Investing.com — Equity markets are climbing to fresh highs largely because investors are being pulled in by fear of missing out, according to a new note from Barclays.
Analyst Emmanuel Cau said in a note that “FOMO has lifted equities to new highs,” even as oil and rate markets signal more caution.
Cau believes equities have shown “incredible resilience against adversity,” with sentiment boosted after a ceasefire announcement pushed major indices back to, or above, pre-war levels.
The U.S. and tech sectors now lead the rebound, supporting the bank’s preference for American stocks over European peers, where early first-quarter earnings point to consumer strain.
Barclays reiterated that its “hold your nerves and hedges” playbook has worked during the conflict, arguing earlier that geopolitical shocks “typically end up as good buying opportunities.”
But Cau also warned that markets may now be pricing in a lot of hope, as both oil prices and bond yields “convey a more cautious message about the war endgame.”
The analyst noted that disruptions in the Strait of Hormuz continue, meaning the economic costs of the conflict remain unresolved.
“It does feel to us that the ‘easy’ de-escalation gains are behind us,” Barclays said, adding that further equity gains may require confirmation from oil and rate markets that the conflict is truly easing.
Still, positioning remains a powerful force. Barclays previously highlighted that CTA and hedge fund de-risking could trigger a “powerful short-squeeze and beta rally.”
While some of that has occurred, many risk-controlled funds have yet to re-risk, leaving them chasing the rebound. After meeting clients this week, the bank believes it is “pretty evident that FOMO prevails,” with most preferring to stay invested because “equities want to go up, no matter what.”
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