Equity markets are pushing to new highs largely due to investors rushing in out of fear of missing further gains, according to a recent note from Barclays.
Analyst Emmanuel Cau wrote that “FOMO has lifted equities to new highs,” even as signals from oil and interest rate markets point to a more cautious backdrop.
Cau noted that stocks have shown “incredible resilience against adversity,” with sentiment improving after a ceasefire announcement helped major indices recover to, or even exceed, levels seen before the conflict.
The rebound has been led by U.S. equities and technology stocks, reinforcing Barclays’ preference for American markets over European ones, where early first-quarter earnings suggest pressure on consumers.
Barclays reiterated that its “hold your nerves and hedges” approach has proven effective during the conflict, having previously argued that geopolitical shocks “typically end up as good buying opportunities.”
However, Cau cautioned that markets may now be reflecting a high degree of optimism, as both oil prices and bond yields “convey a more cautious message about the war endgame.”
He also pointed out that disruptions in the Strait of Hormuz are ongoing, indicating that the economic consequences of the conflict have yet to be fully resolved.
“It does feel to us that the ‘easy’ de-escalation gains are behind us,” Barclays said, adding that further advances in equities may depend on confirmation from oil and interest rate markets that tensions are genuinely easing.
Even so, positioning continues to play a significant role. Barclays had previously highlighted that deleveraging by CTAs and hedge funds could spark a “powerful short-squeeze and beta rally.”
While some of that dynamic has already played out, many risk-controlled funds have not fully re-entered the market and are now being forced to chase the rally. Following recent client discussions, the bank said it is “pretty evident that FOMO prevails,” with most investors opting to stay invested because “equities want to go up, no matter what.”