Definition: “FOMO Bounce”—that delightful spectacle where our cautious retail investors, who clung to their bond funds like life rafts during the market’s roaring +20% ascent the past two years, (2023 and 2024) suddenly morph into fearless dip-buyers at the slightest market hiccup. It’s as if, after years of watching the party from afar, they’ve decided to crash it, moving from bond funds to stocks just as the music’s winding down. Their impeccable timing ensures that every market dip gets a temporary, enthusiasm-fueled uptick that lasts as long as a New Year’s resolution, adding a touch of irony to the investment world. Cheers to the latecomers; your fashionably late arrival keeps the dance floor interesting.
A Bag of Mixed Signals and “Squid” Fed Data (Feb 24–Feb 28, 2025) and what’s ahead.
Last week, from February 24 through February 28, 2025, Wall Street’s performance resembled a moody teenager—alternately bullish and grumbling—while economic data kept investors on their toes. Let’s break down the key facts, figures, and a few sarcastic observations that illustrate the current state of the market.
Market Performance: Bullish Gains, Tech Slips, and Mixed Sentiment
Despite lingering uncertainties, the major indices managed to post modest gains amid bouts of volatility:
- S&P 500: Rose approximately 0.8% for the week, nudging its way higher as investor sentiment gradually improved.
- Dow Jones Industrial Average: Added about 0.4%, bolstered by solid performances from blue-chip stocks.
- NASDAQ Composite: Tumbled roughly 0.5%, as tech stocks—ever the drama queens—struggled with profit warnings and regulatory concerns.
Economic Data: PCE, Fed NOW, and the “Squid” Report
PCE Data
The Personal Consumption Expenditures (PCE) index delivered a surprising twist: it dropped 0.2% month-over-month, beating consensus expectations of a 0.3% decline. Reuters and Bloomberg noted that this softer-than-expected inflation reading has given investors a glimmer of hope that the inflation beast might finally be tamed.
Atlanta Fed NOW Report
Then came the infamous Atlanta Fed NOW report—which, let’s be honest, looked more like the work of a squid with too many tentacles than a clear economic indicator. The report was “squided” up by an unusually high volume of imports rushing in ahead of possible tariffs. As reported by CNBC and corroborated by the WSJ, these pre-tariff shipments distorted real-time activity, making the report’s data a bit of a Rorschach test for market watchers. Essentially, the report screamed, most likely this is a “one off”. Reminding me that sometimes even the Fed’s best attempts have clouds. But the media will play this broken record as long as someone will listen.
Consumer Spending and Savings: A Tale of Cold Weather and California Hangovers
Adding to the intrigue, weekly consumer data painted a paradoxical picture:
- Spending: Dropped by about 1.1%, signaling that households were tightening their belts—perhaps still recovering from the financial hangover of those devastating California wildfires (or as some might say, a fiasco).
- Savings: In contrast, personal savings surged by approximately 3.4%. Cold weather and a dose of fiscal caution seem to have convinced many to play it safe and hoard cash.
Although the headlines make you think the consumer has stopped spending, it most likely was a temporary blip. The positive, the consumer has the money to spend. Moving forward, most do eventually. This is positive for earnings and the market.
With rising disposable income, the economy is positioned to support robust consumption in 2025.
Friday’s Strong Close: A Signal of a Market Turnaround or Just a Blip? (Here comes the FOMO’s)
Last Friday, February 28, 2025, all major exchanges closed with surprising strength. The S&P 500 bounced off a key support level—around 34,200—while the Dow and NASDAQ posted gains of 0.4% and 0.6%, respectively. Bond markets weren’t left behind either; even though the 10-year Treasury yield plunged to 4.31%, investors quickly moved to purchase longer-term debt amid elevated credit spreads. This strong, coordinated close across equities and fixed income has left many asking: Is the market finally ready to turn around?
The Friday Close: What It Tells Us
Friday’s rally was significant for several reasons:
- Technical Bounce: The S&P 500’s rebound from its support level suggests that technical buyers stepped in at what they believe are “discounted” levels. Analysts at Reuters and Bloomberg noted that such bounces often precede broader recoveries, although caution is warranted. (I think we get a FOMO bounce) I’ll wait.
- Cross-Asset Coordination: While equities rallied modestly, bond yields fell sharply (with the 10-year Treasury dropping to 4.31%), yet the credit spreads remain wide—currently averaging 120 to 150 basis points. This divergence implies that while the risk-free rate has softened, concerns over credit risk continue to dominate. CNBC has highlighted this ongoing tension between bond yields and credit spreads.
- Investor Sentiment: The robust close, combined with rising personal savings and subdued spending due to the lingering effects of cold weather and residual “hangover” from last year’s California wildfire crises, points to a market where investors are starting to reposition. Savings data from the Bureau of Economic Analysis and household spending reports indicate that while spending fell by about 1.1%, savings climbed by roughly 3.4%, suggesting cautious optimism in uncertain times.
Looking Ahead: March 3–7, 2025
As we turn our attention to the week ahead, several economic data releases and policy signals are poised to shape investor sentiment:
Key Economic Indicators
- Initial Jobless Claims & Labor Data: Early-week data on jobless claims will be closely watched. Analysts expect these figures to provide further clarity on the labor market’s health, which has been a critical factor in driving market sentiment.
