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1. Shard Calculation

Query:

Response:

Calculated Shard: 148 (from laksa056)

2. Crawled Status Check

Query:

curl -X POST \
  'http://laksa148.int.ahrefs:8124/' \
  -H 'Content-Type: text/plain' \
  -H 'X-ClickHouse-Database: crawler3' \
  -H 'Authorization: Basic YXBpOg==' \
  -d 'SELECT getAhrefsURLFromUnparsed(src_unparsed) AS found_url, ifNull(toUnixTimestamp(download_stamp), 0) AS crawl_time, ifNull(toUnixTimestamp(props_url_first_seen), 0) AS first_indexed_time, download_http_code AS http_code, src_unparsed AS src_unparsed, src_root_hash AS src_root_hash, history_drop_reason AS history_drop_reason, meta_title AS meta_title, meta_descriptions AS meta_descriptions, attrs_boilerpipe_text AS attrs_boilerpipe_text, attrs_markdown AS attrs_markdown, attrs_readable_markdown AS attrs_readable_markdown, meta_canonical AS meta_canonical FROM crawler3.page_info_local FINAL PREWHERE (src_root_hash, src_unparsed) IN ((getAhrefsRootHashFromUnparsed(getAhrefsUnparsedNoserviceFromURL(\'https://www.bankrate.com/investing/signs-of-stock-market-bubble/\')), getAhrefsUnparsedNoserviceFromURL(\'https://www.bankrate.com/investing/signs-of-stock-market-bubble/\'))) FORMAT JSONEachRow'

Response:

{"found_url":"https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/","crawl_time":1776144959,"first_indexed_time":1619536514,"http_code":200,"src_unparsed":"com,bankrate!www,\/investing\/signs-of-stock-market-bubble\/ s443","src_root_hash":"16841441868536461148","history_drop_reason":null,"meta_title":"5 Sure-Fire Signs Of A Stock Market Bubble | Bankrate","meta_descriptions":["The stock market has been on a tear over the past two years. Could we be in a stock market bubble? Here are five signs to look for.","The stock market has been on a tear over the past two years. Could we be in a stock market bubble? Here are five signs to look for."],"attrs_boilerpipe_text":"The stock market has been on a tear for more than two years, with the\nS&P 500\nincreasing roughly 25 percent in both 2023 and 2024. The momentum has continued this year as stocks have continued to “melt up,” with bullish investors putting a floor under the market.\nBut with this market melt-up leaving stocks at elevated valuations and the uncertainty around the impact of tariffs on the economy, some investors may be concerned about a potential bubble. In bull markets that seem to go on endlessly, it’s important not to become complacent.\nHere are five signs to look for to judge whether we’re in bubble market territory and what we’ll likely see if we’re there.\nWatch for these tell-tale signs of a stock market bubble\nThere’s an old saying on Wall Street: “No one rings a bell at the top.” It means that only in retrospect does it become obvious for most market participants that the market has peaked.\nBut while there may be no bell at the top, observant investors can pick up on many indicators that show when the market is in nosebleed territory. You’ll want to see many of these factors working together to produce a euphoric bubble, as you weigh your options for how to keep your portfolio protected in the event that the hot market finally cools off — or worse, the bubble pops.\n1. A story has captured the market’s imagination\nA compelling story is one of the best frameworks for creating a stock bubble. The dot-com bubble of the late 1990s had one: “The internet changes everything.” The housing bubble of the 2000s had one: “Real estate never declines in price.” Even the 19th century’s railway mania promised that the massive benefits of the railroads would transform travel and transportation.\nThese so-called story stocks promise to transform the world, and while the promised benefits may ultimately arrive, they tend to take a lot longer than the stock promoters would have you believe.\nThe benefits of the internet eventually arrived, but not before effectively destroying hundreds of dot-com companies that had poor business models. And even the survivors get caught up in the frenzy, with the stocks of eventual leaders such as\nAmazon\n(AMZN) being bid up to astronomical levels before eventually falling along with the other stocks in the over-hyped sectors.\nInvest Search Icon\nWhere we see it today:\nThere’s no question that the biggest story in the stock market over the past two years has been the rise of artificial intelligence and its potential to impact many industries. AI may change many aspects of how we work and live, but exactly how the future will play out is still unclear.\nCryptocurrency\nis another area that has bubbly qualities, in part because there are not underlying cash flows to help analysts determine a coin’s fair value, if it has any at all.\n2. Prices rise regardless of news\nThe story is important because it offers a theme to build investors’ hopes and dreams on. It also provides a guide for what’s to come and how the new transformational industry might develop. But what if reality differs from the story? Investors will surely adjust their expectations, right?\nIn a bubble, it’s as if every bit of information verifies the story, so stock prices rise regardless of the news. A company hits its earnings estimates? The stock climbs. And if it misses earnings estimates by a mile? It still climbs. The story stocks seem unbreakable, and they are for a time.\nAnd so sharp-eyed investors are calibrating reality to the story in order to see if they fit. When stocks rise but the long-term future looks clearly worse, long-term investors should be extra careful.\nInvest Search Icon\nWhere we see it today:\nStocks have seen tremendous gains the past couple of years and excitement seemed to reach new heights following the reelection of President Donald Trump. Investors bid stocks higher with the expectation that deregulation and a more business-friendly administration would result in a surge in growth. Trump even toured the New York Stock Exchange. When\ntalk of tariffs\npicked up, they were initially dismissed as a negotiating tactic. But soon stocks fell as investors became more concerned about the outlook for growth, then they bounced as investors decided tariffs wouldn’t be as bad as expected.\n3. Other asset prices are soaring, too\nOften in a bubble market, it’s not just stocks that are soaring; it’s other assets, too. Flush with cash from their stock successes, a booming economy or easy money, speculators rush out to\nbuy other highly risky alternative assets\n.\nDuring these times you may see the prices of collectibles skyrocketing. Promoters may try to hype up “new asset classes” by highlighting how investible sports cards are, or how art from the great masters never seems to decline in value. Assets such as these produce no cash flow and so turning a profit hinges entirely on finding someone else to pay more for them than you did.\nAnd the definition of “investible” assets continues to grow: luxury handbags, shoes, Pokémon cards, Beanie Babies, wine, video game cartridges,\ndigital art through NFTs\nand the list goes on and on.\nInvest Search Icon\nWhere we see it today:\nWith thousands of possible examples, cryptocurrencies have seen a flood of interest as speculators and promoters rush to the space to cash in. Cryptocurrency has a total market valuation of around $3.8 trillion as of July 2025, with\nBitcoin\naccounting for the lion’s share of that figure. Of course, it’s not just digital assets that have piqued interest — shoes and handbags have seen soaring prices lately, too.\n4. New traders say that old investors ‘don’t get it’\nWhen the taxi driver, the hairstylist and the grocery clerk are giving you investing tips, it’s a good sign that an investment thesis has spilled over to the mainstream and is attracting less sophisticated retail traders looking for a buck and who are motivated by fear of missing out (FOMO). And they may well succeed — for a period of time.\nIn the rush to build hype, breathless promoters will say, “This time it’s different.” But it rarely is.\nThe time when seasoned investors start to worry the market may have moved unsustainably high is when they see a rush of newer investors into the market and where FOMO is overriding the fundamentals. When new investors are piling into excessively risky investment such as stocks with no earnings track record, or in some cases, no revenue, that is an indicator that trouble could be looming.