Is Wall Street's AI Boom Spreading To Main Street? Nothing To Fear But FOMO?

The S&P 500 rose to yet another record high today, rising above 7600 for the first time. On May 11, we raised our year-end S&P 500 target from 7700 to 8250, still the highest forecast on Wall Street. We did so because of the strength and breadth of S&P 500 earnings during the Q1 earnings reporting season. That led us to conclude that the rally in the stock market since this year's low on March 30 (which we called the next evening on March 31) was driven by Fabulous Earnings Momentum (FEMO) rather than FOMO.

A FEMO-led stock market meltup should be more sustainable than a FOMO-led one. Nevertheless, we are turning cautious about the prospects for the stock market in the coming weeks. The war in the Middle East isn't over. Executives at Exxon and Chevron are warning that global oil inventories are dangerously low and that oil prices could soon spike to $150 a barrel or higher. We've explained why the FOMC might possibly shift from an easing bias to a tightening bias this month, followed by a rate hike in July. Three gigantic IPOs might also increase market volatility in the coming weeks, as we discussed yesterday.