The sharemarket loves a good worry. The best bull runs climb what has been called a wall of worry. They carry on irrespective of whatever the economic challenge, real or imagined, is lobbed before them.
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It's when the market runs out of things to worry about that you need to, well, worry. It's in trouble then because complacency about realistic valuations has set in.
Just as a bull market will start when you least expect it because it seems things couldn't get any grimmer, which is a sign that everybody who wanted to get out has already sold, a bear market will start when they couldn't be rosier.
From what I've seen of the market during the years, the catalyst is rarely predictable or obvious even with hindsight, which can be just as annoying.
We're talking herd mentality here. The market is driven by mass psychology based on fear or greed where a new fact or, better still, rumour can go viral.
Sentiment-driven is how analysts prefer to describe it, which sounds far more reassuring than saying at times it can be barking mad, as recent events suggest.
Needless to say, consistency isn't its forte either. Welcome news one day can be disagreeable the next as its mood changes.
That's why the reaction to, say, a falling dollar might go either way. On one reading it's good because it boosts growth. But it could just as readily be seen as a flight from Australia because investors are losing confidence.
Such ambivalence extends to the US Federal Reserve's threat to raise interest rates by the end of the year, as well as the slowing economy in China.
If the Fed is confident enough about the economic outlook to lift rates, then it's a good sign. Unless, that is, it's a case of misreading the economy.
The slowing economy in China is more problematical. Yet it couldn't have gone on as it was – as a proportion of GDP, corporate borrowings have billowed to the sovereign debt proportions of countries like Greece. And in China it's hard to know where corporate ends and sovereign starts.
At least its transition from an investment to a consumer-driven economy is being managed like a controlled back burn, so if things get ugly China will have the fiscal hoses on hand.
So I'd say the market needs something new to worry about to keep it going.
Oh, I know. It's October, not that I mention this in the context of its bad name when it so happens that the past five Octobers have been corkers. Nobody's ever figured out why October tends to go overboard in one direction or the other, but ever since the global financial crisis the fact is that September has been the shocker, perhaps because of climate change or some such.
No, the problem this month is that the US comes up against its debt ceiling. This is an annual power struggle between Congress and the President, or the rest of the world depending on how you look at it. While common sense always prevails at the very last moment, that leaves plenty of time for the market to have conniptions.
Worse, on this occasion it will coincide with the next meeting of the Fed to consider lifting interest rates, not that it will.
That should keep it worried until Christmas when the Santa rally starts.
