By Steve Sosnick January 20, 2018 PHOTO: GETTY IMAGES Last year I suggested that Mr. Market had a girlfriend named Tina Fomo. Her name is a combination of the two acronyms that are often used to explain the psychology underlying the market’s spectacular rise: TINA, for There Is No Alternative; and FOMO, for Fear of Missing Out. Low interest rates and an outperforming domestic economy led many to believe that there were indeed few preferable alternatives to investing in U.S. equities, while institutional investors were loath to underperform their peers in a steadily rising market. But Mr. Market can be a faithless consort. It is important for investors to examine whether his relationship with Tina Fomo remains a steady one. FOMO seems to remain a key factor in the current rally. One could certainly argue that the current new year’s rally has been propelled by investors’ unwillingness to let the market proceed higher without them. Sentiment indicators are registering strongly bullish, and virtually all potentially risky situations that have occurred since the presidential election have either been ignored or considered to be buying opportunities. In each of those cases, investors piled into equities once they were able to confidently price in the latest positive data. TINA may be showing some cracks, however. The Federal Reserve’s recent rate hikes have pushed up short-term rates to a level where they may provide some competition for equities. The two-year Treasury rate is now yielding more than the Standard & Poor’s 500 dividend rate for the first time in roughly a decade. That alone is hardly sufficient to produce a significant decline in the equity benchmark, but a Fed-propelled steady rise in short-term rates bears attention, as higher risk-free rates could cause a rerating of equity valuations. Further, there are bond investors who believe that as the 10-year Treasury yield rises through 2.5%, it is signaling the end of the bond market’s long-term bull run. At some point, higher interest rates can provide credible competition to stocks and make it more expensive to fund operations or share buybacks. We have already seen underperformance from overtly rate-sensitive sectors, such as utilities and real-estate investment trusts, but the broader market and even the financial sector have shown little evidence of rate concerns so far. IN SOME RESPECTS I find this market reminiscent of 1987. Each day seemed to reveal another new high in stocks and a woeful decline in bond prices, reflecting higher yields. That pattern persisted throughout the first three quarters of the year, proving that stocks and bonds can diverge meaningfully for quite some time. Of course, those trends then reversed with a vengeance. It would be irresponsible to suggest that 2018 could end like 1987, but it would be more irresponsible for equity investors to ignore a significant rise in rates, if that occurs. It is very difficult to suggest hedges in the face of a runaway bull market, though some might argue that it is exactly the time to consider them. Without an obvious catalyst for a market reversal, it behooves investors to keep their hedges as inexpensive as possible. Out-of-the-money put spreads are one way to accomplish this. Consider PowerShares QQQ Trust Series (ticker: QQQ), the exchange-traded fund that tracks the Nasdaq 100. Traders concerned that the tech-heavy index is due for a pullback after earnings season can purchase 160 puts while selling 157 puts that expire on Feb. 16 for a total of $0.43 per contract. The trade breaks even if QQQ closes below $159.57, and yields a maximum of $2.57 if the ETF closes at $157 or below. I’ve never been a fan of the tabloids and couldn’t care less about the status of most celebrity couples. This is an exception. I urge most investors to keep a close eye on Mr. Market and Tina Fomo, and be vigilant in case stresses appear in this all-important relationship. STEVE SOSNICK is the chief options strategist at Interactive Brokers.