The Fear Of Missing Out. Now so prevalent in our society that it has its own hashtag. This social behaviour is now blamed for phenomena as diverse as the amount of time we spend on our mobile phones, to the surge in ticket prices for once-in-a-lifetime concerts. In essence, you can blame it for the return of Kate Bush, All Saints and The Stone Roses (which may or may not be of addition to the greater human happiness). It also infects financial markets. Investors have always been concerned that they might be missing out on the investment of a lifetime… that the thundering herd might leave them behind… that if everyone else is making double digit returns and you’re just sitting there in cash, waiting, you will ultimately be left without cash, and found wanting.
Aha, but we learn, don’t we? Hence why prior to the US election, cash balances were at their highest levels since Sept 11th attacks, or at least that’s how Bank of America’s Fund Manager Survey described it. People were ready for the crisis, they wouldn’t be caught asleep at the wheel this time, oh no. They wouldn’t make the Brexit mistake – a couple of weeks looking dreadful and then a resurgence of stocks to make record highs. Should we be surprised then that as soon as the election was resolved, decisively, with a combined Congress/Presidency, that cash was put to work? In fact the BAML survey shows that the reduction in cash was the biggest MoM decline since August 2009 – in the months after which the S&P rallied 15%.
But what about another Fear. The Fear Of the Unknown. This fear hasn’t bothered markets much over the past few years. There was the Fear of the Ghosts of Lehman Past, but the central banks took care of that. By constantly intervening with QE to prop up asset markets, we shunted this fear to the back of our minds. The battle between these ghosts and the FOMO led to the flash crashes (stay with me). Sell everything, but risk losing out on the rally; buy everything, but risk the black swan event.
We haven’t worried so much about black swans of late. Perhaps that’s because now they come in the form of political, rather than market, risk. It’s not so much a concern whether Deutsche Bank is profitable, or Chinese banks have too much debt; more that the politicians being thrown up by the world’s electorates are more unpredictable than they used to be.
This FOTU is starting to grow. Yes the world’s banks might be merrily ripping up and revising higher their US growth predictions in the blind hope that the new US constellation will deliver some Reaganite Reflationary boost. But just this morning we have a plethora of news that should cause a question mark over these assertions: Trump announces his First Day executive orders such as ripping up TPP and revoking environmental regulations; even as one of his Republican senators warns that he is ‘very concerned’ that no-one is talking about the debt ceiling; and Putin starts moving missiles while Trump does deals with Farage to try to prevent windfarms springing up at his Scottish resort. And that’s just the US. In the UK we have Tony Blair back to fight Brexit (because he did such a good job in the middle east); and in France we have two establishment figures fighting it out to be the only alternative to the anti-establishment Le Pen.
FOMO? Maybe once we stop clicking and thumbing we will start thinking.