Stocks may have more room to run this year as investors who have been sitting on the sidelines feel pressure to jump back in, according to several prominent trading desks across Wall Street. The dynamic is creating what traders describe as a classic fear of missing out cycle that could intensify if major indexes break to new highs.
FOMO Pressure Builds as Under-Invested Traders Rush to Catch Up
Citadel Securities strategist Scott Rubner is among those flagging the growing imbalance in market positioning. In a note to clients, he highlighted that many investors who reduced exposure earlier in the year are now being pulled back into equities as momentum accelerates.
Rubner said themes like artificial intelligence and ongoing deregulation are providing strong tailwinds. He also said, “The supply and demand mismatch has turned decisively in favor of the buyside. If indices push to new highs, FOMO-driven chase behavior could accelerate.”
Rubner added that everyday traders remain the dominant force driving prices. “Retail investors – this year’s primary price setter – continue to hold the hottest hand and remain fully engaged.” He contrasted that with institutional players, whom he described as “under-exposed.”
This divide has been one of the defining storylines of 2025. Retail investors, fueled by steady wage gains, low unemployment, and easy access to trading platforms, have repeatedly stepped in to buy dips. Institutions, meanwhile, have remained cautious due to stretched valuations, geopolitical uncertainty, and shifting Federal Reserve expectations.
Morgan Stanley Sees Strength Beyond the AI Trade
Another theme emerging on Wall Street: the market’s leadership is broadening.
Morgan Stanley’s core trading team said many investors are too narrowly focused on AI-related stocks and are missing a stealth rally happening in other corners of the market. The firm pointed to “mounting strength” in global banking, highlighting that the Invesco KBW Bank ETF (KBWB) has entered a confirmed breakout.
They also noted signs of renewed momentum in the real economy, citing the iShares Transportation Average ETF (IYT) reaching fresh highs. Strength in banks and transportation stocks often signals improving economic expectations because both sectors depend heavily on credit demand and consumer activity.
Morgan Stanley summarized the environment bluntly: “2025 is ending where it spent much of the year: underpricing what can go right.”
Retail Traders Take Over as Buying Streak Extends
JPMorgan data shows that retail enthusiasm is not slowing down. The bank reported that mom and pop investors have now logged eight consecutive days of net buying, marking one of the longest streaks of the year. These investors have shown a willingness to chase rising prices, adding fuel to already strong market momentum.
This influx of retail buying has helped keep volatility unusually low. It has also forced many professional investors to scramble to maintain performance benchmarks, a dynamic that often pushes markets higher near the end of the year.
What a Year-End Rally Would Mean for Investors
Any additional gains would come on top of an already impressive run. The S&P 500 has climbed more than 16 percent in 2025 and is positioned for its third straight positive year and its sixth winning year out of the last seven.
For investors, the potential FOMO-driven upswing presents both opportunity and risk:
Opportunities
• A breakout to new highs could extend equity momentum into early 2026.
• Broader sector participation reduces reliance on mega cap tech leadership.
• Banks and transportation stocks strengthening often signals healthier economic conditions.
Risks
• FOMO-led buying can exaggerate valuations, leaving little cushion during pullbacks.
• Under-positioned institutions may rush in late, adding volatility.
• Retail overconfidence can reverse quickly if economic or political shocks emerge.
The Bottom Line
Market veterans are increasingly warning that the final weeks of the year could trigger a rush of catch-up buying. With retail traders already leaning in and institutions lagging behind, the setup is ripe for a momentum-driven melt up.
The key question now: will new highs ignite a full-scale chase, or will cautious investors continue to resist the fear of missing out? Markets may not wait long to provide an answer.
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