What is a Wall of Worry?
In the finance world, a wall of worry is an increasing amount of negative information about a security or about the market.
How Does a Wall of Worry Work?
For example, a wall of worry might be information that the economy's GDP is flat, followed by reports of higher unemployment, followed by increases in foreclosure rates, followed by bankruptcies at several major companies.
Stock market investors will generally feel pretty downtrodden by this information, especially if it comes at a constant drip over time. Accordingly, investors will begin to wonder if stock prices are going to become more volatile or fall.
However, some investors use the wall of worry to buy, and thus in some cases stock prices might actually rise as the negative information mounts. When the tension finally breaks (that is, one good report comes out or the market gets good news somewhere), stock prices might actually drop as the buyers become sellers.
Why Does a Wall of Worry Matter?
There are two emotions in investing: fear and greed. A wall of worry plays on the former, but it can also trigger the latter.
