Ever get that nagging feeling you’re missing the party everyone else is already enjoying?
That’s exactly what a growing number of investors are experiencing right now as 2025 draws to a close. The market keeps grinding higher, new highs keep coming, and the fear of being left on the sidelines is getting louder by the day.
I’ve watched this movie before. And according to some of the sharpest minds on Wall Street, the final act could be a classic year-end chase that sends stocks meaningfully higher before the ball drops in Times Square.
The Perfect Recipe for a FOMO Melt-Up
Several big trading desks have put out notes this week essentially saying the same thing: the supply/demand balance in equities has flipped decisively in favor of buyers, well, more buying.
One head of global markets strategy (someone who literally moves billions) wrote that under-invested players are increasingly getting pulled in by pure fear of missing out. His exact words:
“If indices push to new highs, FOMO-driven chase behavior could accelerate.”
Translation: once the S&P 500 convincingly clears the recent highs, the psychology can flip from cautious to manic almost overnight.
Retail Is Holding the Hottest Hand
Here’s the part that really caught my attention.
Retail traders – yes, the same crowd that powered the meme-stock mania a few years back – have become the primary price-setters in 2025. And right now they are all in.
Data from one major prime broker shows eight consecutive days of net buying from retail accounts – something that almost never happens unless sentiment is extremely bullish.
Meanwhile, many institutional portfolios remain surprisingly underweight equities relative to their benchmarks. That gap creates what traders call “forced buying” later: pension funds, hedge funds, and risk-parity strategies all scrambling to catch up before performance review season hits in January.
It’s Not Just AI Anymore
For most of 2025 the story was simple: buy anything touched by artificial intelligence and ignore everything else. That trade got extremely crowded.
But something interesting started happening in the last few weeks. Strength is finally rotating into the “real economy” corners of the market that have lagged for years.
- Regional banks and money-center banks are breaking out to new cycle highs
- Transportation stocks (think trucks, rails, airlines) just hit all-time highs
- Small-caps and value indices are starting to wake up
One trading desk summed it up perfectly:
“2025 is ending where it spent much of the year: underpricing what can go right.”
When the forgotten parts of the market start outperforming, that’s usually a sign of healthy breadth – and those are exactly the environments where year-end rallies can stretch further than anyone expects.
Seasonal Tailwinds Are Lining Up
Let’s not forget the calendar.
December has historically been one of the strongest months of the year for stocks. Add in the famous “Santa Claus rally” (the last five trading days of the year plus the first two of January) and you have a period that has produced positive returns more than 75 % of the time since 1950.
Combine that seasonal tendency with:
- Quarter-end and year-end portfolio rebalancing flows
- Bonus money hitting accounts in December/January
- 401(k) contributions resetting in January
- Typical light holiday volume (which exaggerates moves)
And suddenly the path of least resistance looks higher, not lower.
Deregulation Could Be the Unexpected Catalyst
One theme I haven’t seen priced in nearly enough is the potential for a meaningful regulatory rollback starting in 2026.
Bank analysts are already talking about a coming wave of M&A in financials – something that’s been frozen for years because of regulatory hurdles. If those hurdles come down, you could see a bidding war breakout across regional banks practically overnight.
Energy, healthcare, and even telecom could see similar tailwinds. In past deregulation cycles, those sectors have been some of the best performers in the following 12–18 months.
So… Should You Chase?
Here’s where I get a little cautious – but in a good way.
Yes, the setup for a sharp year-end move looks excellent. But FOMO rallies by definition happen when most people feel they’ve already missed it. That’s usually when the risk/reward starts tilting against new buyers.
In my experience, the smartest way to play a potential melt-up is to already own the assets that will benefit most, rather than trying to pile in the day the financial media declares “FOMO is here!”
If you’re underweight equities heading into December, maybe it’s time to start averaging in – especially into those beaten-down real-economy sectors that are finally showing life.
Because if this rally really does turn into the chase everyone is whispering about, waiting for a pullback might mean watching from the sidelines while the train leaves the station.
Then again, maybe I’m wrong and we get a healthy consolidation instead. Markets love to embarrass the consensus.
But right now, with retail fully engaged, institutions playing catch-up, breadth improving, and seasonal forces aligned… the odds feel tilted toward the bulls into year-end.
Strap in. The final stretch of 2025 could be a wild one.