\n— Greg McBride, CFA, Bankrate chief financial analyst\nThis new breed of trader will explain to you why\nWarren Buffett\ndoesn’t “get” the new paradigm and that Buffett and other similarly “old school” investors are behind the curve. This new crowd may have been trading for just a few months, but they insist they understand the markets.\nYet it was Buffett who endured similar barbs from inexperienced traders in the dot-com bust and then came through it all. He avoided much of the housing debacle, too. Buffett was perched on a war chest and took advantage of ailing banks that needed cash and confidence during the 2008 financial crisis.\nPro gamblers love popular horse races such as the Kentucky Derby, because they bring easy money to the track, allowing the real handicappers to take it. So it is with investing, too.\nInvest Search Icon\nWhere we see it today:\nAs investors cheered stocks to new highs in 2024, one notable investor was increasingly taking his chips off the table. Warren Buffett’s\nBerkshire Hathaway was mostly a seller of stocks\nin 2024, with the company’s cash position ballooning to north of $300 billion. Buffett frequently advises against timing the market, but it’s worth noting that he couldn’t find attractive uses for his large cash pile last year, even as other investors let the good times roll.\n5. Stock valuations in the top percentiles\nDuring the last phases of a stock bubble, the prices are all out of proportion to reality. Valuations are in the highest percentiles, as measured historically. By measuring on a relative basis, you get a better sense of how things match up to the bubbles of the past and whether a solid bull run is more likely to burst or continue, albeit with a more modest sense of “animal spirits.”\nIt’s important to recognize that a price rise alone is not sufficient to say something is in a bubble. A stock can rise 100 percent and not be in a bubble if its underlying fundamentals have improved significantly. Or if we start from a low valuation (for example, from the bottom of the pandemic) and then measure after a solid bull run, we’re sure to get gaudy figures that might make you think of a bubble.\nHowever, it’s easy to cherry-pick price increases and say that we’re in a bubble, without looking at the broader context. Stocks could climb for a long while as profits continue to rise.\nInvest Search Icon\nWhere we see it today:\nThere’s no question that stock valuations are high. By one measure, the cyclically adjusted price-to-earnings ratio, the S&P 500 has only traded at a higher valuation twice, in October 2021 and December 1999. In October, Goldman Sachs forecast that equity returns over the next decade would average around 3 percent a year, far from the double-digit returns investors have gotten used to. High valuations don’t guarantee an immediate crash or correction, but it’s probably time for investors to lower their expectations for stocks.\nWhat is a stock market bubble?\nA stock market bubble is a speculative frenzy when stock prices vastly exceed the fundamental value of the companies underlying them. A market as a whole can also be in a bubble if traders buy assets seemingly regardless of their value. Similarly, individual stocks can be in a bubble when investors bid up their prices well beyond what’s justified by the underlying business performance.\nA stock bubble is not merely overvaluation, which can occur even during normal periods as markets become mildly overextended. Instead, a bubble is a period of massive overvaluation, when speculators become inflamed by “animal spirits” and heedlessly bid up stocks. Often these periods are driven by a new business story that promises to revolutionize the world.\nMany investors may find it helpful to\nwork with a financial advisor\nduring times of market uncertainty, like when stocks might be in a bubble. You can develop a financial plan that will set you on a path toward reaching your financial goals.\nWhy should you care about stock market bubbles?\nIt’s important to recognize when a stock market bubble may be happening, though it’s not always obvious, except in retrospect. Recognizing a bubble is important because it allows you to:\nAvoid losing money.\nWhile many speculators make money during a bubble, only the ones who recognize a bubble has formed actually keep their money and avoid jumping back into the bubbly stocks.\nPrepare for a market decline.\nIf you see a bubble has formed, it can help you navigate your portfolio through it. You can move your investments from high-risk picks to low-risk picks, or even sell out of the market altogether. By knowing that a bubble has formed, you can take steps to limit your exposure to it.\nReady your personal finances.\nSometimes a stock bubble can lead to spillover effects in the broader economy. When a bubble bursts, it often precedes a downturn in the economy, creating a recession that can lead to job loss. So a widespread bubble can be a potential indicator that the economy may be approaching its local peak. You can get your finances in order to help withstand this potential downturn.\nUnderstanding whether a stock market bubble is developing can be useful to help navigate your investments, as well as your personal financial situation.\nExamples of a stock market bubble\nThe U.S. has experienced at least two major market bubbles in the recent past. Bubbles and the financial losses they create tend to scar participants for decades.\nThe dot-com bubble:\nIn the period of 1999-2000, the promise of the internet led many traders to buy anything even tangentially connected to it, even if the company did not have a legitimate business plan. While some business behemoths eventually emerged from the bubble — Amazon, for example — many dot-coms quickly became dot-bombs, fading completely into bankruptcy. Other dot-com companies that did survive lost 90 percent or more of their value and never fully recovered from the carnage.\nThe housing bubble:\nIn the period following the dot-com bubble, housing began to appreciate rapidly, powered by low interest rates (which existed as a way to soften the effect of the dot-com burst) and the belief that real estate never declines in value. Housing prices appreciated, as did the stocks of many businesses associated with real estate, including construction companies, banks and a variety of specialty finance firms. When the bubble burst and housing prices plummeted, homeowners and banks were left with assets that were worth much less than they were purchased for. The resulting devastation left the economy reeling for many years.\nOther classic examples of bubbles include the 17th century Dutch tulip mania, Japan’s real estate and stock bubble in the 1980s, the 18th century South Sea bubble and the U.S. stock market of the 1920s, which\npreceded the Great Depression\n. In addition, many analysts think cryptocurrency is a bubble because these digital tokens are not backed by any assets or cash flow.\nHow to avoid losing money when a market bubble bursts\nIt’s not always easy to avoid losing money when a market bubble bursts. In many cases, when one sector is massively inflated, it spills over and affects many other industries. For example, in the bear market of 2007-2009, an inflated housing market led to a market-wide decline in stocks. However, many stocks unrelated to housing recovered relatively quickly in the years following the decline, and eventually even many banks and other businesses recovered, too.\nHere are a few ways to avoid losing money in a bubble:\nAvoid bubble stocks.\nThis advice is easier said than done when a speculative frenzy grips traders, and you’re derided for not understanding the “new economy.”\nOwn stock in non-bubble companies.\nOne of the best ways to avoid losing money in a bubble, while still being invested, is to own stock in companies that are unrelated to the bubble, if that’s possible. However, sometimes even the bubble spills over into unrelated companies.\nBuy value stocks.\nValue stocks are often a good place to be when a market bubble bursts, because they do not have extreme expectations built into their prices. Without those expectations,\nvalue stocks\noften don’t decline as much as bubble stocks do when the market bursts, and they may even rise as investors shift to them.