Are You Experiencing FOMO?
FOMO (Fear Of Missing Out) seems to be widespread among traders and investors these days.
FOMO is driven by the fact that the global stock markets have given a very good return year to date. This is impressive considering how poorly the markets were trading during the last couple of months in 2018. Even more impressive given that the Fed hiked rates last December, and there have been many events that the markets have had to deal with that could have easily hindered the market from performing.
We are near all time highs in the U.S. markets currently. Many investors and traders believe that the Fed will save the day and at the end of this month and start a series of rate cuts, which will underpin growth and earnings making bond investments look even less attractive than they currently do.
Ideally, an aggressive Fed combined with some sort of China/U.S. trade deal, mixed in with proactive stimulus in Europe by the ECB and possibly the realization by politicians, that fiscal stimulus is needed, could all set the table for higher equity prices for the rest of 2019.
But what could go wrong?
- Brexit becomes even more messy with Boris leading the charge, and hurts European/UK growth.
- Iran/U.S. conflict escalates more causing oil price spike, market volatility and uncertainty for companies.
- The Fed disappoints and cuts .25% this month and decides to wait on further action.
- China and the U.S. are unable to reach an agreement on trade, causing slower global activity and supply line disruption.
- Upcoming Spanish elections (4th in 4 years) show the difficulties of European politics. Italy election soon most likely!
- Hong Kong protests begin to spread.
- Upcoming earnings reports and guidance disappoints the market, even though the banks are printing money. (eye on tech!)
Visa on Tuesday, Caterpillar on Wednesday, Most of the key Tech companies as well this week.
- The U.S. Treasury, on instructions from President Trump, decides to intervene in the FX markets
Perhaps the bulls are correct and there is another 5% to 10% in the markets due to a trade settlement, cyclical rebound in growth and a big easing/rate cutting bonanza which will help avoid a recession and push equity markets higher.
The question you have to ask is, should I be happy with the strong return so far this year and reduce exposure and not worry about FOMO, or do I just sit tight with my current market exposure and let it ride? Should I add risk here?
Let us know if you want to look at ways to reduce exposure without selling any of your equity investments. Or ways to add an inexpensive Hedge to your risk.
The USD index is holding just under 97.00. Market seems to be positioning for a lower USD, flight to quality may disappoint them.