It is often said that the stock market climbs a “wall of worry”. I can’t think of a better way to describe all that has transpired since mid-March 2009 when stock markets around the world began one of the greatest market rallys in history. By the outset of this year, stock market values were up by 80-90% on average since mid-March 2009 -and all despite a lot of worry over slow economic recovery in the US, the European debt crisis and most feared of all, the spectre of a double-dip recession!
Now as we approach the second half of 2011, the global economic recovery continues, but it remains fragile. In the US, economic growth has been uneven and there are questions as to what will happen once the Federal Reserve ends its bonds purchases, a form of monetary stimulus. Plus, the most recent economic data shows the rate of job creation in the US declined significantly in the month of May, pushing the unemployment rate up to 9.1%. In Europe, the sovereign debt troubles continue while in China and the other emerging markets, inflation has become a renewed concern, largely due to the spike in the price of oil and other commodities. The question now is how to tame inflation without slowing growth in these economies and risking derailment of the overall global recovery.
In short, we are entering a new phase in the recovery where the worries are evolving, but there are worries all the same, as indeed there always are. And given the meteoric rise in stock market values over the last two years, it is not surprising that the rally might taper off and even stumble a bit as markets continue to climb the “wall of worry”.
Most of you have now been through not just one but two very significant market downturns. With the strength of that experience, you know that your success as an investor is simply about maintaining your focus on the longer term. Markets are guaranteed to go down at times, sometimes for extended periods. But you know these moments are only a temporary lapse in a longer upward trend. So while the markets may worry, you need not!
