FOMO sweeps across the entire market as the speculative frenzy spreads to traditional safe-haven assets!

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When FOMO (Fear of Missing Out) sweeps the market, speculative fervor is no longer limited to risk assets such as tech stocks, but has spread to traditional safe-haven assets like gold and gold ETFs. The S&P 500, Nasdaq, gold, and gold mining stocks are soaring in sync—this unusual asset correlation is sending a dangerous signal.

Last week, the Federal Reserve cut interest rates by 25 basis points to a range of 4.00%-4.25%. This “risk management” move was aimed at guarding against deterioration in the job market, but the market reaction was complex. After sharp intraday fluctuations, stocks closed mixed, the dollar strengthened, and the 10-year Treasury yield rose to around 4.07%.

The most worrying thing is that gold, historically a hedging tool against market stress, is now rising alongside stocks, tech stocks, and even Bitcoin. Gold hit an all-time high, and the gold miner ETF (GDX) soared nearly 100% from its low. This “parabolic” rise shows speculative sentiment has penetrated even into traditionally defensive assets.

Technicals show the S&P 500 closed at 6652 points, two standard deviations above the 50-day moving average, and market breadth continues to deteriorate. When all assets are rising in a frenzy at the same time, it often means risk is accumulating, and sooner or later a link in the chain will break, triggering a major drop.

Fed Rate Cut Triggers Market Division

The Federal Reserve delivered its first rate cut of 2025, lowering the target range for the federal funds rate by 25 basis points to 4.00%-4.25%. Unlike the past two years that focused on inflation, this statement emphasized that “downside risks to employment have risen,” marking a policy shift toward the employment goal.

The market reaction was complex. Following the cut’s announcement, stocks swung wildly before closing mixed. Bond yields fell then rose, with the 10-year U.S. Treasury yield closing near 4.07%, and the dollar strengthening slightly. On Thursday, the market rebounded, buoyed by news that Nvidia will invest $5 billion in Intel to produce AI chips.

Principal analyst Seema Shah thinks this helps “get ahead of the slowdown without overreacting,” while AmeriVet analyst Gregory Faranello described it as “an orderly path toward a neutral rate.” But the risk is that rate cuts in an environment where inflation is still high—especially if tariff-related costs eventually materialize—could put the Fed in a bind.

Markets’ cautious response and the dollar’s strength show investors aren't fully convinced the Fed has found the right balance.

Technical Warning: FOMO Sentiment Drives Market to Extreme Overbought

From a technical perspective, obvious FOMO-chasing signs appear—the S&P 500 keeps hitting record highs, standing two standard deviations above its 50-day moving average. This kind of extreme deviation usually signals short-term correction risk.

According to the latest Goldman Sachs report, the retail trading proxy—transactions of less than 100 shares—accounted for 66% of total U.S. equity trading volume in Q3, up sharply from 31% in January 2019, now over 20% of the notional trading volume. This retail trading frenzy confirms the rising FOMO mood.

Volatility is extremely subdued: the VIX index is trading around 15.6, at the bottom decile of recent history. Such low volatility supports the “buy-the-dip” mindset, but leaves almost no margin for error before large options expiry.

Market breadth continues to deteriorate, becoming a key concern. Although large tech stocks are driving the index higher, negative divergence remains worrying. Historically, such divergence often foreshadows coming short-term corrections.

AI Boom Inflates Tech Stock Valuations

Artificial intelligence has reemerged as the market’s focus, with large-cap tech stocks continuing to attract heavy inflows. AI leaders such as Nvidia and Microsoft reported strong Q2 results, and market expectations keep rising. According to DataTrek, Wall Street analysts’ earnings forecasts for the S&P 500 for each quarter of the next year are at record highs.

However, AI sector valuations have been stretched to extremes, with forward P/E ratios of related companies reaching record levels. Many companies are being priced for perfection, so economic weakness, overestimated demand, or margin compression could trigger sharp re-pricing. The Global X AI ETF (AIQ) is showing overbought conditions, on par with levels seen before April’s selloff.

From hedge funds and institutions to retail investors, everyone is increasing exposure to the same stocks—this “crowded trade” creates fragility. If the narrative breaks, unwinding could be very swift. In addition, governments worldwide are starting to address AI-related ethical, privacy, and security issues, with regulatory risk rising but not yet reflected in prices.

Gold’s “Parabolic” Surge Sounds Speculation Alarm

The most eye-catching speculative signal comes from the “parabolic” surge in gold and gold miner stocks. Historically, gold hedges against market stress, inflation, or currency depreciation, but this year it's rising in tandem with stocks, tech shares, and Bitcoin—an exceptionally rare correlation.

Gold has hit a record high, boosted by central bank demand, geopolitical uncertainty, and a weaker dollar. Real yields are falling while inflation expectations stay high, supporting gold’s move. The dollar and gold price are highly negatively correlated; as the dollar falls, foreign central banks holding dollar reserves turn to gold to hedge currency risks.

Gains among gold mining stocks are even more aggressive. The VanEck Gold Miners ETF (GDX), a gold miner proxy, has surged nearly 100% from its low, which is uncharacteristic for a sector known for volatility and operational risk. Historically, when such extreme overbought occurs, it’s usually closer to the top of the rally.

The broader worry is that gold and miner stocks now behave like momentum stocks. A dollar reversal could quickly sap bullish enthusiasm, and since the dollar is now trading near fair value, such a risk is rising. Historically, the dollar often rallies after rate-cut cycles by the Fed.

If risk appetite fades, these assets could be sold off alongside equities, leaving investors with few conventional portfolio hedges. The market’s lesson is simple: when all assets are soaring together in a frenzy, risks are piling up, and eventually a link will break, triggering a big drop.

Risk Warning and DisclaimerThe market has risks, invest cautiously. This article does not constitute personal investment advice, nor does it take into account the unique investment objectives, financial situations, or needs of any individual user. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their particular circumstances. Any investment based on this is at your own risk. ```