(Fear of missing out)
Markets are hitting fresh new highs. Optimism is in the air. A surge in the markets of ten percent (10%) once the Phase One tariff agreement is reached is expected. A rally of historical proportions is occurring. Outflows out of bond funds and into equity markets is happening at breakneck speed.
Bears are definitely being beaten down as fear of a recession ebbs and markets head into the historically best half of the year. Heading into the holidays, back to school and holiday sales start to kick in. Paired with folks going back to work, the focus of the economy shifts to, well, work. Indicators point to a strong finish through the holidays.
Supporting this upside are several positive headlines: the recent Federal Reserve report, by Chairman Powell, indicates a pause in lower rates for the near future. The Fed’s apparent comfort with the changes they made and current data makes the case for a wait and see attitude. Reasoning for the seventy-five (75) basis point decrease has been coined as a “mid-cycle adjustment,” not as a need to stave off a recession. Wall Street has responded favorably to this by brushing off any economic concerns and embracing a continuance of a bull market. Supporting this is the closing out of the third (3rd) quarter earnings allowing the market to breath until January.
A nice upside surprise recently has been the slight lifting of the global economy. Recent negative rates seen overseas has shifted upward in light of the positive data. American treasuries have responded to the global market and U.S. rally by reversing course. Global markets have been dragging down our economy for the last several years. If there is a sustainable shift into a global expansion, the U.S. economy would be a recipient and could drive several more legs of a bull market.
When this is paired with a possible trade deal before the end of the year, you have the high probability of a rally through New Year’s. Driving this is the “Fear of Missing Out.” This is when small investors jump into the market because it has been doing well, despite the market being valued fairly and maybe even being adjudged at a rich premium. This is not the time to buy more of what has been doing well. This is the time you ring the register and take profits. Fear by many money managers is that the high stock prices do not have any justification. In fact, the opposite is the case, with lowered expectations for many companies. With the bond market prices going down due to the fear of trade shifting to FOMO in equities, we are seeing yields rise. This is a great time to add to your fixed income positions, a great place to put profits.
Don’t let FOMO force you to buy stocks. Use FOMO to take profits.
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Andrew F. Kotyuk, CIMA* is CEO and Principal of Alpha Wealth Management LLC
For questions or investment topics please email me email@example.com.
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