Stock market outlook: FOMO rally setting investors up for disappointment

the remaining 65% of the index trades at 17.4x, according to Kolanovic. That's not cheap, as the historical forward P/E of the index is 15.3x, meaning that current valuations represent a 10% premium.

Those stretched valuations could set investors up for disappointment if the economy shows any signs of slowing in the second half of this year or early next year. "If the activity momentum does weaken in [the] second half, relative to the current projections of no/soft landing, stocks are unlikely to shrug it off, or look through, as they are not priced for disappointment anymore, even if one is to fully take out the tech/AI/FAANG groups from the equation," he said.

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