Aurelia Butler

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ORLANDO, Florida (Reuters) – FOMO and TINA are two English-language acronyms that have become common parlance in financial markets. Together, they help explain the relentless rise of U.S. equities – a trend that now should probably be raising red flags.    Investors’ “fear of missing out” (FOMO) on a two-year bull run has helped the S&P 500 hit 47 record highs this year. And this momentum shows few signs of waning because if investors want equity exposure, “there is no alternative” (TINA) to the United States, at least not if the relative strength of U.S. economic data and corporate profits is your guide.     In many ways, the latter trend is feeding the former, and the symbiotic relationship between the two only seems to be getting stronger.IT’S ALL RELATIVEThe S&P 500 and Nasdaq are both up more than 20% this year, compared to 16% for Japan’s Nikkei, 14% for Chinese blue chips and Asian stocks ex-Japan, 10% for euro zone stocks, and 8% for Britain’s FTSE 100.Wall Street’s outperformance has, of course, been flattered by a handful of Big Tech names: the FAANG index is up a whopping 34% this year. But the equal-weighted S&P 500’s year-to-date gains of 15% are still better than investors are getting almost anywhere else.While these lopsided returns might suggest U.S. equities are “overbought”, the underlying fundamentals suggest otherwise. The Atlanta Fed’s GDPNow model is currently projecting third quarter annualized growth of 3.4%, the highest since the model’s initial estimate in July. Corporate America also boasts a very positive outlook. While earnings growth is only expected to be around 5% in the third quarter, this figure is expected to bounce back well into double figures in the coming quarters and settle around 15% for 2025 overall, according to LSEG I/B/E/S estimates.    Little wonder Goldman Sachs’ equity strategists reckon the S&P 500 is on course to reach 6000 points by the end of the year. It could even reach 6270 if markets see a replication of historical October-December election year patterns, they add. Meanwhile, Germany – the largest economy in Europe and fourth largest in the world – is flirting with its second consecutive annual contraction, something the advanced manufacturing hub hasn’t seen in over 20 years. China – the world’s second-largest economy – is in the midst of a major property crisis and flirting with deflation. This has prompted an unprecedented policy response from Beijing that many experts still don’t think will be enough to get the economy firing on all cylinders. Then there’s Japan, which appears to be so concerned about stalling its economy and spooking investors that it’s hesitant to raise interest rates by more than a few basis points.    Foreign investors have clearly taken notice: their share of the entire U.S. equity market is now a record 18%, Goldman Sachs figures show.BLOATED AND EXPENSIVE    Is the U.S. stock market morphing into a mirror image of the U.S. bond market? Parallels are emerging: they are both the most liquid markets in their respective asset classes; they offer investors the ‘safest’ securities; and they dwarf all rivals by a considerable distance.    Indeed, Wall Street has been a veritable money machine for investors this year, especially the mega caps sitting on huge cash piles and boasting credit ratings comparable to those of the federal government.     It’s therefore unsurprising that the U.S. share of the global equity market cap has climbed to a record high 72%. Who wouldn’t want a slice of that pie?This level of concentration cannot last forever, so investors should be wary of buying U.S. equities at current levels, right?    Maybe, but maybe not.       True, U.S. stocks are the most expensive in the developed world by some distance, based on long-term valuations measured by Robert Shiller’s cyclically adjusted price-to-earnings (CAPE), and are more expensive than they have been relative to global stocks for more than two decades.But, worryingly for U.S. bears, investors are unlikely to dramatically reallocate any time soon. “Institutional investors are getting forced into the market right now given ‘FOMU’: fear of materially underperforming benchmark equity indices,” Goldman’s Scott Rubner wrote this week, providing investors with yet another acronym. And bull markets that celebrate their second birthday have historically tended to last multiple years thereafter, Ryan Detrick at Carson Group has found.    So U.S. bears might be correct that equity markets will eventually mean revert, but these investors risk underperforming and losing clients long before that happens.(The opinions expressed here are those of the author, a columnist for Reuters.) (By Jamie McGeever; Editing by Christina Fincher) More

