Nvidia’s Monster Rally Fueling Market Momentum: Evercore ISI’s Julian Emanuel Warns of FOMO

The technology sector has been experiencing a surge in momentum, with Nvidia leading the charge. Evercore ISI’s Julian Emanuel, a senior managing director, has observed a trend among clients, many of whom are concerned about being underinvested rather than overexposed in the current market climate. This shift in sentiment, according to Emanuel, is reminiscent of the Y2K era and is being driven by excitement around artificial intelligence and the belief that the U.S. economy will avoid a recession.

Emanuel’s warning comes as the Dow Jones Industrial Average reached an all-time high of 38,797.38 on Monday, while the tech-heavy Nasdaq Composite is up 6% year-to-date and just 2% off its record high. Nvidia, the global leader in artificial intelligence chips, has seen its stock price rise by 46% year-to-date and an impressive 240% over the past year.

The senior managing director at Evercore ISI believes that stocks could experience a 13% pullback this year, which he considers a normal occurrence during a non-recession period. Emanuel advises investors to consider lightening up on their positions if they cannot see themselves buying more during a potential market downturn. However, he has not completely abandoned the winning growth trade. Emanuel’s top picks include communication services, consumer staples, health care, and money markets.

Emanuel’s S&P 500 year-end target is 4,750, which implies a roughly 5% loss from Monday’s close. Despite this potential loss, the senior managing director remains optimistic about the defensive properties of certain sectors.

The fear of missing out (FOMO) is a powerful force in the market, and it has been underpinning the super-charged momentum market, according to Emanuel. This sentiment, which has been absent since 2021, is a cause for concern, as it can lead to irrational buying and selling decisions.

The dot-com boom and subsequent collapse serve as a reminder of the risks associated with FOMO. During that period, investors were driven by the fear of missing out on potential gains, leading to inflated valuations and eventual market correction. Emanuel believes that similar dynamics are at play in the current market, with artificial intelligence and the belief that the U.S. will avoid a recession being the major catalysts.

Emanuel’s warning comes as the technology sector continues to outperform other sectors in the market. The sector has been fueled by the shift to remote work and the increasing adoption of artificial intelligence and other advanced technologies. The sector’s strong performance has led to a surge in momentum, with many investors looking to capitalize on the trend.

However, Emanuel cautions that this momentum is not without risks. The senior managing director advises investors to be mindful of the potential for a market correction and to consider lightening up on their positions if they cannot see themselves buying more during a downturn.

Despite the potential risks, Emanuel remains bullish on the technology sector and believes that it will continue to outperform other sectors in the market. The senior managing director’s top picks include communication services, consumer staples, health care, and money markets. These sectors offer defensive properties and are well-positioned to weather potential market volatility.

In conclusion, Nvidia’s monster rally has fueled a fear of missing out in the market, according to Evercore ISI’s Julian Emanuel. This sentiment, which has been absent since 2021, is a cause for concern, as it can lead to irrational buying and selling decisions. Emanuel advises investors to be mindful of the potential for a market correction and to consider lightening up on their positions if they cannot see themselves buying more during a downturn. Despite the potential risks, the senior managing director remains bullish on the technology sector and believes that it will continue to outperform other sectors in the market. Emanuel’s top picks include communication services, consumer staples, health care, and money markets. These sectors offer defensive properties and are well-positioned to weather potential market volatility.