\nBuy solid companies.\nBy investing in high-performing companies, especially those unrelated to the bubble, you may be able to escape the carnage when the bubble pops.\nWhile it may be possible to dodge the worst when a bubble pops, often it’s not entirely avoidable, because even good stocks can decline in the short term. That’s why it’s vital to think long term and\ninvest for the long term\n. Buy solid companies and then take advantage of downturns and buy them when a bubble bursts.\nBottom line\nWhen stocks are soaring, it can be easy to overlook the increasing dangers posed by their valuation. It’s easy to get caught up in the euphoria, and high prices seem to lead to even higher prices. The party swirls on, until one day it doesn’t. So the world’s best investors focus on controlling their emotions as the market rises (and falls) so that they can coolly recognize when they need to buy and when they need to tread carefully.\nEditorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.\nDid you find this page helpful?\nInfo Icon\nHelp us improve our content","attrs_markdown":"[Skip to Main Content](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#main-content)\n\n- [Banking](https:\/\/www.bankrate.com\/banking\/)\n  All\n  \n  Banking\n  \n  Checking & savings\n  \n  CDs\n  \n  Money market\n  \n  Banks\n  \n  [Explore all banking resources](https:\/\/www.bankrate.com\/banking\/)\n  \n  Banking\n  \n  Compare accounts\n  \n  - [Best high-yield savings accounts](https:\/\/www.bankrate.com\/banking\/savings\/best-high-yield-interests-savings-accounts\/)\n  - [Best checking accounts](https:\/\/www.bankrate.com\/banking\/checking\/best-checking-accounts\/)\n  - [Best free checking accounts](https:\/\/www.bankrate.com\/banking\/checking\/best-free-checking-accounts\/)\n  \n  Get guidance\n  \n  - [Savings calculator](https:\/\/www.bankrate.com\/banking\/savings\/simple-savings-calculator\/)\n  - 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[![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/3d6f458d84\/how-to-start-investing-nav-imagery.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) How to start investing 7 min read](https:\/\/www.bankrate.com\/investing\/how-to-start-investing\/)\n  \n  Compare plans\n  \n  - [Best retirement plans](https:\/\/www.bankrate.com\/retirement\/best-retirement-plans\/)\n  - [Best IRA accounts](https:\/\/www.bankrate.com\/retirement\/best-ira-accounts\/)\n  - [Best Roth IRA accounts](https:\/\/www.bankrate.com\/investing\/best-roth-ira\/)\n  - [Best 401(k) rollover options](https:\/\/www.bankrate.com\/retirement\/best-places-to-rollover-401k\/)\n  \n  Get guidance\n  \n  - [401(k) calculator](https:\/\/www.bankrate.com\/retirement\/401-k-calculator\/)\n  - [Retirement plan calculator](https:\/\/www.bankrate.com\/retirement\/retirement-plan-calculator\/)\n  - [Roth IRA calculator](https:\/\/www.bankrate.com\/retirement\/roth-ira-plan-calculator\/)\n  - [All retirement calculators](https:\/\/www.bankrate.com\/retirement\/calculators\/)\n  - [Retirement resources](https:\/\/www.bankrate.com\/retirement\/)\n  \n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/59a3f533a8\/best-worst-states-for-retirement-nav-imagery.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) Best & worst states for retirement 6 min read](https:\/\/www.bankrate.com\/retirement\/best-and-worst-states-for-retirement\/)\n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/a6b1dc15ca\/how-to-save-for-retirement-nav-imagery.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) How to save for retirement 15 min read](https:\/\/www.bankrate.com\/retirement\/how-to-save-for-retirement\/)\n  \n  Finding an advisor\n  \n  - [Find a financial advisor](https:\/\/www.bankrate.com\/investing\/financial-advisors\/financial-advisor-matching\/)\n  - [Best financial advisors](https:\/\/www.bankrate.com\/investing\/financial-advisors\/best-financial-advisors\/)\n  - [How to choose a financial advisor](https:\/\/www.bankrate.com\/investing\/financial-advisors\/how-to-choose-a-financial-advisor\/)\n  - [Financial planner vs advisor](https:\/\/www.bankrate.com\/investing\/financial-advisors\/financial-advisor-vs-financial-planner\/)\n  \n  Get guidance\n  \n  - [What is financial planning?](https:\/\/www.bankrate.com\/investing\/financial-advisors\/what-is-financial-planning\/)\n  - [What is a fiduciary?](https:\/\/www.bankrate.com\/investing\/financial-advisors\/what-is-a-fiduciary\/)\n  - [What is a CFP?](https:\/\/www.bankrate.com\/investing\/financial-advisors\/what-is-a-certified-financial-planner\/)\n  - [What is wealth management?](https:\/\/www.bankrate.com\/investing\/financial-advisors\/what-is-wealth-management\/)\n  - [Financial advisor resources](https:\/\/www.bankrate.com\/investing\/financial-advisors\/)\n  \n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/1cdbf65950\/what-is-wealth-management-s.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) When to get an advisor 4 min read](https:\/\/www.bankrate.com\/investing\/financial-advisors\/when-to-get-a-financial-advisor\/)\n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/38750a2d5a\/what-is-a-certified-financial-planner-s.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) Pros & cons of financial advising 7 min read](https:\/\/www.bankrate.com\/investing\/financial-advisors\/pros-cons-financial-advisor\/)\n  \n  [Explore all investing resources](https:\/\/www.bankrate.com\/investing\/)\n- [Credit cards](https:\/\/www.bankrate.com\/credit-cards\/)\n  All\n  \n  Credit cards\n  \n  Cards by category\n  \n  Cards by credit\n  \n  Tools & reviews\n  \n  Guides & resources\n  \n  [Explore all credit cards resources](https:\/\/www.bankrate.com\/credit-cards\/)\n  \n  Credit cards\n  \n  Compare cards\n  \n  - [Best cards of 2026](https:\/\/www.bankrate.com\/credit-cards\/best-credit-cards\/)\n  - [Best cash back cards](https:\/\/www.bankrate.com\/credit-cards\/cash-back\/best-cash-back-cards\/)\n  - [Best balance transfer cards](https:\/\/www.bankrate.com\/credit-cards\/balance-transfer\/best-balance-transfer-cards\/)\n  - [Best 0% APR cards](https:\/\/www.bankrate.com\/credit-cards\/zero-interest\/best-zero-interest-cards\/)\n  - [Best travel cards](https:\/\/www.bankrate.com\/credit-cards\/travel\/best-travel-cards\/)\n  - [Best rewards cards](https:\/\/www.bankrate.com\/credit-cards\/rewards\/best-rewards-cards\/)\n  - [Best business cards](https:\/\/www.bankrate.com\/credit-cards\/business\/best-business-cards\/)\n  - [Best sign up bonus cards](https:\/\/www.bankrate.com\/credit-cards\/rewards\/best-bonus-offer-cards\/)\n  \n  Find my matches\n  \n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/4f02ac6944\/cardmatch-nav-imagery.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) CardMatch™ Get personalized card recommendations](https:\/\/www.bankrate.com\/credit-cards\/tools\/cardmatch\/)\n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/10ad7295ae\/card-comparison-tool-nav-imagery.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) Card comparison tool Compare credit cards side-by-side](https:\/\/www.bankrate.com\/credit-cards\/tools\/compare\/)\n  \n  See your card matches\n  \n  Answer a few quick questions and we’ll show you your top credit card options.\n  \n  [Find my matches](https:\/\/www.bankrate.com\/credit-cards\/tools\/cardmatch\/)\n  \n  Compare cards\n  \n  - [Excellent credit](https:\/\/www.bankrate.com\/credit-cards\/rewards\/best-for-excellent-credit\/)\n  - [Good credit](https:\/\/www.bankrate.com\/credit-cards\/building-credit\/best-for-good-credit\/)\n  - [Fair credit](https:\/\/www.bankrate.com\/credit-cards\/building-credit\/best-for-fair-credit\/)\n  - [Bad credit](https:\/\/www.bankrate.com\/credit-cards\/bad-credit\/best-for-bad-credit\/)\n  \n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/2e8651b174\/how-to-build-credit-nav-imagery.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) How to build credit 7 min read](https:\/\/www.bankrate.com\/personal-finance\/credit\/how-to-build-credit-fast\/)\n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/5a53191033\/best-cards-for-building-credit-nav-imagery.