I. Three Shades Of Fear
Monday's issue of The Wall Street Journal featured a story titled, "Hedge Fund Elliott Warns of FOGO: Fear of Getting Obliterated in the Market." That has inspired us today to coin "FOJO," or fear of jumping out of the market. FOMO, of course, is the fear of missing out on a bull market. Only a few months ago, we felt the need to coin "FEMO," or fabulous earnings momentum to describe this year's earnings-led bull market.
FOMO is reflected in the forward price-to-earnings (P/E) multiple, while FEMO is captured by forward earnings per share (E). So far this year, FEMO has been booming, but FOMO has been fading. S&P 500 forward earnings surged 31.3% ytd through November 2, lifting the index 10.2% despite a 13.8% contraction in its forward P/E (chart). Earnings momentum has more than offset multiple contraction.
