In an effort to visualize the “wall of worry” I’ve taken several of my most reliable sentiment indicators and taken the inverse summation of all.  The result follows and displays the height (or lack thereof) of the “wall”.  The results are fairly straight forward and interesting.  You can see that the “wall” peaked in 1991, 2003 and 2009.  The previous two peaks were prior to mult-year bull markets.  Interestingy, the latest reading of 88.4 is not far from the March 2009 high of 93.5.   Strictly using this long-term sentiment indicator it would be safe to say that the “wall of worry” remains quite high.

Cullen Roche

Cullen Roche

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Comments
  • MIKE

    CUP AND HANDLE FORMATION
    it’s going to break up with upside target of 150

    04/07/2010 at 4:50 AM
  • gordon flash

    Guys, the GOLDMAN SACHS BANK is in you hands! Stop buying the crap from them and SELL ALL THEIR SHARES! They will never be able to repay all of their 750 BN USD of DEBT. This is more than Greece, Spain and Portugal together…
    They got a gift from the FED and now are gone in the wind with all this money!!

    04/07/2010 at 6:50 AM
  • Our Man in NYC

    Love the chart; pragmatic capitalist — gives a great visualization!

    04/07/2010 at 11:24 AM
  • This little piggy

    I’m surprised that the implied complacency before the tech collapse was “lower” than before the credit crisis.

    04/07/2010 at 6:15 PM
    • Mjcostello

      I think the extremely low “wall of worry” at the tech peak wasn’t just complacency it was extreme euphoria, I’d be interested to know what indicators compose the “wall” and if that was the all time low in 2000.

      04/09/2010 at 9:02 PM
  • roger

    why the “inverse sum” what is the significance of that methodology?

    04/15/2010 at 9:44 AM