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) Best cards for building credit Find out which credit cards could help](https:\/\/www.bankrate.com\/credit-cards\/building-credit\/best-for-no-credit-history\/)\n  \n  See what the experts say\n  \n  Read in-depth credit card reviews to find out which cards have the best perks and more.\n  \n  [Read card reviews](https:\/\/www.bankrate.com\/credit-cards\/reviews\/)\n  \n  Get guidance\n  \n  - [Credit card payoff calculator](https:\/\/www.bankrate.com\/credit-cards\/tools\/credit-card-payoff-calculator\/)\n  - [Balance transfer calculator](https:\/\/www.bankrate.com\/credit-cards\/tools\/credit-card-balance-transfer-calculator\/)\n  - [Credit utilization calculator](https:\/\/www.bankrate.com\/credit-cards\/tools\/credit-utilization-calculator\/)\n  - [Points and miles calculator](https:\/\/www.bankrate.com\/credit-cards\/tools\/points-and-miles-calculator\/)\n  - [All credit card calculators](https:\/\/www.bankrate.com\/credit-cards\/tools\/)\n  \n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/43548bf9cd\/spender-type-tool-nav-imagery.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) Spender type tool Find cards that fit your needs](https:\/\/www.bankrate.com\/credit-cards\/tools\/spender-type-tool\/)\n  \n  Get advice\n  \n  - [Credit cards 101](https:\/\/www.bankrate.com\/credit-cards\/advice\/)\n  - [Balance transfer advice](https:\/\/www.bankrate.com\/credit-cards\/balance-transfer\/)\n  - [Zero interest credit cards](https:\/\/www.bankrate.com\/credit-cards\/zero-interest\/)\n  - [Rewards credit card advice](https:\/\/www.bankrate.com\/credit-cards\/rewards\/)\n  - [Cash back credit card advice](https:\/\/www.bankrate.com\/credit-cards\/cash-back\/)\n  - [Travel credit card advice](https:\/\/www.bankrate.com\/credit-cards\/travel\/)\n  - [Business credit card advice](https:\/\/www.bankrate.com\/credit-cards\/business\/)\n  \n  Build credit\n  \n  - [Advice for bad credit](https:\/\/www.bankrate.com\/credit-cards\/bad-credit\/)\n  - [Rebuilding credit score](https:\/\/www.bankrate.com\/credit-cards\/building-credit\/)\n  \n  [Explore all credit cards resources](https:\/\/www.bankrate.com\/credit-cards\/)\n- [Loans](https:\/\/www.bankrate.com\/loans\/)\n  All\n  \n  Loans\n  \n  Personal loans\n  \n  Auto loans\n  \n  Student loans\n  \n  Small business loans\n  \n  [Explore all loans resources](https:\/\/www.bankrate.com\/loans\/)\n  \n  Loans\n  \n  Compare lenders\n  \n  - [Best personal loans](https:\/\/www.bankrate.com\/loans\/personal-loans\/rates\/)\n  - [Best personal loans for bad credit](https:\/\/www.bankrate.com\/loans\/personal-loans\/bad-credit-loans\/)\n  - [Best debt consolidation loans](https:\/\/www.bankrate.com\/loans\/personal-loans\/debt-consolidation-loans\/)\n  - [Best home improvement loans](https:\/\/www.bankrate.com\/loans\/home-improvement\/rates\/)\n  \n  Get guidance\n  \n  - [Personal loan resources](https:\/\/www.bankrate.com\/loans\/personal-loans\/)\n  - [Personal loan lender reviews](https:\/\/www.bankrate.com\/loans\/personal-loans\/reviews\/)\n  - [Personal loans calculator](https:\/\/www.bankrate.com\/loans\/personal-loans\/personal-loan-calculator\/)\n  - [Average personal loan interest rates](https:\/\/www.bankrate.com\/loans\/personal-loans\/average-personal-loan-rates\/)\n  \n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/38750a2d5a\/what-is-a-certified-financial-planner-s.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) Personal loan basics 9 min read](https:\/\/www.bankrate.com\/loans\/personal-loans\/what-is-a-personal-loan\/)\n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/4c26764452\/how-to-start-saving.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) How to get a personal loan 11 min read](https:\/\/www.bankrate.com\/loans\/personal-loans\/how-to-get-personal-loan\/)\n  \n  Compare lenders\n  \n  - [Best auto loans](https:\/\/www.bankrate.com\/loans\/auto-loans\/rates\/)\n  - [Best auto loan refinance rates](https:\/\/www.bankrate.com\/loans\/auto-loans\/refinance-rates\/)\n  - [Best car loans for bad credit](https:\/\/www.bankrate.com\/loans\/auto-loans\/bad-credit-loans\/)\n  \n  Get guidance\n  \n  - [Auto loan resources](https:\/\/www.bankrate.com\/loans\/auto-loans\/)\n  - [Auto loan lender reviews](https:\/\/www.bankrate.com\/loans\/auto-loans\/reviews\/)\n  - [Auto loan calculator](https:\/\/www.bankrate.com\/loans\/auto-loans\/auto-loan-calculator\/)\n  - [Auto loan refinancing guide](https:\/\/www.bankrate.com\/loans\/auto-loans\/how-to-refinance-car-loan\/)\n  \n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/d1a328a134\/auto-loan-refinancing-guide-nav.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) How to get the best auto loan rate 10 min read](https:\/\/www.bankrate.com\/loans\/auto-loans\/how-to-get-the-best-auto-loan-rate\/)\n  - [![](https:\/\/www.bankrate.com\/f\/102997\/720x720\/c481afa0d2\/auto-loan-refinancing-guide-s.jpg\/m\/50x50\/filters:quality\$90\$:format\$webp\$) Auto loan basics 5 min read](https:\/\/www.bankrate.com\/loans\/auto-loans\/what-is-an-auto-loan\/)\n  \n  Compare lenders\n  \n  - [Student loan rates](https:\/\/www.bankrate.com\/loans\/student-loans\/rates\/)\n  - [Student loan refinancing rates](https:\/\/www.bankrate.com\/loans\/student-loans\/refinance-rates\/)\n  - [Best bad credit student loans](https:\/\/www.bankrate.com\/loans\/student-loans\/bad-credit-loans\/)\n  \n  Get guidance\n  \n  - [Student loan resources](https:\/\/www.bankrate.com\/loans\/student-loans\/)\n  - [Student loan lender reviews](https:\/\/www.bankrate.com\/loans\/student-loans\/reviews\/)\n  - [Student loan calculator](https:\/\/www.bankrate.com\/loans\/student-loans\/student-loan-calculator\/)\n  - [Student loan refinance calculator](https:\/\/www.bankrate.com\/loans\/student-loans\/student-loan-refinance-calculator\/)\n  \n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/3d6f458d84\/how-to-start-investing-nav-imagery.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) Private student loan basics 10 min read](https:\/\/www.bankrate.com\/loans\/student-loans\/private-student-loans-guide\/)\n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/4c26764452\/how-to-start-saving.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) How to get a student loan 11 min read](https:\/\/www.bankrate.com\/loans\/student-loans\/how-to-get-student-loan\/)\n  \n  Compare lenders\n  \n  - [Best small business loans](https:\/\/www.bankrate.com\/loans\/small-business\/best-small-business-loans\/)\n  - [Bad credit small business loans](https:\/\/www.bankrate.com\/loans\/small-business\/bad-credit-business-loans\/)\n  - [Business lines of credit](https:\/\/www.bankrate.com\/loans\/small-business\/business-line-of-credit\/)\n  - [Small business loan banks](https:\/\/www.bankrate.com\/loans\/small-business\/best-banks-for-small-business-loans\/)\n  \n  Get guidance\n  \n  - [Small business loans resources](https:\/\/www.bankrate.com\/loans\/small-business\/)\n  - [Small business loan reviews](https:\/\/www.bankrate.com\/loans\/small-business\/reviews\/)\n  - [Small business loan calculator](https:\/\/www.bankrate.com\/loans\/small-business\/business-loan-calculator\/)\n  \n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/4c26764452\/how-to-start-saving.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) How small business loans work 9 min read](https:\/\/www.bankrate.com\/loans\/small-business\/how-do-small-business-loans-work\/)\n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/38750a2d5a\/what-is-a-certified-financial-planner-s.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) How to get a business loan 9 min read](https:\/\/www.bankrate.com\/loans\/small-business\/how-to-get-a-business-loan\/)\n  \n  [Explore all loans resources](https:\/\/www.bankrate.com\/loans\/)\n- [Home equity](https:\/\/www.bankrate.com\/home-equity\/)\n  All\n  \n  Home equity\n  \n  HELOC\n  \n  Home equity loans\n  \n  [Explore all home equity resources](https:\/\/www.bankrate.com\/home-equity\/)\n  \n  Home equity\n  \n  HELOC\n  \n  A HELOC is a variable-rate line of credit that lets you borrow funds for a set period and repay them later.