Fear of missing out is driving a buying rush on Wall Street, with options market metrics flashing some of the most bullish signals in years.
Easing tensions in the Middle East, falling oil prices and robust earnings reports have supported the market's climb to new highs, but some options-market measures suggest investors' FOMO has emerged as a distinct driver of the rally.
"There are several factors, but FOMO is a part of it," said Mark Hackett, chief market strategist at Nationwide.
"Most of the core tenets of the bear thesis have broken down, and being short on an absolute or relative basis is a risk that many are unwilling to take," Hackett said.
Before a 5.8% jump logged by the S&P 500 in the four sessions through August 4, the benchmark index had traded within a 5.7% range for about three months — far narrower than the average 12.5% range for rolling three-month periods since 2006.
The index's sharp gain came into even starker relief following a bruising selloff in AI shares late in July.
For years, investors have been rewarded for buying every market dip. That's showing up again, with various gauges of investors' enthusiasm for upside wagers perking up.
The one-month average daily ratio of calls to puts on the S&P 500 has risen to 0.9, among the most bullish readings in at least four years, according to a Reuters analysis of Trade Alert data.
A measure of short-term S&P 500 call skew — a gauge of how much extra investors are willing to pay for bets on a fast, sharp rally in stocks, relative to bets on a decline — last week soared to a two-year high, according to Susquehanna Financial Group analysis.
Another sign of the market's overheated conditions comes from the Bullish Percent Index, a market-breadth indicator that tracks the percentage of S&P 500 stocks trading in bullish technical patterns. The measure rose above the 70% mark, pointing to overbought conditions, according to Adam Turnquist, chief technical strategist at LPL Financial.
Taken together, these indicators highlight how much markets have been driven lately by momentum and speculative enthusiasm rather than by fundamentals.
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