‘FOMO’ Is in Early Stages With Plenty of Cash for Dips, DBS Says

(Bloomberg) -- The fear of missing out and the lack of appealing alternatives will continue to boost stocks, according to DBS Group Ltd.

“‘FOMO’ is in its early innings” with lots of cash on the sidelines that could eventually find its way into equities, Chief Investment Officer Hou Wey Fook said in a webinar Monday. “There is capacity to buy whenever there are corrections in the equity markets.”

Stocks have emerged as the TINA (there is no alternative) play because of the low or zero returns offered by bonds and cash, Hou said. Also, retail investors have become “a force to contend with” as they’re more knowledgeable and are driven by higher liquidity, high savings rates, and zero commissions at many brokerages.

DBS’s remarks come as the MSCI all-country stock index sits a full 34% above its March 23 closing low when uncertainty about the impact of Covid-19 was near its peak. The gauge is still down 8% from where it started the year, but the rebound has been fast, thanks to the stimulus from central banks and governments globally.

DBS continues to recommend a “barbell” strategy, with assets placed to benefit from divergent market outcomes, and maintains a preference for sectors like e-sports that can benefit from Millennial and Gen-Z wealth, and from pandemic-related changes in behavior.

Other observations from DBS:

• Technology-company earnings are sustainable as the world becomes more digital
• Gold is a good risk diversifier, and a proprietary DBS model points to more upside
• Asia high-yield credit offers value as it’s pricing in a 9.2% default rate, well above forecasts.

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