\n  \n  [HELOC Rates](https:\/\/www.bankrate.com\/home-equity\/heloc-rates\/)\n  \n  Home equity basics\n  \n  - [Best HELOC lenders](https:\/\/www.bankrate.com\/home-equity\/heloc-lenders\/)\n  - [HELOC calculator](https:\/\/www.bankrate.com\/home-equity\/heloc-calculator\/)\n  - [What is a HELOC?](https:\/\/www.bankrate.com\/home-equity\/what-is-heloc\/)\n  - [Pros and cons of HELOCs](https:\/\/www.bankrate.com\/home-equity\/pros-cons-of-home-equity-lines\/)\n  - [Home equity lender reviews](https:\/\/www.bankrate.com\/home-equity\/reviews\/)\n  \n  - [![](https:\/\/www.bankrate.com\/f\/102997\/1440x1440\/e9e92b7729\/home-equity-heloc-guide-nav-imagery.png\/m\/50x50\/filters:quality\$90\$:format\$webp\$) What is home equity? 8 min read](https:\/\/www.bankrate.com\/home-equity\/what-is-home-equity\/)\n  - [![Home purchase](https:\/\/www.bankrate.com\/f\/102997\/1280x720\/98576f9f53\/home-purchase.jpeg\/m\/50x50\/filters:quality\$90\$:format\$webp\$) How to calculate home equity 6 min read](https:\/\/www.bankrate.com\/home-equity\/how-to-calculate-equity-in-your-home\/)\n  \n  Home equity loans\n  \n  Home equity loans let you borrow a lump sum at a fixed rate, based on how much of the home you own outright.\n  \n  [Home equity loan rates](https:\/\/www.bankrate.com\/home-equity\/home-equity-loan-rates\/)\n  \n  Get guidance\n  \n  - 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[Investing](https:\/\/www.bankrate.com\/investing\/)  ›\n2. 5 sure-fire signs of a stock market bubble\n\nAdvertiser Disclosure\n\n# 5 sure-fire signs of a stock market bubble\n![James Royal, Ph.D.](https:\/\/www.bankrate.com\/2021\/10\/26151853\/James-Royal-headshot-scaled-square.jpg?auto=webp&quality=85&width=24&height=24&fit=cover&enable=upscale&crop=1:1,smart) ![Brian Baker, CFA](https:\/\/www.bankrate.com\/2021\/05\/20103456\/brian-baker.jpg?auto=webp&quality=85&width=24&height=24&fit=cover&enable=upscale&crop=1:1,smart) ![Brian Beers](https:\/\/www.bankrate.com\/2019\/05\/06102103\/b-beers-headshot1.jpg?auto=webp&quality=85&width=24&height=24&fit=cover&enable=upscale&crop=1:1,smart)\n\nWritten by\n\nJames Royal, Ph.D.\n\n![](https:\/\/www.bankrate.com\/2021\/10\/26151853\/James-Royal-headshot-scaled-square.jpg?auto=webp&quality=85&width=64&height=64&fit=cover&enable=upscale&crop=1:1,smart)\n\n[James Royal, Ph.D.](https:\/\/www.bankrate.com\/authors\/james-royal\/)\n\nFormer Principal Writer, Investing and Wealth Management\n\nExpertise\n\n- •  Investing\n- •  Wealth management\n\nFormer Bankrate principal writer and editor James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more.\n\n[Read more](https:\/\/www.bankrate.com\/authors\/james-royal\/)\n\n- [Connect with James Royal, Ph.D. on Twitter](https:\/\/twitter.com\/JimRoyalPhD)\n- [Connect with James Royal, Ph.D. on LinkedIn](https:\/\/www.linkedin.com\/in\/james-royal-phd-809b929\/)\n- [Get in contact with James Royal, Ph.D. via Email](mailto:jroyal@redventures.com)\n\nClose\n\n[James Royal, Ph.D.](https:\/\/www.bankrate.com\/authors\/james-royal\/)\n\nand\n\nBrian Baker, CFA\n\n,\n\n![](https:\/\/www.bankrate.com\/2021\/05\/20103456\/brian-baker.jpg?auto=webp&quality=85&width=64&height=64&fit=cover&enable=upscale&crop=1:1,smart)\n\n[Brian Baker, CFA](https:\/\/www.bankrate.com\/authors\/brian-baker-cfa\/)\n\nFormer Senior Writer, Investing and Retirement\n\nExpertise\n\n- •  Investing\n- •  Wealth management\n\n16 Years of experience\n\nBrian Baker covered investing and retirement for Bankrate. He is a CFA Charterholder and previously worked in equity research at a buyside investment firm. Baker is passionate about helping people make sense of complicated financial topics so that they can better plan for their financial futures.\n\n[Read more](https:\/\/www.bankrate.com\/authors\/brian-baker-cfa\/)\n\n- [Connect with Brian Baker, CFA on Twitter](https:\/\/twitter.com\/briandbaker1)\n- [Connect with Brian Baker, CFA on LinkedIn](https:\/\/www.linkedin.com\/in\/brian-baker-cfa-1019779)\n- [Get in contact with Brian Baker, CFA via Email](mailto:brbaker@redventures.com)\n\nClose\n\n[Brian Baker, CFA](https:\/\/www.bankrate.com\/authors\/brian-baker-cfa\/),\n\nEdited by\n\nBrian Beers\n\n![](https:\/\/www.bankrate.com\/2019\/05\/06102103\/b-beers-headshot1.jpg?auto=webp&quality=85&width=64&height=64&fit=cover&enable=upscale&crop=1:1,smart)\n\n[Brian Beers](https:\/\/www.bankrate.com\/authors\/brian-beers\/)\n\nFormer Managing Editor\n\nExpertise\n\n- •  Investing\n- •  Banking\n\nBrian Beers is a former managing editor for Bankrate. He oversaw editorial coverage of banking, investing, the economy and all things money.\n\n[Read more](https:\/\/www.bankrate.com\/authors\/brian-beers\/)\n\n- [Connect with Brian Beers on Twitter](https:\/\/twitter.com\/brian_beers)\n- [Connect with Brian Beers on LinkedIn](https:\/\/www.linkedin.com\/in\/brian-beers\/)\n\nClose\n\n[Brian Beers](https:\/\/www.bankrate.com\/authors\/brian-beers\/)\n\nPublished on July 18, 2025 \\| 8 min read\n\nBankrate is always editorially independent. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Here's an explanation for how we make money . Our Bankrate promise is to ensure everything we publish is objective, accurate and trustworthy.\n\n![A trader on the floor of the New York Stock Exchange looking at at a monitor with a concerned look on their face.](https:\/\/www.bankrate.com\/brp\/2024\/01\/06122702\/5-sure-fire-signs-of-a-stock-market-bubble.jpg?auto=webp&optimize=high&crop=16:9)\n\nMichael M. Santiago\/Getty Images\n\nTable of contents\n\n- [Watch for these tell-tale signs of a stock market bubble](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#signs)\n- [What is a stock market bubble?](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#what-is)\n- [Why should you care about stock market bubbles?](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#why)\n- [Examples of a stock market bubble](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#examples)\n- [How to avoid losing money when a market bubble bursts](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#bursts)\n\nTable of contents\n\nBack to top\n\nThe stock market has been on a tear for more than two years, with the [S\\&P 500](https:\/\/www.bankrate.com\/investing\/how-to-buy-sp-500-index-fund\/) increasing roughly 25 percent in both 2023 and 2024. The momentum has continued this year as stocks have continued to “melt up,” with bullish investors putting a floor under the market.\n\nBut with this market melt-up leaving stocks at elevated valuations and the uncertainty around the impact of tariffs on the economy, some investors may be concerned about a potential bubble. In bull markets that seem to go on endlessly, it’s important not to become complacent.\n\nHere are five signs to look for to judge whether we’re in bubble market territory and what we’ll likely see if we’re there.\n\n##\n![](https:\/\/navi.cohesionapps.com\/display?write_key=wk_2M3TlVcWbz8i1RTZjLkSmbWfyQC&adId=50a6c197db&req=https%3A%2F%2Fwww.bankrate.com%2Finvesting%2Fsigns-of-stock-market-bubble%2F&ref=)\n\n## Watch for these tell-tale signs of a stock market bubble\nThere’s an old saying on Wall Street: “No one rings a bell at the top.” It means that only in retrospect does it become obvious for most market participants that the market has peaked.\n\nBut while there may be no bell at the top, observant investors can pick up on many indicators that show when the market is in nosebleed territory. You’ll want to see many of these factors working together to produce a euphoric bubble, as you weigh your options for how to keep your portfolio protected in the event that the hot market finally cools off — or worse, the bubble pops.\n\n### 1\\. A story has captured the market’s imagination\nA compelling story is one of the best frameworks for creating a stock bubble. The dot-com bubble of the late 1990s had one: “The internet changes everything.” The housing bubble of the 2000s had one: “Real estate never declines in price.” Even the 19th century’s railway mania promised that the massive benefits of the railroads would transform travel and transportation.\n\nThese so-called story stocks promise to transform the world, and while the promised benefits may ultimately arrive, they tend to take a lot longer than the stock promoters would have you believe.