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Notes on the economy: Climbing the wall of worry

There's an old saying on Wall Street that the market climbs a wall of worry. There’s an element of truth in this adage. If everyone is optimistic about the market, then there aren’t many new buyers remaining. Times of unbridled optimism have often signaled market tops. Conversely, periods of elevated pessimism also can present opportunities.

In my last column, I observed that there was a disconnect between historically negative consumer sentiment (“soft data”) and positive actual economic data on employment, inflation and growth in the economy (“hard data”).

Consumer sentiment may improve, which could provide a further boost to markets and the economy. However, the sentiment of institutional money managers has turned more positive recently. Stock valuations as a multiple of earnings are relatively high.

As we anticipated, the market has been volatile this year. There have been significant concerns around tariffs and geopolitical events. But the stock market has climbed the wall of these worries.

It can be especially difficult to make long-term investment decisions in volatile markets. Your financial advisor can help you sift through fact and emotion, both hard data and soft data.
David Royal, chief financial & investment officer at Thrivent

What should an investor do when there are significant causes for concern but also potential opportunities? What many investors appear to be doing is sitting on the sidelines. Over the past five years, money market fund assets in the U.S. have gone from about $4 trillion to $7 trillion, increasing by a trillion dollars over the past year alone.

In times of heightened uncertainty, it can be difficult to know whether the market will continue to climb. Holding unusually large amounts of cash could cause an investor to miss out on opportunities. Such opportunities include not only additional stock gains but also the ability to lock in historically attractive longer-term fixed income yields.

It can be especially difficult to make long-term investment decisions in volatile markets. Your financial advisor can help you sift through fact and emotion, both hard data and soft data. At Thrivent, we are cautiously optimistic on stocks and the economy. Your financial advisor can help you look through short-term worries and align around a plan that is right for you and your future goals.

David Royal is executive vice president and chief financial & investment officer at Thrivent. 

Thrivent Market & Economic Update
Join Thrivent investment leaders for our live quarterly Market and Economic Update at 11:30 a.m. CT on Oct. 14. Get insights on current trends and what they could mean for you. This event is open to anyone, so feel free to share with a friend. Register to attend live or receive the recording.

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