The few times that I’ve been rock climbing, mostly in my native Massachusetts, I’ve found it exhilarating but also nerve-wracking. Of course, that’s the point — it’s all about the adrenaline.

I’ve thought of those experiences lately, while observing the stock market’s cliffhanger performance. As stocks continue to march higher despite today’s geopolitical and economic dangers, they’re proving an old Wall Street adage: bull markets climb walls of worry.

This expression refers to the stock market’s tendency to climb when investor fears don’t materialize. The wall of worry reflects a maturing cycle, when potential upside still exists but weaknesses start to appear in the fundamentals.

What’s keeping the stock market aloft? Growing expectations of a Federal Reserve interest rate cut next week, hopes that trade tensions can be resolved, and a resilient (albeit slowing) economic expansion.

The market’s mixed mood of optimism tempered by fear could break either way in coming weeks. Regardless, the insurgent nature of the Donald Trump administration ensures daily uncertainty for the duration of his regime. You should focus on the hard data, notably the latest influx of earnings reports.

To date, about 16% of S&P 500 companies have reported actual earnings results for the second quarter of 2019. About 79% of these companies have reported earnings per share above estimates (see chart).

According to this week’s data from FactSet, the estimated blended earnings decline for the second quarter is -1.9%, which is narrower than the earnings decline of -3.1% predicted last week. “Blended” combines actual results for companies that have reported and estimated results for companies that have yet to report.

The improved outlook for earnings is largely due to positive earnings surprises from companies in the banking and technology sectors.

Read This Story: Hard Data, Hard Investment Choices

Nonetheless, the overall outlook for earnings remains negative. If -1.9% is the actual decline for the quarter, it will mark the first time the S&P 500 index has reported two straight quarters of year-over-year declines in earnings since Q1 2016 and Q2 2016. Two consecutive quarters of negative earnings growth is the official definition of an “earnings recession.”

One sector that’s expected to post negative Q2 earnings growth is energy, which is grappling with supply-and-demand imbalances that weigh on oil and gas prices.

So far this week, the earnings results from various bellwether companies have been mixed. Aerospace giant Boeing (NYSE: BA) and construction equipment stalwart Caterpillar (NYSE: CAT) weighed on the Dow yesterday after both companies reported disappointing numbers that missed expectations on the top and bottom lines. However, after the market closed, Facebook (NSDQ: FB) reported better-than-expected earnings and revenue.

Tech giants Amazon (NSDQ: AMZN) and Alphabet (NSDQ: GOOGL), and coffee chain Starbucks (NSDQ: SBUX) grab the earnings spotlight today, after the market closes.

The British Trump?

On the geopolitical front, it’s not just the U.S.-China trade war that’s spooking investors. Europe suddenly seems a lot less stable.

If you watched the circus surrounding Robert Mueller’s testimony in front of Congress yesterday, you’d be tempted to think that our nation’s capital is a kindergarden. However, if you want to see even worse political disarray, look to our cousins across the pond.

Tory leader Boris Johnson on Wednesday took over as Britain’s new prime minister, amid the quagmire of Brexit. The outspokenly nativist Johnson is a divisive figure with a combative personality, hence the inevitable comparisons to Donald Trump.

A staunch “Brexiteer,” Johnson promises to cut a deal to leave the European Union by the deadline of October 31, or exit the EU without one. Johnson named Brexit hardliners to top posts on Wednesday, replacing most of the cabinet.

Can Johnson miraculously solve the Brexit puzzle that brought down Theresa May’s government? Perhaps. But if he doesn’t and Britain executes a no deal (aka “hard”) Brexit, you can expect the financial markets to respond negatively.

Brexit could be the trigger for a global market crash, but it’s an under-reported story in the U.S. because 1) it involves complicated policy and 2) it’s foreign affairs. That’s a deadly combination for television ratings. When a news announcer starts a story with the words “in Europe today,” most American viewers quickly change the channel. They’d rather hear about teen rapper T-Kay’s murder sentencing.

But the stakes of Brexit are enormous. Britain is the fifth-largest national economy in the world, measured by nominal gross domestic product. As the following chart shows, a hard Brexit would clobber the country’s economy:

In today’s interconnected global economy, the reverberations of Brexit will come back to hit our shores. Britain and the EU remain far apart on a Brexit deal, which makes markets nervous. A growing number of investors are removing their wealth from the UK, a trend that will accelerate as the British Parliament grapples with gridlock and the October deadline gets closer.

Brexit is a particularly pressing concern for London, the financial services hub for the Continent. Big banks already are fleeing to competing cities, such as Paris and Berlin.

How much attention have channels such as CNBC given to Brexit? By my reckoning, very little. But remember, black swans by definition seem to come out of nowhere. A Brexit “cock-up,” to use a British expression, could exert a domino effect around the globe.

I’m not alarmist by nature, and I take a dim view of perma-bears and fear-mongers. If you had listened to them, you would have missed out on this historic bull market. However, the long period of calm that fueled the bull market is over. Uncertainty is the byword. The good news is that extreme change can breed future investment opportunities.

Stay invested. There’s still money to be made in the market, but until this chaos subsides, you should make defensive moves.

Consider taking profits from your biggest growth stock gainers; maintain exposure to precious metals (gold and/or silver) as part of your hedges; elevate cash levels; and use “stop loss” orders. Some of these steps may seem basic, but the fact is, even veteran investors tend to forget them. Don’t lose your grip and fall off the wall.

Questions or comments? I’d love to hear from you: mailbag@investingdaily.com

John Persinos is the managing editor of Investing Daily.