Technically Speaking: FOMO Overrides FOLM


With concerns rising, it is not surprising to see that investor “optimism” has dwindled in recent weeks particularly as price volatility has risen sharply this year. The chart below shows the daily price movements of the S&P 500 from 2017 to present.


The chart below is a composite “investor sentiment” index or rather how investors “feel” about the current investing environment.


Clearly, the “exuberance” of the market has given way to more “concern” since the beginning of the year, but given sentiment remains elevated there is little to suggest real “fear” is present.

In other words, as I discussed this past weekend, despite the rise in “fear,” investors are not willing to “do” anything about. Or rather, F.O.M.O. (fear of missing out) still trumps F.O.L.M. (fear of losing money.)

“With valuations elevated and earnings expectations extremely lofty, the risk of disappointment in corporate outlooks is elevated. Furthermore, despite those who refuse to actually analyze investor complacency measures, both individual and institutional investors remain heavily weighted towards equity risk. In other words, while investors may be “worried” about the market, they aren’t doing anything about due to the ‘fear of missing out.’”  




“This is the perfect setup for an eventual ‘capitulation’ by investors when a larger correction occurs as overexposure to equities leads to ‘panic selling’ when losses eventually mount.”

Overall, the market continues to quickly discount the various risks facing the market. But almost as quickly as one is “priced in,” another emerges. With “trade wars” now live, “Brexit” running into trouble and the November elections in the U.S. quickly approaching, there are plenty of concerns which still lay ahead.

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