\n\nThe benefits of the internet eventually arrived, but not before effectively destroying hundreds of dot-com companies that had poor business models. And even the survivors get caught up in the frenzy, with the stocks of eventual leaders such as [Amazon](https:\/\/www.bankrate.com\/investing\/how-to-invest-in-stocks\/) (AMZN) being bid up to astronomical levels before eventually falling along with the other stocks in the over-hyped sectors.\n\n**Where we see it today:** There’s no question that the biggest story in the stock market over the past two years has been the rise of artificial intelligence and its potential to impact many industries. AI may change many aspects of how we work and live, but exactly how the future will play out is still unclear. [Cryptocurrency](https:\/\/www.bankrate.com\/investing\/what-is-cryptocurrency\/) is another area that has bubbly qualities, in part because there are not underlying cash flows to help analysts determine a coin’s fair value, if it has any at all.\n\nMORE:  [How to turn \\$1,000 into \\$1 million, according to a top wealth advisor](https:\/\/www.bankrate.com\/investing\/best-ways-to-invest-1000\/)\n\n### 2\\. Prices rise regardless of news\nThe story is important because it offers a theme to build investors’ hopes and dreams on. It also provides a guide for what’s to come and how the new transformational industry might develop. But what if reality differs from the story? Investors will surely adjust their expectations, right?\n\nIn a bubble, it’s as if every bit of information verifies the story, so stock prices rise regardless of the news. A company hits its earnings estimates? The stock climbs. And if it misses earnings estimates by a mile? It still climbs. The story stocks seem unbreakable, and they are for a time.\n\nAnd so sharp-eyed investors are calibrating reality to the story in order to see if they fit. When stocks rise but the long-term future looks clearly worse, long-term investors should be extra careful.\n\n**Where we see it today:** Stocks have seen tremendous gains the past couple of years and excitement seemed to reach new heights following the reelection of President Donald Trump. Investors bid stocks higher with the expectation that deregulation and a more business-friendly administration would result in a surge in growth. Trump even toured the New York Stock Exchange. When [talk of tariffs](https:\/\/www.bankrate.com\/taxes\/trump-tariffs-explained\/) picked up, they were initially dismissed as a negotiating tactic. But soon stocks fell as investors became more concerned about the outlook for growth, then they bounced as investors decided tariffs wouldn’t be as bad as expected.\n\n### 3\\. Other asset prices are soaring, too\nOften in a bubble market, it’s not just stocks that are soaring; it’s other assets, too. Flush with cash from their stock successes, a booming economy or easy money, speculators rush out to [buy other highly risky alternative assets](https:\/\/www.bankrate.com\/investing\/popular-alternative-investments\/).\n\nDuring these times you may see the prices of collectibles skyrocketing. Promoters may try to hype up “new asset classes” by highlighting how investible sports cards are, or how art from the great masters never seems to decline in value. Assets such as these produce no cash flow and so turning a profit hinges entirely on finding someone else to pay more for them than you did.\n\nAnd the definition of “investible” assets continues to grow: luxury handbags, shoes, Pokémon cards, Beanie Babies, wine, video game cartridges, [digital art through NFTs](https:\/\/www.bankrate.com\/investing\/what-is-an-nft-non-fungible-token\/) and the list goes on and on.\n\n**Where we see it today:** With thousands of possible examples, cryptocurrencies have seen a flood of interest as speculators and promoters rush to the space to cash in. Cryptocurrency has a total market valuation of around \\$3.8 trillion as of July 2025, with [Bitcoin](https:\/\/www.bankrate.com\/investing\/what-is-bitcoin\/) accounting for the lion’s share of that figure. Of course, it’s not just digital assets that have piqued interest — shoes and handbags have seen soaring prices lately, too.\n\nLearn more:  [Best ways to get free financial advice](https:\/\/www.bankrate.com\/investing\/financial-advisors\/how-to-get-free-financial-advice\/)\n\n## 4\\. New traders say that old investors ‘don’t get it’\nWhen the taxi driver, the hairstylist and the grocery clerk are giving you investing tips, it’s a good sign that an investment thesis has spilled over to the mainstream and is attracting less sophisticated retail traders looking for a buck and who are motivated by fear of missing out (FOMO). And they may well succeed — for a period of time.\n\nIn the rush to build hype, breathless promoters will say, “This time it’s different.” But it rarely is.\n\n> \"The time when seasoned investors start to worry the market may have moved unsustainably high is when they see a rush of newer investors into the market and where FOMO is overriding the fundamentals. When new investors are piling into excessively risky investment such as stocks with no earnings track record, or in some cases, no revenue, that is an indicator that trouble could be looming.\"\n> \n> — Greg McBride, CFA, Bankrate chief financial analyst\n\nThis new breed of trader will explain to you why [Warren Buffett](https:\/\/www.bankrate.com\/investing\/warren-buffett-stocks-berkshire-hathaway-portfolio-13f-filing\/) doesn’t “get” the new paradigm and that Buffett and other similarly “old school” investors are behind the curve. This new crowd may have been trading for just a few months, but they insist they understand the markets.\n\nYet it was Buffett who endured similar barbs from inexperienced traders in the dot-com bust and then came through it all. He avoided much of the housing debacle, too. Buffett was perched on a war chest and took advantage of ailing banks that needed cash and confidence during the 2008 financial crisis.\n\nPro gamblers love popular horse races such as the Kentucky Derby, because they bring easy money to the track, allowing the real handicappers to take it. So it is with investing, too.\n\n**Where we see it today:** As investors cheered stocks to new highs in 2024, one notable investor was increasingly taking his chips off the table. Warren Buffett’s [Berkshire Hathaway was mostly a seller of stocks](https:\/\/www.bankrate.com\/investing\/warren-buffett-stocks-berkshire-hathaway-portfolio-13f-filing\/) in 2024, with the company’s cash position ballooning to north of \\$300 billion. Buffett frequently advises against timing the market, but it’s worth noting that he couldn’t find attractive uses for his large cash pile last year, even as other investors let the good times roll.\n\n![](https:\/\/navi.cohesionapps.com\/display?write_key=wk_2M3TlVcWbz8i1RTZjLkSmbWfyQC&adId=e52860307a&req=https%3A%2F%2Fwww.bankrate.com%2Finvesting%2Fsigns-of-stock-market-bubble%2F&ref=)\n\n### 5\\. Stock valuations in the top percentiles\nDuring the last phases of a stock bubble, the prices are all out of proportion to reality. Valuations are in the highest percentiles, as measured historically. By measuring on a relative basis, you get a better sense of how things match up to the bubbles of the past and whether a solid bull run is more likely to burst or continue, albeit with a more modest sense of “animal spirits.”\n\nIt’s important to recognize that a price rise alone is not sufficient to say something is in a bubble. A stock can rise 100 percent and not be in a bubble if its underlying fundamentals have improved significantly. Or if we start from a low valuation (for example, from the bottom of the pandemic) and then measure after a solid bull run, we’re sure to get gaudy figures that might make you think of a bubble.\n\nHowever, it’s easy to cherry-pick price increases and say that we’re in a bubble, without looking at the broader context. Stocks could climb for a long while as profits continue to rise.\n\n**Where we see it today:** There’s no question that stock valuations are high. By one measure, the cyclically adjusted price-to-earnings ratio, the S\\&P 500 has only traded at a higher valuation twice, in October 2021 and December 1999. In October, Goldman Sachs forecast that equity returns over the next decade would average around 3 percent a year, far from the double-digit returns investors have gotten used to. High valuations don’t guarantee an immediate crash or correction, but it’s probably time for investors to lower their expectations for stocks.