Investor enthusiasm for stocks and risk assets shows no sign of abating, suggesting more gains across Asian markets on Tuesday. With no major economic data or events in Asia to sway sentiment, the positive momentum from Monday's global market rally is likely to continue, driven largely by a powerful 'fear of missing out' (FOMO) mentality among investors.
On Monday, global market activity demonstrated the strong influence of FOMO. Even as volatility, a stronger dollar, higher bond yields, and geopolitical uncertainties increased, equities continued to rise. This trend is indicative of a potent mix of investor optimism and speculative behavior, reminiscent of 'irrational exuberance,' a term coined by former Federal Reserve Chairman Alan Greenspan to describe markets where asset prices are significantly inflated.
A notable example of changing sentiment is Morgan Stanley's recent upgrade of its 12-month forecast for the S&P 500. Mike Wilson, the firm's U.S. equity strategist, and a well-known market pessimist, raised his base-case target to 5400 points from a previous forecast of 4500. This 20% increase underscores a shift even among traditionally cautious analysts. Whether this adjustment signals a peak in investor enthusiasm remains uncertain, but for now, bullish sentiment prevails.
Asian markets are benefiting from this global trend. The MSCI Asia ex-Japan equity index reached a two-year high on Monday, marking its seventh consecutive increase. Another positive day on Tuesday would mark its best performance streak since late 2021. Japan's Nikkei also gained significantly, rising above 39,000 points for the first time in over a month. Meanwhile, the dollar climbed above 156.00 yen, approaching levels that previously triggered yen-buying interventions by Japanese authorities.
Currency traders remain vigilant, though immediate intervention seems unlikely. The latest Commodity Futures Trading Commission data indicate a third consecutive week of reduced net short yen positions by speculators, albeit slightly.
In the Asia-Pacific region, the key event on Tuesday is the release of the Reserve Bank of Australia's (RBA) May 7 meeting minutes. During this meeting, the RBA dismissed the possibility of a near-term interest rate hike while indicating that rate cuts were also unlikely in the near future. This stance helped the Australian dollar stabilize, reaching a four-month high above $0.67. Current Australian rates markets do not fully price in a 25-basis point rate cut until April next year.
Additional noteworthy developments on Tuesday include Australia's consumer sentiment data for May and Indonesia's presentation of its 2025 economic forecast to parliament. These events will offer further guidance to markets as investors navigate the complex interplay of global economic indicators and regional dynamics.