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The Biggest Problem With the U.S. Stock Market? FOMO

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The S&P 500 has rebounded some from its big losses triggered by Trump's added 10% to 25% China tariff threat. 

But the threat hasn't ended. For all anyone knows, it may be getting closer to a reality. Yet the S&P 500 is back up to a 17% year-to-date gain.

So what's driving the gains?

"Fear of missing out," said Steve Sosnick, head trader and chief strategist at Interactive Brokers. "FOMO. And I think what happens is, that's why you see such sharp moves. When the market sells off, it's, it's clear that somebody had to sell or over the past couple of days and that happens. There's any number of things that happen. But as you saw the market sort of peter out to normal, they did sort of feel sold out at some point on Wednesday, which is when we started to see futures bounce off the lows and the equity markets move higher." 

Sosnick added, "The rally we saw on Thursday... I took that to be FOMO. We will relentlessly move higher."

He said when stocks fall and there's still some optimism on fundamentals, institutional investors think other investors will start bidding prices up again. Then, each investor gets ahead of that phenomenon and starts buying stocks, in a self-fulfilling prophecy. "You get herd behavior and that sort of self-reinforces," Sosnick said. 

Chris Macke, corporate investment strategist recently told TheStreet he also thinks FOMO is the market's biggest problem. "Oddly enough, when we've got this big bad breaking news [potential added tariffs], it's actually fear of missing out," that the market sees, Macke said. 

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