The Fear of Missing Out Takes Center Stage
As the stock market continues to soar, investors are grappling with the fear of missing out (FOMO) on potential gains. The S&P 500 has risen roughly 26% year to date, with some assets experiencing massive surges. Bitcoin, for instance, reached an all-time high of over $88,000 per coin, while shares of Coinbase have jumped over 70% in just five days. Tesla’s stock has also seen a significant increase, up over 50% in the past five sessions.
The Trump Trade Takes Hold
Many of these surging trades are part of the so-called Trump trade, where areas of the market that could benefit from the president’s expected policies are rallying. However, the massive moves suggest that there’s more at play than just fundamental stories. The fear of missing out is driving investor behavior, as the risk of underperforming the benchmark becomes increasingly palpable.
Small-Cap Stocks Join the Party
Some of the best-performing assets over the past week include areas of the market previously dubbed undervalued, such as small-cap stocks. The Russell 2000 Index has seen a nearly 10% increase over a five-day period. This could be the beginning of a year-end chase, according to TPW Advisory founder Jay Pelosky.
Wall Street Strategists Boost Their Views
Three strategists closely tracked by Yahoo Finance have increased their views on where the S&P 500 will land in the coming months since the election results. Julian Emanuel, who leads the equity, derivatives, and quantitative strategy team at Evercore ISI, predicts the S&P 500 will hit 6,600 by the end of June 2025. Oppenheimer’s John Stoltzfus has also boosted his 2024 year-end target from 5,900 to 6,200.
Valuations Reach New Heights
Research from FactSet shows the S&P 500 is already trading at 22.2 times 2025 earnings estimates, above the five-year and 20-year averages. While high valuations themselves aren’t often a reason to sell, they do raise concerns about sustainability.
The Emergence of “Animal Spirits”
Yardeni Research president Ed Yardeni expects the S&P 500 to hit 6,100 by the end of 2024, 7,000 by 2025, and 10,000 by the end of the decade amid the emergence of “animal spirits” in the market. This could lead to a big melt-up, but also sets the stage for a potential meltdown.
A Long-Term Perspective
If Yardeni’s call is correct and the S&P 500 surges to 10,000 by 2030, it would represent an 11% annual return, in line with the long-term average over the last 100 years. Perhaps this is the only kind of FOMO worth chasing.
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