FOMO drives the stock market up

O FOMO (fear of missing out) so far we've mainly talked about the fear of missing out on something important on social media. However, this feeling is not alien to stock market investors who are afraid that they may miss significant increases. Many investors currently have cash and are waiting for a signal to buy. Since the New Year, the S&P500 has already increased by 7,5 percent, and the Nasdaq by as much as 14,5 percent, so FOMO is gaining momentum. 

FOMO helps indexes

The New Year brought a fresh breeze of optimism to the capital market and an "everything" rally, during which the prices of most stocks rose, despite the still valid prospect of further interest rate hikes. The S&P 500 has gained 7,5 percent since the beginning of the year, and the Nasdaq has recovered 14,5 percent. after last year's losses. Wig20 it has gained 4,5% since the beginning of the year.

Even the latest good data from the US labor market failed to shake the rally on the US stock market. Many investors are now in "buy" mode after they exited the market last year and now have plenty of cash to invest. The question of the best time to buy shares is currently one of the most important questions that investors ask themselves. It can be seen that many investors are experiencing FOMO today. This is how the fear of missing something important, omitting an important event, related to social media and modern technologies, was named. On the stock exchange, FOMO means the fear of missing a price rally that may bring significant increases. It drives current purchases and buys shares of many investors who previously waited calmly with purchases for larger discounts.

Is the risk of recession falling?

Purchases are supported by data from the US economy, which indicate a retreat recession risk. Employment in the US economy remains high, the number of vacancies to be filled is increasing, and the unemployment rate has reached its lowest level since 1969. Fighting inflation FED is not satisfied with these figures, but they are well received by investors. The market believes that they should not change the scenario in which there will be only one interest rate hike in the US by 0,25pp in March. And it is definitely betting on a soft landing of the American economy. Though it remains sensitive to a more hawkish FED stance in the future.

Height S & P500 by 6,2 percent in January is the second best January in the history of this index (only 2019 brought better results). In addition, the principle "like January, like the whole year" worked in the history of this index in 70 percent. cases. The Nasdaq had its best January since 2001. The "January effect" usually brings positive results for companies that lost last year, which is also what we are seeing now. Therefore, crypto-assets, technology companies and China record the greatest increases, while the dollar and commodities are getting cheaper. If the good fundamentals in the form of lower inflation and not as bad as expected profits hold, then FOMO among investors may become more common and result in buying and expanding the current rally.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.