From FOMO to FOTO

With strong earnings growth driving a year-to-date gain of about 13% in the S&P 500 .SPX, Sam Stovall, chief investment strategist at CFRA, noted that if the benchmark index manages a fourth consecutive year of double-digit gains this would only be the second time this has happened since World War Two.

Along the way, though, Stovall pointed out that the tech-heavy Nasdaq-100 .NDX had slumped by more than 11% from its early June record close, "as the chorus of concerns grew louder that earnings growth was peaking and that capital expenditure increases were eating into cash flows."

But after June's sharp selloff, he noted that “buy the dip” returned in force after July 29, causing proponents of the “fear of missing out” (FOMO) school of thought to point to historical risks.

Specifically, Stovall wrote that missing the best 10, 20, and 30 days from 1987 through 2025 would have resulted in reducing the S&P 500’s CAGR of 11.5% to 9.3%, 7.3%, and 6.0%, respectively.

However, he said “fear of topping out” (FOTO) followers also entered the conversation "with concerns that the surge in earnings and the spike in prices are signs of a market top, supported by sky-high margin debt, still-hot inflation readings, and the likelihood that the Federal Reserve is leaning toward raising rates despite the weak July jobs report."

He pointed to their counter argument that avoiding the 10, 20, and 30 worst days would have improved the S&P 500’s CAGR since 1987 to 14.1%, 15.1%, and 16.3%.

The strategist did not say directly which side of the debate he is on, but he did note that CFRA tweaked its estimates last week. The firm raised its 12-month S&P 500 price target to 8,650 from 7,730, implying 11.8% upside from the close on August 7. It also lifted its year-end 2026 closing level target to 8,050 from 7,575, which would represent a near 4% increase from Friday's close.