\n\n##\n## What is a stock market bubble?\nA stock market bubble is a speculative frenzy when stock prices vastly exceed the fundamental value of the companies underlying them. A market as a whole can also be in a bubble if traders buy assets seemingly regardless of their value. Similarly, individual stocks can be in a bubble when investors bid up their prices well beyond what’s justified by the underlying business performance.\n\nA stock bubble is not merely overvaluation, which can occur even during normal periods as markets become mildly overextended. Instead, a bubble is a period of massive overvaluation, when speculators become inflamed by “animal spirits” and heedlessly bid up stocks. Often these periods are driven by a new business story that promises to revolutionize the world.\n\nMany investors may find it helpful to [work with a financial advisor](https:\/\/www.bankrate.com\/investing\/financial-advisors\/how-to-choose-a-financial-advisor\/) during times of market uncertainty, like when stocks might be in a bubble. You can develop a financial plan that will set you on a path toward reaching your financial goals.\n\nGet started:  [Match with an advisor who can help you achieve your financial goals](https:\/\/advisormatch.bankrate.com\/questionnaire?am_type=BR&amp%3Bamp%3Butm_source=BRarticle)\n\n##\n## Why should you care about stock market bubbles?\nIt’s important to recognize when a stock market bubble may be happening, though it’s not always obvious, except in retrospect. Recognizing a bubble is important because it allows you to:\n\n- **Avoid losing money.** While many speculators make money during a bubble, only the ones who recognize a bubble has formed actually keep their money and avoid jumping back into the bubbly stocks.\n- **Prepare for a market decline.** If you see a bubble has formed, it can help you navigate your portfolio through it. You can move your investments from high-risk picks to low-risk picks, or even sell out of the market altogether. By knowing that a bubble has formed, you can take steps to limit your exposure to it.\n- **Ready your personal finances.** Sometimes a stock bubble can lead to spillover effects in the broader economy. When a bubble bursts, it often precedes a downturn in the economy, creating a recession that can lead to job loss. So a widespread bubble can be a potential indicator that the economy may be approaching its local peak. You can get your finances in order to help withstand this potential downturn.\n\nUnderstanding whether a stock market bubble is developing can be useful to help navigate your investments, as well as your personal financial situation.\n\n##\n## Examples of a stock market bubble\nThe U.S. has experienced at least two major market bubbles in the recent past. Bubbles and the financial losses they create tend to scar participants for decades.\n\n- **The dot-com bubble:** In the period of 1999-2000, the promise of the internet led many traders to buy anything even tangentially connected to it, even if the company did not have a legitimate business plan. While some business behemoths eventually emerged from the bubble — Amazon, for example — many dot-coms quickly became dot-bombs, fading completely into bankruptcy. Other dot-com companies that did survive lost 90 percent or more of their value and never fully recovered from the carnage.\n- **The housing bubble:** In the period following the dot-com bubble, housing began to appreciate rapidly, powered by low interest rates (which existed as a way to soften the effect of the dot-com burst) and the belief that real estate never declines in value. Housing prices appreciated, as did the stocks of many businesses associated with real estate, including construction companies, banks and a variety of specialty finance firms. When the bubble burst and housing prices plummeted, homeowners and banks were left with assets that were worth much less than they were purchased for. The resulting devastation left the economy reeling for many years.\n\nOther classic examples of bubbles include the 17th century Dutch tulip mania, Japan’s real estate and stock bubble in the 1980s, the 18th century South Sea bubble and the U.S. stock market of the 1920s, which [preceded the Great Depression](https:\/\/www.bankrate.com\/investing\/biggest-stock-market-crashes-in-us-history\/). In addition, many analysts think cryptocurrency is a bubble because these digital tokens are not backed by any assets or cash flow.\n\n##\n## How to avoid losing money when a market bubble bursts\nIt’s not always easy to avoid losing money when a market bubble bursts. In many cases, when one sector is massively inflated, it spills over and affects many other industries. For example, in the bear market of 2007-2009, an inflated housing market led to a market-wide decline in stocks. However, many stocks unrelated to housing recovered relatively quickly in the years following the decline, and eventually even many banks and other businesses recovered, too.\n\nHere are a few ways to avoid losing money in a bubble:\n\n- **Avoid bubble stocks.** This advice is easier said than done when a speculative frenzy grips traders, and you’re derided for not understanding the “new economy.”\n- **Own stock in non-bubble companies.** One of the best ways to avoid losing money in a bubble, while still being invested, is to own stock in companies that are unrelated to the bubble, if that’s possible. However, sometimes even the bubble spills over into unrelated companies.\n- **Buy value stocks.** Value stocks are often a good place to be when a market bubble bursts, because they do not have extreme expectations built into their prices. Without those expectations, [value stocks](https:\/\/www.bankrate.com\/investing\/best-etfs\/) often don’t decline as much as bubble stocks do when the market bursts, and they may even rise as investors shift to them.\n- **Buy solid companies.** By investing in high-performing companies, especially those unrelated to the bubble, you may be able to escape the carnage when the bubble pops.\n\nWhile it may be possible to dodge the worst when a bubble pops, often it’s not entirely avoidable, because even good stocks can decline in the short term. That’s why it’s vital to think long term and [invest for the long term](https:\/\/www.bankrate.com\/investing\/best-long-term-investments\/). Buy solid companies and then take advantage of downturns and buy them when a bubble bursts.\n\n## Bottom line\nWhen stocks are soaring, it can be easy to overlook the increasing dangers posed by their valuation. It’s easy to get caught up in the euphoria, and high prices seem to lead to even higher prices. The party swirls on, until one day it doesn’t. So the world’s best investors focus on controlling their emotions as the market rises (and falls) so that they can coolly recognize when they need to buy and when they need to tread carefully.\n\n*Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.*\n\nDid you find this page helpful?\n\n**Why we ask for feedback** Your feedback helps us improve our content and services. It takes less than a minute to complete.\n\nYour responses are anonymous and will only be used for improving our website.\n\nHelp us improve our content\n\nYes\n\nNo\n\nThank you for your feedback\\!\n\nYour input helps us improve our content and services.\n\nCite us\n\nShare this article\n\nShare this article\n\nClose\n\n![](https:\/\/www.bankrate.com\/2021\/10\/26151853\/James-Royal-headshot-scaled-square.jpg?auto=webp&quality=85&width=96&height=96&fit=cover&enable=upscale&crop=1:1,smart)\n\nWritten by\n\n[James Royal, Ph.D.](https:\/\/www.bankrate.com\/authors\/james-royal\/)\n\nFormer Principal Writer, Investing and Wealth Management\n\n- [Connect with James Royal, Ph.D. on Twitter](https:\/\/twitter.com\/JimRoyalPhD)\n- [Connect with James Royal, Ph.D. on LinkedIn](https:\/\/www.linkedin.com\/in\/james-royal-phd-809b929\/)\n- [Get in contact with James Royal, Ph.D. via Email](mailto:jroyal@redventures.com)\n\n[Read more from James](https:\/\/www.bankrate.com\/authors\/james-royal\/)\n\nFormer Bankrate principal writer and editor James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more.