Corporations have been posting very strong Q3 2021 earnings numbers. With over 90% of S&P 500 companies reporting, earnings are up 43.1% from the same period last year, on +18.6% higher revenues. Almost 80% of companies beat their earnings-per-share estimates. All told, earnings for the S&P 500 have reached a new all-time quarterly record, surpassing a record set the previous quarter. Estimates for 2022 earnings have moved higher all year.

And yet no one seems to be happy with the economy. There are only problems, issues, and crises, with barely any stories covering record sales, rising wages, abundant jobs, and incredible demand. Some of the biggest U.S. retailers, including Target and Walmart, have reported being fully stocked for the holiday shopping season, but all we hear about are supposedly empty shelves.1

I’m not saying the economy is humming nicely and there are no issues to speak of. But I do think there is a fairly wide – and seemingly growing – disconnect between people’s perception of the economy versus the actual fundamentals of the economy. Many investors and the media see the economy in bad shape and getting worse, which makes me even more bullish. The wall of worry is growing, and stocks love to climb it.

I see three main narratives driving the wall of worry today. Assuming these concerns persist—which I believe they likely will—my bullishness is likely to persist, too.

Worry #1: Supply Chain Problems Will Crush Holiday Sales

Many folks are worried that supply chain issues are going to create a lack of goods and services this holiday season. Supply just hasn’t been able to keep up with demand, and it seems all but certain consumers will encounter an “out of stock” sign at some point in the next several weeks.

But that does not necessarily translate to depressed holiday sales. In fact, there are signs consumers are buying goods early, perhaps to get supplies while they last. October retail sales report showed U.S. consumers out spending in droves, with sales to retail stores, online sellers, and restaurants rising by 1.7% month-over-month, according to the Commerce Department. Sales in most categories are back above pre-pandemic levels. Some of the biggest U.S. retailers, including Walmart, Target, and Home Depot all reported better-than-expected Q3 earnings and also reported that shelves are stocked in anticipation of the holiday shopping season. While there are certainly shortages and tight inventories in some parts of the economy, there is a reasonable counter-argument that a perceived lack of goods and services may be slightly overblown. If the worries and concerns over the supply of goods are greater than the actual scope of the problem, that’s potentially bullish for stocks, in our view.2

Worry #2: Inflation is Going to Hurt Consumers and Choke-Off Growth

In October, the Consumer Price Index (CPI) measure of inflation reached a 30-year high, posting a 6.2% year-over-year increase and following five straight months where inflation has topped 5%. Fears of high inflation hurting consumers and killing growth have flooded the airwaves.

Again, my point here is not that inflation is benign and there is nothing to worry about. What I’m focused on is whether the fear of higher inflation might be bigger than the actual risk of higher inflation. If fear outweighs risk, and inflation is even modestly better than most expect, that can be good for stocks.

Permanent, nefarious inflation happens when there is too much money chasing too few goods, which I’m sure has many readers are saying: that’s what we have now! The difference, however, is that the U.S. and global economy have the capacity to build-out supply, it is just currently trailing the demand surge in the economy. Bringing supply online takes much longer than bringing demand back, as businesses ramp production and navigate supply chains. “Too few goods” is fixable, in other words, and I think in a few months’ time more supply will ease inflation.3

Worry #3: Another Debt Ceiling Showdown to Ruin Christmas

Treasury Secretary, Janet Yellen, recently penned (another) letter to Congress, in which she wrote “there are scenarios in which Treasury would be left with insufficient remaining resources to continue to finance the operations of the U.S. government beyond [December 15].” She added that “to ensure the full faith and credit of the United States, Congress must raise or suspend the debt limit as soon as possible.”

This issue is not currently being discussed much in the media, but I would slate it as a “coming soon” brick in the wall of worry. The debt ceiling has become a political flashpoint, and there is little doubt a showdown around the holidays would make for a gripping story. I expect it to return to the headlines in December, driving additional worry about its impact on the markets and the economy.

The narratives are sure to focus around the U.S. “defaulting” on debt, which has been a mischaracterization in the past and will be in the future, in my view. At the end of the day, the U.S. Treasury does not need Congress’s authorization (or Congress-approved funding) to make interest payments on debt—it has ample tax revenues to cover them—nor does it need Congressional approval to issue new debt to refinance a maturing bond. The implication that failure to raise the debt ceiling would trigger a credit event is off-base, and markets know it.4   

Bottom Line for Investors

The economy is far from perfect, but demand is strong, the jobs market is wide open, and corporations are posting a record profit. Yet few people are happy. Instead, widespread concern and worry over supply chains, inflation, labor shortages, and coming soon, the debt ceiling, are prevailing. That makes me even more bullish. The reason is simple: when everyone is fixated on an issue and it becomes widely discussed, its pricing power concurrently falls. This is how “walls of worry” get built, and stocks love to climb them.


1 November 12, 2021.

2 Wall Street Journal. November 16, 2021.

3 Wall Street Journal. November 10, 2021.

4 New York Times. November 16, 2021.


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