NEW YORK (Reuters) - Wall Street often faces a wall of worry, the issues that can halt a market rally, yet the fears that haunt investors now seem to persist far longer than they did in the past, said Ken Fisher, the billionaire investor and author, in an interview.
The idea that investors and traders now have longer bouts of skepticism is important because climbing a wall of worry is a trait of a strong bull market.
Only when the last ripple of angst to fluster investors has ebbed and sentiment hits the euphoria stage, leading reluctant investors to jump in, do stock rallies finally peter out.
If Fisher’s hypothesis is correct, the rally that began in March 2009 has more legs. Wall Street’s biggest bugbear to keep investors awake at night - when the Federal Reserve will begin to trim its easy-money policy and by how much - remains up in the air after the Fed’s decision to stand pat on Wednesday.
The rally this year has overcome fears about the fiscal cliff, the sequester, a potential attack on Syria and renewed concerns about Chinese economic growth. A fight in Congress over increasing the ceiling on U.S. government debt now looms.
“I’m not sure why, but it takes us longer to grind through our phobias and the world is not ready to cry wolf on the fear as fast as it used to, to disallow the phobias,” Fisher said.
While Fisher told Reuters in an interview that he’s sure that concerns on Wall Street have longer lives, he’s unsure why that is, though he suspects the cause can be found in the changing nature of communication and its impact on media.
A prime suspect is the advent of news aggregators on the Internet whose quality is poor, putting people who might lack direct knowledge of a subject in the position of determining whether information is credible. That has prolonged the time it takes to fully decipher and debunk certain viewpoints, he said.
“We have this quality where we haven’t yet learned to not get too carried away with these views,” Fisher said. “It’s different than it used to be, though, because it used to be in my view that we got over this stuff faster.”
As of June 30, Fisher Investments oversaw more than $46 billion in assets under management. He’s written several popular books on investing and has been a Forbes magazine columnist for more than 25 years.
Investors remain concerned about the eventual end of the Fed’s bond-buying program, known as quantitative easing (QE), but they shouldn’t, Fisher said.
They should embrace QE’s end as it would allow interest rates on longer-dated government debt to rise and provide banks the incentive to increase lending, a cornerstone of economic growth, Fisher said.
Yields on benchmark 10-year U.S. Treasury notes fell as low as 2.673 percent after the Fed said on Wednesday it would keep its bond-buying program intact, down from 2.86 percent before the statement. Yields had pushed over 3 percent two weeks ago in anticipation the Fed would trim its buying.
“The way you get loan growth and the way you make the banks more eager to lend is to make the yield curve steeper, not flatter,” Fisher told Reuters.
U.S. stocks soared to record highs while the U.S. dollar and bond yields fell sharply on Wednesday after the Fed surprised investors by postponing the start of highly anticipated plans to roll back its massive monetary stimulus.
“I never liked quantitative easing,” Fisher said. “It’s misunderstood by almost everybody. Flattening the yield curve is not stimulative, flattening the yield curve is anti-stimulative.
“This one is another non-starter that won’t go away until it goes away. Until it goes away will people realize that its going away is a good thing instead of a bad thing,” he said.
Reporting by Herbert Lash; Editing by Nick Zieminski