“How low can stocks go,” the Wall Street Journal wondered on March 9, 2009, as the financial crisis was wiping away trillions of dollars from American equities, the deepest rout since the Great Depression.

That day, of course, marked the bottom. The bull market that celebrates its seventh anniversary today has restored $14 trillion to stock values, pushing up the Standard & Poor’s 500 Index by almost 200 percent.

Now, investors are awash in angst, showing little faith the run can continue. They worry about contracting corporate earnings, slowing Chinese growth and uncertainty over interest rates. And they’re walking the talk by pulling cash from stocks at almost the fastest rate on record. It’s not unwarranted -- the S&P 500 has gained just 0.5 percent in the last 18 months.

Yet if history is any guide, that very cynicism provides a compelling case for the run to persist, at least by traditional market analysis. Bull markets usually die amid excessive optimism, and that’s nowhere to be found.

“This pervasive pessimism, skepticism and unwillingness to invest in equities anywhere near the degree we’ve seen in past bull markets has been a very unique characteristic,” Liz Ann Sonders, chief investment strategist at Charles Schwab & Co., said on Bloomberg Radio. That contrarian sentiment constitutes “the wall of worry that stocks like to climb,” she said. 

David Fuller's view

This article makes some very astute points, but are they right?

I think so, for the reasons mentioned but plenty of cyclical bear markets are evident, including on Wall Street, and some are more serious.  The S&P 500 has not seen the arbitrary 20% correction, although it would on a break below 1800. 

The Dow Jones Transport Average signalled Wall Street’s vulnerability and fell over 31% before the climactic ending in January. It has had a good rebound but now needs to form a higher low and then a higher high to confirm that demand is back in control.  Similarly, the Russell 2000 Index, a good indicator of market breadth, fell over 27% before rebounding sharply to test heavy overhead resistance. 

Subscribers have seen these charts before along with others which show why Wall Street and many other stock markets could range for at least a few more months.  However, that is not a disaster and there are also outperformers so this is no 2008.   This service has seen few reasons to suspect that slump would be repeated in the current decade.  

Instead, stock markets are dealing with a considerable amount of uncertainty, partly created by the slump in commodities which is most likely past its nadir now that we are beginning to see supply cutbacks.