The indices are chugging along here on Tuesday morning with both the S&P 500 and Dow Jones Industrial Average (DJIA) sitting at levels that would produce new all-time closing highs.
According to Bank of America Merrill Lynch, the biggest fear of portfolio managers has shifted from a possible recession to fear of missing out on further market upside. This has been a tough year for institutional money managers and it is becoming even tougher as they try to keep pace with indices hitting new highs.
The action we are seeing so far on Tuesday does a very good job of illustrating how money managers are struggling with Fear of Missing Out (FOMO). The action is mostly index-driven, which what happens when there is a rush to put a lot of money to work very fast. The easiest way to add exposure is to buy index ETFs or big -cap names such as Amazon.com Inc. (AMZN) and Apple Inc. (AAPL) , among others.
A further tipoff that this is what is happening is the mediocre breadth, which is running around 3,400 gainers to 3,150 decliners. Stocks are not being bought broadly. There is little effort to select individual stocks based on their merit. The level of new 12-month highs is also suppressed.
President Trump speaks later on Tuesday and the potential for a reversal on his comments is very high. This action is index- and algorithm-driven right now and those two things will be triggered again when Trump speaks.
Like many money managers, I'm trying to put cash to work but it is not an easy given the nature of the action. The path of least resistance is to simply buy the indices and try to ride the wave higher.