“FOMO,” or the fear of missing out, has been one of the forces driving the stock market to new heights in recent years, as investors maintain or add equity positions because they’re afraid of losing out on bigger returns down the road. Now, Ed Yardeni argues there’s a new driver for stocks: “FEMO.” The acronym, according to the founder of Yardeni Research, refers to “fabulous earnings momentum.” Put another way, earnings have been so strong that analysts can’t raise their estimates fast enough. “This year has been all about FEMO,” wrote Yardeni. He pointed out that forward earnings estimates for the S & P 500 are up 14.4% — hitting a record — while the average price-to-earnings multiple is down 4.6% as the benchmark index advances more than 9% to all-time highs. At the end of day, the stock market ultimately answers to one thing: Are earnings growing or going lower? So while higher oil and other worries are causing some volatility, the bulk of investors are seeing expectations for future profit growth increasing and therefore want to keep buying stocks. .SPX YTD mountain S & P 500 year to date “The entire rally has been driven by forward earnings. The multiple has contracted. FOMO inflates the P/E. This market did the opposite. That is why we are not in the bubble camp,” Yardeni said in the note. FactSet’s John Butters noted that analysts see S & P 500 earnings expanding by 21% or more in the second, third and fourth quarters. That would bring overall 2026 profit growth to 22.1% from a year earlier. The S & P 500 is only 9% for the year despite that expected boom in earnings. “While there are modest exceptions, so far it isn’t wrong to say fundamentals and performance have been highly correlated, both at the market and sector level,” Adam Parker, founder of Trivariate Research, wrote over the weekend. To be sure, this doesn’t mean the market is disregarding macro drivers such as the U.S.-Iran war. The S & P 500 notched its eighth straight winning week on Friday on hope a deal to end the war was nearing. Stocks rose again on Tuesday (U.S. equity markets were closed due to the Memorial Day holiday) after President Donald Trump said negotiations between the two countries were proceeding “nicely.” That said, FEMO appears to be the ultimate driver.
