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.