Sucker’s rally! Four months since the stock market began its recovery from last year’s carnage, skeptics are still piling on.

Doubters of bull markets ceaselessly hunt bogeymen. There are the old standbys: the Fed and its rate hikes, inflation and recession.

There are some newfangled distractions, too: Chinese spy balloons, anyone? The noise signals we are, in fact, in the middle of a genuine bull market.

It’s part of a routine behavioral phenomenon I have long called the “Pessimism of Disbelief.” It forms bull markets’ very ramp upward – parallel to but different from the “wall of worry” that bull markets climb.

Let me explain.

Bear markets brutalize with depth, length, or, as in 2022, the sheer magnitude of fears grinding on investors’ nerves.

The resulting scars create a hyperfocus on negatives and dismiss emerging positives as fleeting or illusory.

This Pessimism of Disbelief – or PoD for short – starts with each new bull market, lasting about a third of its full duration. At this juncture, PoD has infected most investors.

This Pessimism of Disbelief – or PoD for short – starts with each new bull market, lasting about a third of its full duration.
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A Bank of America survey shows two-thirds of global fund managers see stocks’ post-October climb as a bear market rally, citing fears from inflation to geopolitics to recession.

A survey of eurozone investor expectations is similarly dour.

The American Association of Individual Investors’ weekly poll shows bullishness up some, but still well below long-term averages.

PoD’s real tell is the “Yeah, but” objection. Yeah, inflation slowed again in January – but less than December.

Yes, economic data look resilient and stocks rose, but that just brings more inflation and the Fed. Sure, improved supply chains cooled freight rates, but increased inventory means rising warehouse costs. Yeah, China reopened, but it’s pushing oil prices skyward.

Disbelief is the first step of psychological denial and a form of grief. While the classic “wall of worry” is simple pessimism about the future, PoD goes a bit further – it’s an anchoring in the past and a form of what behavioralists call confirmation bias – an outright denial of manifest progress and better-than-expected results.

Meanwhile, in this column on Christmas Day, I told you perfection isn’t necessary for rising stocks. They simply need reality to exceed pre-priced expectations. If bad news isn’t bad enough, stocks rise. Happens in every new bull market ever.

Remember 2020? Stocks’ bottomed March 23. Then PoD began.

Most dubbed the subsequent rally a Fed-driven sugar high soon to be killed by new COVID flareups, government interference, supply-chain chaos or a debt implosion.

Remember 2009’s bottom and the ensuing double-dip talk, the fear of Alt-A mortgage defaults and muni bond wipeouts?

Oldsters like me recall when rising unemployment, recession and automaker layoffs dogged spirits long after October 1974’s bottom. Or late 1982’s worries over tax hikes and weak profits. Stocks didn’t just rise in those bull markets’ gloomy early months – they soared.

Since 1925, median S&P 500 returns six months after bear market lows is 22.8%.

Twelve months? 38.0%. Those early gains are crucial. They compound throughout a bull market’s lifespan —averaging about five years.

Be careful with any “Yeah, but” – yours or anyone else’s. Be sure it’s about fresh concerns and not rehashing old, pre-priced ones.

Instead, heed the wisdom of market legend Sir John Templeton: “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”

Ken Fisher is the founder and executive chairman of Fisher Investments, a four-time New York Times bestselling author, and regular columnist in 17 countries globally.