The FOMO market is back: Morning Brief

Updated Tue, Nov 12, 2024, 3:21 AM 4 min read

The S&P 500 (^GSPC) is now up roughly 26% year to date, and the risk of underperforming the benchmark is palpable. Some of the best-performing assets over the past week include areas of the market some have previously dubbed undervalued, like small-cap stocks. The Russell 2000 Index (^RUT) is now up almost 10% over a five-day period.

We may be seeing the beginnings of a year-end chase, TPW Advisory founder Jay Pelosky told Yahoo Finance. "Active managers tend to underperform. One of the reasons why is weeks like last week where if you had any cash at all, you were underperforming because the market went up so strongly. So now you set up that chase into year end."

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This chase is on among Wall Street strategists too. Three strategists closely tracked by Yahoo Finance have boosted their views on where the S&P 500 will land in the coming months since the Nov. 6. election results.

"Exuberance lies ahead," Julian Emanuel, who leads the equity, derivatives, and quantitative strategy team at Evercore ISI, wrote in a note to clients Wednesday night. "President-Elect Trump will move fast on policy initiatives, and stocks will move fast in response."

Emanuel cited a "public reengaged in speculation," pointing to the moves in bitcoin and Tesla when laying out the case for the S&P 500 to hit 6,600 by the end of June 2025.

Oppenheimer's John Stoltzfus offered a similar theory when boosting his 2024 year-end target from 5,900 to 6,200.

Stoltzfus's higher market call didn't come with a boost to his earnings forecast, suggesting that the index's valuation will instead keep ballooning higher. Research from FactSet on Friday, showed the S&P 500 is already trading at 22.2 times 2025 earnings estimates. This is above the five-year average of 19.6 and the 20-year average of 15.8.

Strategists often point out that high valuations themselves aren't often a reason to sell. As Evercore's Emanuel wrote recently, "Expensive has a history of getting more expensive and lasting longer with greater gains.

Yardeni Research president Ed Yardeni wrote in a note to clients on Monday he expects the S&P 500 to hit 6,100 by the end of 2024, 7,000 by 2025, and 10,000 by the end of the decade amid the emergence of "animal spirits" in the market.

Spirits, Yardeni added, whose run-up could also "set the stage for a meltdown" after a big melt-up.

But for now, the catalyst for such a downturn isn't in sight. Sure, concerns like sticky inflation readings prompt investors to question whether the Federal Reserve will stop cutting interest rates. But Yardeni believes that valuations can remain high as long as investors continue to see solid a path for earnings growth amid lessened recession fears.

"We aren't saying that a recession can't occur over the rest of the decade," Yardeni wrote. "However, we note that despite the significant tightening of monetary policy during 2022 through 2024, there has been no recession. Why should there be one over the remainder of the Roaring 2020s?"

Forget the short-term moves in bitcoin or Tesla for a second. If Yardeni's call is right and the S&P 500 surges to 10,000 by 2030, it'd be just more than a 11% annual return for the S&P 500, in line with the long-term average over the last 100 years.

If that's the trade you fear missing out on, then you might just have the only kind of FOMO worth chasing.

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.