“Fear of missing out” (FOMO) is driving this stage of the market rally. Fund managers were under -allocated to equities at the start of the year and are now playing catch-up with the indexes. Since the consensus is that the Federal Reserve has the market’s back, there is very little fear that playing catch up now carries significant risk.
The latest survey of fund managers from Bank of America shows that allocations to stocks are at their lowest since September 2016. That certainty implies that many fund managers have missed the 2019 rally and will be looking to catch up by putting more of their cash to work in stocks.
The day before the meeting of the Fed’s Open Market Committee on Wednesday, the belief is that the central bank’s dot plot will show an “official” drop in the number of projected interest rate increases for 2019 to one from the two interest rate increases projected in the December dot plot. There is also speculation that the Fed will announce the timing of its plan to end the current $50 billion a month
balance sheet run-off.
If the financial markets get what they are hoping for on Wednesday, you can expect FOMO to go into overdrive, at least until we hit the next big data event with the beginning of earnings season on April 12.
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