- Producer Price Index (PPI): A PPI release scheduled for March 4 could influence inflation expectations. A softer-than-expected PPI would reinforce the recent PCE data, which had a 0.2% decline, while a surprise uptick might add to inflation fears.
- Consumer Sentiment: On March 6, the latest Consumer Sentiment Index is due. With households currently hoarding savings (up by 3.4%), any positive reading could bolster confidence in consumer spending, despite last week’s 1.1% decline in spending.
Monetary Policy Signals
- Fed Communications: Investors will also be waiting on any hints from Federal Reserve officials regarding future rate cuts or policy adjustments. Given the current focus on 10-year Treasury yields as a policy lever by the Trump administration, any indications of further easing could help tighten credit spreads and lower mortgage rates.
- Import Data and Tariff Impacts: There’s speculation that the “squid-like” distortions in the Atlanta Fed NOW report, driven by a surge in pre-tariff imports, may start to ease. This could signal a normalization in trade data, thereby reducing one source of market uncertainty.
Is the Market Ready to Turn Around?
I think a FOMO bounce can happen. If you are a trader, it could be good. I am not a day trader.
Policy Clarity: (it’s follow the leader)
Until clear policy signals emerge, don’t get carried away. The smart money is hanging back on the sidelines, which means volatility is here to stay. In the meantime, the FOMO money will keep buying the dip and fueling brief bounces—if you’re a day trader that might be your jam. As for me, I’m a position trader, not a frantic scalper. I’ll be patiently waiting for a much better entry point. Once the FOMO fizzles out and the market corrects sharply, smart money will inevitably step back in—and I’ll be right there following the leader.
2025 Market Outlook: Incomes Up, Q1 Earnings Soar, and Friendly Rates…But Watch out for Washington and Sky-High P/E Ratios
It appears that 2025 might finally have a silver lining—if you can ignore the lingering circus in Washington and the stock market’s chronic case of “too rich for smart money.” Despite all the political uncertainty and lofty P/E ratios that have kept institutional investors cautiously on the sidelines, there are some genuinely positive signals lighting the way forward.
The Bright Side: Strong Incomes, Stellar Q1 Earnings, and Accommodative Interest Rates
For starters, recent data shows that household incomes have been steadily increasing—a comforting trend that’s likely to boost consumer spending (even if they’re still tightening their belts after last winter’s brutal chill and the lingering financial hangover from the California wildfires). With rising disposable income, the economy is positioned to support robust consumption in 2025.
Add to that the fact that the S&P 500 delivered impressive earnings in Q1, outperforming most expectations. Top-tier companies are reporting solid profit margins and healthier balance sheets, which has set the stage for a more optimistic market sentiment. Analysts at Bloomberg and Reuters have noted that this strong Q1 performance is providing a solid foundation for what many hope will be a sustained rally.
And let’s not forget interest rates. With the 10-year Treasury yield recently tumbling nearly 10 basis points to 4.31%—and with the Federal Reserve’s current stance keeping rates relatively friendly—financing conditions have become much more attractive. Lower interest rates mean cheaper borrowing costs, which should, in theory, give a further boost to the already buoyant real estate and equity markets.
Looking Ahead: What’s on the Horizon for March 2025?
As we approach the week of March 3–7, 2025, several key economic releases and policy signals could influence investor sentiment:
- Labor and Jobless Claims: Early-week jobless claims will be scrutinized to gauge the labor market’s resilience. A solid report here could buoy confidence.
- Producer Price Index (PPI): Scheduled for release on March 4, the PPI could either reinforce the softer inflation narrative (bolstering the case for further rate cuts) or add fuel to inflationary fears.
- Consumer Sentiment Index: With consumer confidence having taken a hit (the Conference Board’s index fell to 98.3 in February); any uptick in sentiment might spark a re-allocation back into equities. If that happens, I expect selling on the news a few days later by the smart money. (this report needs to be taken with a grain of salt) although helpful,l it often is skewed towards whichever political affiliation one has)
- Policy Signals: Any hints from Washington regarding deregulatory measures—or further tariffs—will be closely watched. The uncertainty from Washington remains the elephant in the room, and its next move could have significant ramifications on market flows.
Final Thoughts: A Mixed Bag with a Dash of Sarcasm
So, while increased incomes, impressive Q1 earnings, and friendly interest rates provide a compelling case for a market upswing in 2025, look good. BUT SHORT TERM the challenges remain very real. Washington’s lingering uncertainty and the high valuations keeping the smart money cautious mean that any rally could be as fleeting as NVDA’s temporary earnings high—buoyant today, but doomed to fizzle out once the headline is out and the “sell on the news” cycle kicks in.
In short, while there are reasons to be cautiously optimistic, investors should brace themselves for volatility. The market might be ready to FOMO bounce. I expect defensive stocks and bonds to continue their steady ascent for now as institutional investors retreat from the high-flying tech and AI sectors.
Stock Disclaimer: The information provided in this article is for informational purposes only and should not be construed as investment advice. The author may hold positions in securities mentioned herein. Investing in stocks, bonds, and other financial instruments involves significant risk, including the potential loss of principal. Past performance is not indicative of future results. Always consult a qualified financial advisor before making any investment decisions.