In 2015, weak growth numbers in China were worrying investors. There was also China’s decision to devalue their currency, which sent equity markets into a brief tailspin. China was posting weaker-than-expected manufacturing and export figures, and the currency devaluation felt like a desperation move to revive growth.1

In 2016, investor fear shifted to the second coming of a credit crisis, as banks were starting to write-off non-performing energy loans that went bust after the steep drop in crude oil prices in 2014. Germany’s biggest bank, Deutsche Bank, saw the cost to insure its debt soar by over 180% in just a three-month period, and Credit Suisse and other major European banks were reporting similar squeezes. Many prognosticators, at the time, were warning of crisis in banking.2

Go back to 2011 (which it’s worth reminding was part of the current bull market), and all talk was centered around the ‘European Debt Crisis,’ with worries of Europe’s impending collapse. In 2013 and 2014, the news spent months covering the fiscal cliff and the repercussions it could have on the economy.

In all of these cases, the stock market endured volatility along the way, sometimes with sharp, steep, and scary declines. But I believe the crucial understanding investors should draw from this walk down memory lane is, did this volatility ever last long enough to harm long-term returns?

Throughout these years, I spent quite a bit of time (and several pages) hashing and re-hashing all of the above-listed fears and all the others of the time. China slowing, the energy recession, stock market volatility – these were all stories that were sparking concern that the economic expansion was nearing an end and that the next bear market was upon us.

Yet, here we are approaching 2020, with the equity bull market still going strong – posting what appears to be one of the better performance years on record. The takeaway: over time, recycled negative stories tend to have diminishing pricing power, in my view.

That’s why heading into 2020, I think this bull market has more room to run. Lately, a majority of economic stories seem to only focus on a handful of narratives: China (trade), slowing global growth, manufacturing recession, weak earnings, impeachment, and Brexit. In other words, absolutely nothing new that we don’t already know.

So, around the carousel we go, hashing and rehashing the same stories and worries about the U.S. and global economic future. If, in the new year, you notice that these stories continue to dominate headlines – which I believe they probably will – then I think it makes sense to use this as a cue that there’s more bull market left to go. If investors and news headlines move away from these worrying factors and talk shifts to “goldilocks” growth and an unstoppable stock market, then I’d say it’s time to start worrying. But we’re not there yet.

Bottom Line for Investors

The more effective you are at drowning out negative, recycled headlines, the more success you will have over time as an equity investor, in my opinion. Above, I made a case for being bullish heading into 2020, without even mentioning anything about positive economic fundamentals as drivers of upside! These positive fundamentals exist, of course. But the point is that you can often parse a great deal of useful information about the stock market simply by identifying the elements of the “wall of worry” and asking yourself: have I seen this already? If you have, the economy and stock market are probably in better shape than you think.





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