(Reuters) – American Express (NYSE:AXP) reported third-quarter profit above Wall Street estimates on Friday, benefiting from disciplined expense management that helped cushion a blow from softer fee growth.Shares of AmEx fell 2% before the opening bell even as the credit card giant raised its profit forecast for 2024.The company’s affluent customers have allowed it to maintain relatively smaller provisions for credit losses compared with peers that serve a broader spectrum of customers, including those with lower income.It has also showed restraint in managing rewards and other expenses, allowing it to outdo profit expectations even when revenue growth decelerates.”(This quarter is) another proof point of management’s ability to flex expenses to hit earnings per share (EPS) targets when top line is softer,” said Citi analyst Keith Horowitz.AmEx’s total expenses were $12.08 billion in the quarter, lower than expectations of $12.74 billion, according to estimates compiled by LSEG.Revenue rose 8% to $16.64 billion but fell short of the $16.67 billion estimate. Discount revenue – the fee it earns from merchants for facilitating transactions – rose 4%, while analysts had expected 5.3% growth.”We do not need double-digit revenue growth to hit mid-teens EPS because we are disciplined with our operating expenses. Our credit is also very, very strong,” Chief Financial Officer Christophe Le Caillec told Reuters in an interview.Profit rose 2% to $2.51 billion for the three months ended Sept. 30. On a per-share basis, it earned $3.49 versus the $3.28 that analysts had forecast.The company now sees 2024 EPS between $13.75 and $14.05, higher than the earlier range of $13.30 to $13.80. “Expectations were elevated, but we believe the growth opportunities remain large and the valuation remains attractive,” William Blair analysts said in a note. More

(Reuters) -Futures pointed to a higher open for the S&P 500 and the Nasdaq on Friday as technology shares broadly advanced and investors parsed corporate results, while Netflix (NASDAQ:NFLX) jumped after beating subscriber growth estimates.Shares of Netflix gained 6.4% in premarket trading after the streaming giant topped Wall Street estimates for subscriber additions and said it expected continued growth through the end of the year. Most of the so-called Magnificent Seven stocks, which have driven much of Wall Street’s rally this year, were higher in premarket trading, with Apple (NASDAQ:AAPL) up 2% after data showed a jump in new iPhone sales in China.Chip heavyweight Nvidia (NASDAQ:NVDA) rose 1.2%, extending gains from Thursday following strong results from contract chipmaker TSMC, which lifted semiconductor stocks.Dow E-minis were down 55 points, or 0.13%, U.S. S&P 500 E-minis were up 14 points, or 0.24%, and Nasdaq 100 E-minis were up 112.5 points, or 0.55%.Mostly upbeat earnings from financial companies and broadly positive economic data have lifted the Dow and the S&P 500 to fresh record highs this week. The Dow closed at a record high on Thursday, while the S&P 500 is nearing the psychologically important 6,000 mark.All three major indexes were set to log their sixth consecutive week of gains.”The financials have responded very well to earnings. They were the first real big (sector) to report and they performed rather well. Now the attention is shifting and it’s going to be on tech and other big blue-chip companies,” said Adam Sarhan, chief executive at 50 Park Investments.”Until we see stocks really get walloped or fall hard on earnings, the market’s earned the bullish benefit of the doubt.”However, stretched valuations – with the S&P 500 trading at nearly 22 times forward earnings – and high expectations for corporate results could leave stocks vulnerable to a pullback, amid indications that investors are exploring less expensive sectors.The small-cap Russell 2000 is set to outperform major indexes in the week with a roughly 2% rise. Futures tracking the index were up 0.3%. American Express (NYSE:AXP) lost 2.7% after its quarterly revenue missed estimates.Procter & Gamble (NYSE:PG) edged 0.4% lower after it missed first-quarter sales expectations, while oil giant SLB dipped 1% after missing third-quarter revenue estimates.Fed officials Christopher Waller, Neel Kashkari and Raphael Bostic are slated to speak during the day. Expectations for the U.S. Federal Reserve to ease interest rates by 25 basis points at its November meeting have remained fairly steady throughout the week, currently standing at 90%, according to CME’s FedWatch.In economic data, single-family housing starts increased 2.7% to a seasonally adjusted annual rate of 1.027 million units in September.Meanwhile, U.S. listings of Chinese companies leapt after China’s central bank launched funding schemes aimed at boosting the equity market. Alibaba (NYSE:BABA) gained 3%, JD (NASDAQ:JD).com rose 5.3% and PDD Holdings jumped 4.1%.CVS Health (NYSE:CVS) slumped 9.8% after a report said it had named long-time executive David Joyner its new top boss. More