Climbing the Wall of Worry

It is often said that financial markets climb a “wall of worry”, which describes a market that advances despite a steady stream of skepticism, uncertainty and investor anxiety. Rather than rising based on optimism, this metaphor applies when negative news is either absorbed or turns out to be ‘less-bad’ than originally feared, enabling markets to move higher as the skepticism slowly ebbs brick-by-brick.

Over the past ten days alone, investors have encountered plenty of new “bricks” to add to the market’s current wall of worry. These have included:

• Geopolitical tensions remaining heightened with an unclear resolution in Middle East

• Concerns about the pace and sustainability of spending on AI infrastructure

• A joint Japanese-U.S. currency intervention to support the yen that sent ripples through global financial markets

• A forced liquidation of a large hedge fund focused on AI themed investments

• Newly installed Fed Chair Kevin Warsh holding rates steady at last week’s FOMC meeting, while also declining to offer market participants a roadmap to how the Federal Reserve might react to future inflation data

Today, and despite an abundance of recent “bricks”, the S&P 500 index achieved another new all-time high. Prior to today’s record level, this benchmark index for U.S. stocks had already notched 26 all-time closing highs in 2026. This market performance reflects the fact that the fundamentals that matter most to long-term investors continue to point in a constructive direction.

Most importantly are the continued strength and acceleration of corporate earnings throughout this year, with analysts now expecting full-year 2026 S&P earnings to grow more than 30% compared to 2025. Many of our readers may recall hearing us at our Investment Outlooks say, “As go earnings, so goes the market”. This saying has been largely validated with what we’ve experienced year-to-date.

Second, underlying economic data on the growth of the U.S. economy remains strong. Just this week, the benchmark Institute for Supply Management (ISM) surveys for both the manufacturing and services sectors of the economy showed we are decidedly in expansion territory (July 2026). The manufacturing sector has displayed notable strength, with the trifecta contribution from orders, production and employment in July at their strongest level since March of 2022, and the index overall at its highest level since July 2022 (see chart).

In addition to the above referenced economic fundamentals, growing optimism surrounding a deal with Iran and a re-opening of the Strait of Hormuz have already pushed oil prices materially lower, easing one of the market’s biggest inflation concerns. As of this writing, commodity futures markets are pricing a return to $70 per barrel of the benchmark West Texas Intermediate crude deliverable next spring.

The past several weeks has provided no shortage of reasons for investor caution. At the same time, the underlying economic and corporate data that have supported this market remain largely intact. While markets will undoubtedly continue to react to new developments, long-term investors should not lose sight of one of the most important disciplines in investing: distinguishing between the headlines of the day and the underlying fundamentals that ultimately drive investment returns.

Takeaways for the Week:

• Today’s jobs report of a loss of 23,000 jobs in July was well below expectations and was largely driven by a loss of 53,000 from the public sector. Revisions to prior months were also negative

• This week, the lockup period on nearly $100 billion worth of Space-X stock (SPCX) expired, allowing a record 900 million new shares to come to market.

Disclosure

The views expressed represent the opinion of Ferguson Wellman. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections and other forward-looking statements are based on available information and Ferguson Wellman’s views as of the time of these statements. Past performance may not be indicative of future results. Ferguson Wellman, Octavia Group and West Bearing do not provide tax, legal, insurance or medical advice. This material has been prepared for general educational purposes only and not as a substitute for qualified counsel who can determine how this information applies to you. We believe the information provided is from reliable sources but should not be assumed accurate or complete.

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