The abbreviations "FOMO" and "TINA" have become two commonly used terms in global financial markets in recent years.
These two words together explain the reasons for the sustained rise of the US stock market, and as the current bull market officially enters its third year this month, the exploration and dismantling of these two commonly used terms in the industry may also become the key to the market's future direction.
Let's first explain the meanings of these two words. FOMO stands for 'Fear of Missing Out', and its meaning is self-evident in the market - people often keep buying stocks out of fear of missing out on the opportunity for a sharp rise in the US stock market. So far this year, the "FOMO" effect has helped the S&P 500 index break 47 historical closing highs.
Moreover, there is almost no sign of weakening in this momentum, which is attributed to the influence of 'TINA'.
TINA means' There is no alternative to owning equity '. In the eyes of many US stock investors, the stocks here refer solely to US stocks. Because in their view, if investors want to invest and are guided by the relative advantages of economic data and corporate profits, then the US stock market will be the best choice.
In many ways, the latter trend (TINA) mentioned above seems to be fueling the former trend (FOMO), and the symbiotic and resonant effects between the two seem to be becoming increasingly strong.
The US stock market commands the world
In fact, from multiple comparisons, it is not difficult for people to understand the reasons why the "FOMO" and "TINA" phenomena are prevalent in the US stock market.
The S&P 500 Index and Nasdaq Composite Index have both risen by over 20% this year. As a comparison, the Nikkei 225 index, which broke its historical high in the first quarter of this year, only rose by 16% this year. The Shanghai and Shenzhen 300 index, which started to gain momentum at the end of the third quarter, rose by about 14%, the European Stoxx 50 index rose by only about 10%, and the FTSE 100 index in the UK rose by only about 8%.
Despite Wall Street's excellent performance this year, thanks to the leading gains of some large tech companies - the FAANG index, representing a few tech giants, has risen as much as 34% this year.
But even measured by weighted indices such as the S&P 500 index, its year to date increase is still about 15%, which is still better than the returns investors can obtain in most other markets.
At the same time, although the performance of the "one dominant" return rate may indicate that the US stock market is "overbought", the fundamental feedback on the economy and corporate profits seems to have not yet reached this stage. For example, the well-known Atlanta Fed's GDP Now model currently predicts that the annualized GDP growth rate in the third quarter of the United States can reach 3.4%, which is the highest value since the model made preliminary estimates in July.
The outlook for American companies is also very optimistic. According to LSEG I/B/E/S estimates, although the overall profit growth of the US stock market in the third quarter is expected to be only around 5%, this figure is expected to rebound to double digits in the coming quarters and reach around 15% by 2025.
No wonder many Wall Street investment bank strategists, including Goldman Sachs, have recently further raised their expectations for the target level of the US stock market.
Goldman Sachs has recently predicted that the S&P 500 index is expected to reach 6000 points by the end of this year. The bank also added that if the market replicates the common election year pattern from October to December in history, the S&P 500 index may even reach 6270 points.
Who is competing with you in this world?
The current economic and market conditions in other regions of the world also reflect the rarity and value of the current American stock market.
Germany, the largest economy in Europe and the fourth largest in the world, is currently facing its second consecutive year of economic contraction, a situation not seen in this global advanced manufacturing center for over 20 years.
In Japan, the country's decision-makers seem to be increasingly cautious - they are very worried that investors will be scared, so they are hesitant to take further steps to raise interest rates.
Many global investors have clearly also noticed this: Goldman Sachs' data shows that overseas investors currently hold a record 18% share in the entire US stock market.
From many perspectives, the position of US stocks in the global stock market seems to be changing into the "mirror image" of US bonds in the bond market: both are the most liquid markets in their respective asset classes; They provide investors with the 'safest' securities; Their position and performance in their respective fields pale in comparison to their major global competitors.
Therefore, it is not surprising that under the combination of "FOMO" and "TINA", the market value share of the US stock market in the MSCI Global Stock Index has climbed to a record high of 72%. Who doesn't want to get a piece of the pie from it?
However, will this concentration last forever? Is there really no one in the current equity market that can compete with the US stock market?
Everything will obviously not always be so absolute.
Measured by the cyclically adjusted price to earnings ratio (CAPE) invented by Nobel economist Robert Shiller, the US stock market, which has just celebrated its second anniversary of a bull market, is currently the most expensive market among developed countries.
Note: Comparison of Cycle Adjusted Price to Earnings (CAPE) Ratios among Countries
Compared to global stock markets, the valuation of US stocks is also in its most overvalued state in twenty years.
Note: The yellow line in the above figure represents the P/E ratio of the S&P 500, the blue line represents the P/E ratio of international stocks other than the US stock market, and the red line below represents the difference between the two
Although from many perspectives, investors are unlikely to significantly reallocate assets in the short term. Goldman Sachs' Scott Rubner wrote last week: "Institutional investors are currently forced into the market due to concerns about 'FOMU' (fear of significantly underperforming benchmark stock indices, similar to FOMO)." However, what if more attractive targets and investment opportunities emerge globally in the future?
In fact, whether it is the "no other choice but to hold US stocks" behind TINA or the "fear of missing out" behind FOMO, it seems that they both assume that the bull market in the US stock market will never turn back, and people have little opportunity in the global stock market except for the US stock market. But what if one day more investors realize that there are better options besides holding US stocks?
The arrogant Japanese stock market played such a role briefly in the first quarter of this year, but unfortunately fell back into silence in the past six months. At present, whether A-shares can become a new global leader with low valuations and continuous policy incentives, and challenge the ability of US stocks to attract funds, seems to be making some global investors have strong expectations.
The global fund manager survey released by Bank of America earlier this month showed that "long Chinese stocks" has entered the "TOP 3" of the most popular trading rankings in this survey, only behind the "long seven tech giants" and long gold. The net proportion of global fund managers who expect the Chinese economy to strengthen in the next 12 months has reached 48%, the highest level since April 2023.
Anyway, behind the bull market in the United States, whether it is "FOMO" or "TINA", they actually reflect the confidence and belief of market participants that the bull market will move forward and climb to new heights forever.
And such confidence and belief may also be what A-shares, which have just entered a bull market in the past month, urgently need and crave in the future - whether the policy package can be turned into real bullets in the stock market, and whether the market can still make most people fearless after experiencing temporary adjustments. All of this will truly test the courage and wisdom of decision-makers and investors.