Finance Alliance News Oct. 21st news (Editor Xiao Xiang) The abbreviations "FOMO" and "TINA" have become two common terms in the global financial markets in recent years.

These two words together explain the reasons for the continuous rise of the US stock market. With the current bull market in the American stock market officially entering its third year this month, the discussion and analysis of these two industry "common terms" may also become a key factor in the market's future direction.

Let's first explain the meanings of these two words. FOMO stands for "Fear of Missing Out," which in the market context, its meaning is obvious - people often continue to buy stocks out of fear of missing out on the opportunity of a significant surge in the US stocks. So far this year, the "FOMO" effect has helped the S&P 500 index set historical closing highs 47 times.

Moreover, this momentum shows no sign of waning, which can also be attributed to the influence of "TINA."

TINA means "There Is No Alternative to owning equities". In the eyes of many American stock investors, equities here specifically refer to US equities. Because in their view, if investors want to invest and be guided by the relative advantages of economic data and corporate profits, then US stocks are the best choice.

In many ways, the latter trend (TINA) seems to be fueling the former trend (FOMO), and the symbiotic and resonant effects between the two appear to be becoming stronger.

The US stock market "commands the world"

In fact, from multiple comparisons, it is not difficult for people to understand the reasons why the "FOMO" and "TINA" phenomena are prevalent in the US stock market.

The S&P 500 Index and the Nasdaq Composite Index have both gained over 20% this year. In comparison, the Nikkei 225 Index, which broke historical highs in the first quarter of this year, has only risen by 16% year-to-date. The CSI 300 Index, which started to gain momentum in the third quarter, has increased by about 14%. The Europe Stoxx 50 Index has only risen by around 10%, and the UK FTSE 100 Index has only risen by about 8%.

Despite Wall Street's outstanding performance this year, benefiting from the leadership of some large technology companies, the index representing a few technology giants, the FAANG index, has surged by as much as 34% this year.

Even when measured by equal-weighted indexes like the S&P 500 Index, the year-to-date gain is still around 15%, which is better than the returns investors have achieved in most other markets.

At the same time, although the outperformance of the "winner-takes-all" may indicate an "overbought" US stock market, the fundamental feedback in terms of economy and corporate profits does not seem to have reached that point yet. For example, the well-known Atlanta Fed's GDPNow model currently predicts an annualized GDP growth rate of 3.4% for the third quarter in the US, the highest value since the model's initial estimate back in July.

The outlook for US companies is also very optimistic. According to LSEG I/B/E/S estimates, although the overall profit growth in the US stock market is expected to be only around 5% in the third quarter, this number is likely to rebound to double digits in the coming quarters and reach around 15% by 2025.

It is not surprising that many Wall Street investment strategists, including Goldman Sachs, have recently further raised their expectations on the target levels for the US stock market.

Goldman Sachs has now forecasted that the S&P 500 Index is expected to reach 6,000 points by the end of this year. The bank also added that if the market replicates the common pattern from October to December in election years historically, the S&P 500 Index might even reach 6,270 points.

Who is competing at the top of the world these days?

The current economic and market situation in other regions around the world actually reflects the preciousness of the current long bull market in the US stock market.

Germany, the largest economy in Europe and the fourth largest in the world, is currently facing a second consecutive year of economic contraction, a situation that has never occurred in this global advanced manufacturing center in more than 20 years.

In Japan, the country's decision-making level seems to be increasingly cautious, very concerned about scaring investors, hence hesitating to take further steps to raise interest rates.

Many global investors have apparently noticed this: according to Goldman Sachs data, foreign investors currently hold a record 18% share in the entire US stock market.

From many perspectives, the position of US stocks in the global stock market seems to be transforming into the 'mirror image' of US bonds in the bond market: both are the most liquid markets in their respective asset classes; they provide the 'safest' securities for investors; their status and performance in their respective fields outshine major global competitors.

Therefore, under the combined influence of 'FOMO' and 'TINA', it is not surprising that the market capitalization share of US stocks in the MSCI Global Equity Index has climbed to a record 72%. Who wouldn't want to get a share of that?

However, will this level of concentration continue forever? Is there really no one in the current equity market who can compete with US stocks at the top?

Clearly, things will not always be so absolute.

Measured by the cyclically adjusted price-to-earnings ratio (CAPE) invented by Nobel laureate economist Robert Shiller, the US stock market, which just celebrated its two-year bull market anniversary, is currently the most expensive market among developed countries.

Note: Comparison of cyclically adjusted price-to-earnings ratio (CAPE) among various countries

Relative to global stock markets, the valuation of the US stock market is currently at its most overvalued state in the past twenty years.

Note: The yellow line in the above chart represents the S&P 500 price-to-earnings ratio, the blue line represents international stocks price-to-earnings ratio excluding US stocks, and the red line below represents the gap between the two.

Despite many perspectives, investors are unlikely to drastically reallocate assets in the short term. Last week, Goldman Sachs' Scott Rubner wrote, 'Due to 'FOMU' (fear of markedly underperforming benchmark stock indices, similar to FOMO), institutional investors are currently forced to enter the market.' However, what if more appealing targets and investment opportunities emerge globally in the future?

In fact, whether it is the 'TINA' behind 'other than holding US stocks, there is no other choice' or the FOMO behind the US stock 'fear of missing out,' both seem to imply that the US stock bull market will never look back. People in the global stock market, apart from US stocks, do not have many opportunities. But what if one day more investors realize that there are better choices besides holding US stocks?

In the first quarter of this year, the once dominant Nikkei index briefly played such a role, but unfortunately has fallen back into silence over the past half year. Now, could A shares, with their low valuations and continuous policy support, become the new global leader, challenging the US stock market's ability to attract funds, and appearing to be generating high expectations among some global investors.

Bank of America's global fund manager survey released earlier this month shows that "going long on Chinese stocks" has made it into the top 3 of the most popular trading rankings in this survey, ranking only after "going long on the magnificent 7" and going long on gold. The net percentage of global fund managers expecting a stronger Chinese economy in the next 12 months has reached 48%, the highest level since April 2023.

Regardless, behind the long bull market in the US stocks, whether it's "FOMO" or "TINA", it actually reflects the market participants' confidence and belief that the bull market will continue to climb to new heights without any hindrance.

And such confidence and belief may also be what A-shares, which have just entered a bull market in the past month, urgently need and desire - whether the upcoming policy stimulus package can translate into real actions in the stock market, whether the market, behind the temporary adjustments, can still make most people fearless. All of this will truly test the courage and wisdom of decision-makers and investors.