2024: Year Of FOMO
Following is an update to my last blog post a week ago.
A funny thing happened after Trump trounced Biden at their first debate...aside from copious hand-wringing among Democrats, the vaunted Trump rotation to cyclicals ran out of gas early in the week and then the Tech/deflation trade came back on in size. Why? Because the economic data was thoroughly weak, bond yields fell and rate cut odds rose. Economic collapse was once again conflated as a buying opportunity. In other words, Trump may well be the presumptive president-elect, however there are still seven months between now and when he would take office which means investors are now crowded into the most overvalued stocks going into a possible recession. Good idea? Not really. Zerohedge informs us that the first week of July (aka. July 4th week) is seasonally the "best week of the year" for stocks. What they didn't mention is that the best week of the year, kicks off the WORST quarter of the year seasonally for stocks, Q3.
Here in the chart below, we see that mega cap stocks peaked last year in early July having rallied off the November lows of 2022. Now, mega caps are late stage parabolic off the lows of November 2023.
As we see above, this rotation to Tech amid collapsing market participation (new highs) has continued for so long that pundits now totally ignore it. The fact that the "Magnificent 7" continue to be the only stocks driving this market higher is no longer mentioned. The fact that Microsoft now sports a 40 P/E ratio is never mentioned. That is twice the market average.
The last time we saw this few weekly highs at a new all time high was December 2021 which was also a holiday trading week on collapsed volume. In other words, rife for market manipulation.
And despite the collapse in breadth and narrow market, pundits claim that currently there is very little froth in these markets right now. That may be true at this moment, but all of 2024 has been one big FOMO rally. It started in January with the new Bitcoin ETFs. In March it was the Nvidia "AI Woodstock" conference. Then the cyclical rotation started to come on in size when Trump became the Republican nominee. And of course there has been rate cut FOMO since the November lows. And then Bitcoin halving FOMO.
Here we see that Bitcoin halving is taking place, just not as anyone actually expected. Which should be a reminder to everyone that on the other side of the bubble, FOMO evaporates and then comes the hard landing.
In summary, every FOMO market narrative of 2024 has been a massive lie. From the promise of non-existent rate cuts, to the now-evaporating reflationary "Trump" trade, to belief in mainstream Crypto adoption, and of course this AI super bubble which has levitated a handful of stocks to the stratosphere ahead of recession.
What is yet to be revealed is the hard landing that awaits the other side of FOMO, when all of the market narratives are revealed to be fraudulent at the exact same time.
