Yep, we’ve all heard the expression. You may vaguely sense that it’s a caution against jumping out of your investments when headlines are scary – and you are right.
But, what does this even mean?
Origin Story – Every good superhero needs one.
- It is thought the expression started in the 1950s to depict a sustained stock market rise during periods of economic or financial stress.
- A wall of worry refers to multiple ongoing concerns—economic, political, or geopolitical—that weigh on sentiment, while prices nonetheless continue to advance.
- In practice, it captures the idea that bull markets are not calm; investors are often uneasy, expecting pullbacks even as the trend remains upward.
- The phrase also reflects that as long as investors are still worried and looking for negatives, expectations remain restrained, which can actually support further gains until euphoria sets in.
What it’s trying to tell you
- The expression (cliché, idiom) reminds us that scary headlines do not automatically translate into lasting damage to long‑term returns; markets often recover and move higher once fears prove overstated.
- It supports staying invested and following a plan, rather than reacting to every crisis with wholesale selling.
- It also cautions that when worries disappear and investors become complacent or euphoric, risk may be rising beneath the surface.
Real world examples? Here you go!
World War II
- During World War II, U.S. stocks initially fell around key shocks (such as Pearl Harbor) but recovered losses quickly; the Dow dropped about 2.9% after the attack and regained that decline in less than a month.
- From 1939 to the end of the war in 1945, the Dow Jones Industrial Average rose roughly 50%, which works out to over 7% per year, even amid one of history’s most destructive conflicts.
Who can forget – although we often do – COVID!
- The COVID shock triggered a violent crash in early 2020, but by year‑end the S&P 500 delivered an 18.4% total return and finished at a new record high.
- That gain came despite repeated waves of infections, deep labor‑market weakness, and extreme economic uncertainty; a handful of large technology and consumer names drove much of the index’s advance.
General geopolitical crises – it’s always something.
- Looking across post‑World War II conflicts, the S&P 500 has often posted positive returns in the year following major geopolitical shocks.
- For example, after the outbreak of the Korean War in 1950, the S&P 500 returned about 11.2% over the following year; during the year after the Cuban Missile Crisis in 1962, it gained roughly 27.8%.
- Similarly, following Iraq’s invasion of Kuwait in 1990, which initially drove stocks down and triggered an oil shock, the S&P 500 returned about 10.2% over the subsequent year.
Don’t take this the wrong way – I’m not encouraging trying to time getting out of the market now and getting back in for 2027.
As ever, I’m encouraging you to – not ignore the news exactly – (though I don’t blame those who are on a strict “news diet”), but don’t let it translate to emotional selling in your portfolio.
