Why does the stock market keep rising? Apparent reasons for it to do so have begun to disappear. The S&P 500 and NYSE sit at multiyear highs, though the NASDAQ remains well below its 2000 Internet bubble-fueled level. A review of the causes for markets to rise so aggressively leaves no reason to hope for further advances and plenty of reasons to expect a drop.

There is an old saying the stock market crawls up a “wall of worry,” but at some point the worries multiply beyond anything that could prime more advances. Worry has turned to a multitude of bad signs, which are so obvious as to be overwhelming.

The first cause of concern is the closest to stock price increases. Earnings for most of the S&P 500 have been up since 2009. However, analysts expect the third quarter to reverse that trend, and this may extend into the fourth quarter and early next year. Stocks quickly will become more expensive than they have been in the recent past.

The most powerful strike against the market advance is that the chances the U.S. economy will falter have risen considerably. The list of reasons for this to happen has become a mile long. Atop that list are the chances that the fiscal cliff will hurt confidence and slow business activity as tax hikes become more likely. The cliff puts the holiday shopping season at risk, and the surge of consumer activity from the period is essential to gross domestic product.

Jobs figures will get worse, and the fourth-quarter numbers may even show the economy has lost jobs. Part of the reason for this is intertwined with the fiscal cliff. But, on their own, employers continue to squeeze productivity from their current work forces and bring on new workers at low salaries and with fewer benefits than in the past. Low wages mean low consumer activity, which brings the circle back around to the holiday season.

There is a myth that the housing market has started a sharp recovery. That is hardly true if current prices are matched with those in 2006. Many markets remain 30% below those levels. People continue to remain anxious about underwater mortgages, and those underwater mortgages and foreclosures still gnaw at any housing improvement.

Finally, real wages remain below levels of the late 1990s. The consumer’s firepower has been reduced considerably. If he believes this trend will continue, his spending habits will remain conservative.

The causes for the stock market to trade upward are gone.

Douglas A. McIntyre

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