FOMO (fear of missing out) has been one of the driving forces driving the stock market to new heights in recent years, as investors maintain or add to their stock positions for fear of losing out on larger profits in the future. Now, Ed Yardeni claims that the new driving force behind stock prices is “FEMO.” According to the founder of Yardeni Research, the acronym stands for “Great Earnings Momentum.” In other words, earnings are so strong that analysts can’t raise their estimates high enough. “This year was all about FEMO,” Yardeni wrote. He pointed out that while future earnings estimates for the S&P 500 are up 14.4%, a new all-time high, the average price-to-earnings ratio is down 4.6% as the benchmark index is up more than 9% to its all-time high. At the end of the day, the stock market ultimately has one answer. Are earnings increasing or decreasing? So, while there is some volatility due to high oil prices and other concerns, most investors see expectations for future earnings growth increasing and want to continue buying the stock. .SPX YTD Mountain S&P 500 Year-to-Date Index “The overall rally has been driven by forward earnings. Multiples have compressed. FOMO has driven up P/E ratios. This market has done the opposite, so we are not in the bubble camp,” Yardeni said in a note. Analysts expect S&P 500 earnings to expand more than 21% in the second, third and fourth quarters, said FactSet’s John Butters. As a result, the overall profit growth rate for 2026 will be 22.1% compared to the previous year. Despite the expected jump in earnings, the S&P 500 Index is only up 9% for the year. “With a few exceptions, it’s safe to say that fundamentals and performance have so far been highly correlated at both the market and sector level,” Adam Parker, founder of Trivariate Research, said over the weekend. To be sure, this does not mean that the market is ignoring macro factors such as the war between the US and Iran. On Friday, the S&P 500 notched its eighth consecutive week of wins on hopes that a deal to end the war is near. Stocks rose again on Tuesday (US stock markets were closed for the Memorial Day holiday) after President Donald Trump said negotiations between the two countries were progressing “well.” That being said, FEMO seems to be the ultimate driving force.