\n\n![](https:\/\/www.bankrate.com\/2021\/05\/20103456\/brian-baker.jpg?auto=webp&quality=85&width=96&height=96&fit=cover&enable=upscale&crop=1:1,smart)\n\nCo-written by\n\n[Brian Baker, CFA](https:\/\/www.bankrate.com\/authors\/brian-baker-cfa\/)\n\nFormer Senior Writer, Investing and Retirement\n\n- [Connect with Brian Baker, CFA on Twitter](https:\/\/twitter.com\/briandbaker1)\n- [Connect with Brian Baker, CFA on LinkedIn](https:\/\/www.linkedin.com\/in\/brian-baker-cfa-1019779)\n- [Get in contact with Brian Baker, CFA via Email](mailto:brbaker@redventures.com)\n\n[Read more from Brian](https:\/\/www.bankrate.com\/authors\/brian-baker-cfa\/)\n\nBrian Baker covered investing and retirement for Bankrate. He is a CFA Charterholder and previously worked in equity research at a buyside investment firm. Baker is passionate about helping people make sense of complicated financial topics so that they can better plan for their financial futures.\n\n![A trader on the floor of the New York Stock Exchange looking at at a monitor with a concerned look on their face.](https:\/\/www.bankrate.com\/brp\/2024\/01\/06122702\/5-sure-fire-signs-of-a-stock-market-bubble.jpg?auto=webp&optimize=high&crop=16:9)\n\nMichael M. Santiago\/Getty Images\n\nBankrate is always editorially independent. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Here's an explanation for how we make money . Our Bankrate promise is to ensure everything we publish is objective, accurate and trustworthy.\n\nTable of contents\n\n- [Watch for these tell-tale signs of a stock market bubble](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#signs)\n- [What is a stock market bubble?](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#what-is)\n- [Why should you care about stock market bubbles?](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#why)\n- [Examples of a stock market bubble](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#examples)\n- [How to avoid losing money when a market bubble bursts](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#bursts)\n\nBack to top\n\n## You may also like\n![U.S. President Donald Trump answers a reporters question during a meeting with Israeli Prime Minister Benjamin in the Oval Office of the White House on April 7, 2025 in Washington, DC.](https:\/\/www.bankrate.com\/brp\/2025\/04\/09172224\/Trumps-90day-tariff-pause-leads-to-booming-stocks-Should-investors-stay-on-guard-300x169.jpg)\n\n[Trump’s 90-day tariff ‘pause’ leads to wild reversal in markets — should investors stay on guard?](https:\/\/www.bankrate.com\/investing\/trump-tariff-pause-impacts-markets\/)\n\nInvesting\n\nBy [James Royal, Ph.D.](https:\/\/www.bankrate.com\/authors\/james-royal\/)\n\n3 min read\n\n![Stock market ticker](https:\/\/www.bankrate.com\/2019\/03\/22142110\/How-to-trade-stocks.jpg)\n\n[How to trade stocks: A beginner’s guide](https:\/\/www.bankrate.com\/investing\/how-to-trade-stocks\/)\n\nInvesting\n\nBy [James Royal, Ph.D.](https:\/\/www.bankrate.com\/authors\/james-royal\/)\n\n8 min read\n\n![Man working from home](https:\/\/www.bankrate.com\/2023\/04\/06163032\/GettyImages-169816890.jpeg)\n\n[7 proven strategies to identify potential breakout stocks and boost your investment portfolio](https:\/\/www.bankrate.com\/investing\/ways-to-identify-breakout-stocks\/)\n\nInvesting\n\nBy [Bob Haegele](https:\/\/www.bankrate.com\/authors\/bob-haegele\/)\n\n3 min read\n\n![Tips to find safer stocks](https:\/\/www.bankrate.com\/2022\/06\/30141838\/GettyImages-1340533768.jpg)\n\n[5 tips to find safer stocks amid recession fears](https:\/\/www.bankrate.com\/investing\/tips-to-find-safe-stocks\/)\n\nInvesting\n\nBy [Bob Haegele](https:\/\/www.bankrate.com\/authors\/bob-haegele\/)\n\n4 min read\n\n## [Bankrate logo](https:\/\/www.bankrate.com\/)\n### About\n- [About us](https:\/\/www.bankrate.com\/about\/)\n- [Leadership](https:\/\/www.bankrate.com\/leadership\/)\n- [Press room](https:\/\/www.bankrate.com\/press-releases\/)\n- [Bankrate Data Center](https:\/\/www.bankrate.com\/data-center\/)\n- [Careers](https:\/\/www.bankrate.com\/careers\/)\n- [Site map](https:\/\/www.bankrate.com\/corporate\/site-map\/)\n\n### Help\n- [Compare rates](https:\/\/www.bankrate.com\/compare-rates\/)\n- [Latest news](https:\/\/www.bankrate.com\/news\/)\n- [Popular topics](https:\/\/www.bankrate.com\/popular-finance-topics\/)\n- [Advertise with us](https:\/\/www.bankrate.com\/media-kit\/)\n\n### Legal\n- [Privacy policy](https:\/\/www.bankrate.com\/privacy\/)\n- Cookie settings\n- [Do Not Sell or Share My Personal Information](https:\/\/www.bankrate.com\/do-not-sell-or-share-my-personal-information\/)\n- [Consumer Health Information Privacy Policy](https:\/\/www.bankrate.com\/consumer-health-information-privacy-policy\/)\n- [Understanding Bankrate’s averages](https:\/\/www.bankrate.com\/understanding-bankrates-rate-averages\/)\n- [Terms of use](https:\/\/www.bankrate.com\/terms\/)\n- [GLBA annual notice](https:\/\/www.bankrate.com\/glba-notice\/)\n- [California Consumer Financial Privacy Notice](https:\/\/www.bankrate.com\/2022\/02\/15094901\/california-notice.pdf)\n- [Licenses](https:\/\/www.bankrate.com\/licenses\/)\n\n### How we make money\nBankrate.com is an independent, advertising-supported publisher and comparison service. 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We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.\n\nBankrate follows a strict [editorial policy](https:\/\/www.bankrate.com\/editorial-guidelines\/ \"editorial policy\"), so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.\n\nWe’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.\n\nBankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.\n\nTable of contents\n\n- [Watch for these tell-tale signs of a stock market bubble](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#signs)\n- [What is a stock market bubble?](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#what-is)\n- [Why should you care about stock market bubbles?](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#why)\n- [Examples of a stock market bubble](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#examples)\n- [How to avoid losing money when a market bubble bursts](https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/#bursts)\n\n**Quick citation guide**   Select a citation to automatically copy to clipboard.\n\n**APA:**  Royal, J., & Baker, CFA, B. (2025, July 18). *5 sure-fire signs of a stock market bubble.* Bankrate. Retrieved April 14, 2026, from https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/\n\nCopied to clipboard\\!\n\n**MLA:**  Royal, James & Brian Baker, CFA. \"5 sure-fire signs of a stock market bubble.\" *Bankrate*. 18 July 2025, https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/.\n\nCopied to clipboard\\!\n\n**Chicago:**  Royal, James & Brian Baker, CFA. \"5 sure-fire signs of a stock market bubble.\" Bankrate. July 18, 2025. https:\/\/www.bankrate.com\/investing\/signs-of-stock-market-bubble\/.\n\nCopied to clipboard\\!\n\n![](https:\/\/www.facebook.com\/tr?id=1805085980359671&ev=PageView&noscript=1)\n\n![](https:\/\/www.facebook.com\/tr?id=1564326531369118&ev=PageView&noscript=1)","attrs_readable_markdown":"The stock market has been on a tear for more than two years, with the [S\\&P 500](https:\/\/www.bankrate.com\/investing\/how-to-buy-sp-500-index-fund\/) increasing roughly 25 percent in both 2023 and 2024. The momentum has continued this year as stocks have continued to “melt up,” with bullish investors putting a floor under the market.\n\nBut with this market melt-up leaving stocks at elevated valuations and the uncertainty around the impact of tariffs on the economy, some investors may be concerned about a potential bubble. In bull markets that seem to go on endlessly, it’s important not to become complacent.\n\nHere are five signs to look for to judge whether we’re in bubble market territory and what we’ll likely see if we’re there.\n\n## Watch for these tell-tale signs of a stock market bubble\nThere’s an old saying on Wall Street: “No one rings a bell at the top.” It means that only in retrospect does it become obvious for most market participants that the market has peaked.\n\nBut while there may be no bell at the top, observant investors can pick up on many indicators that show when the market is in nosebleed territory. You’ll want to see many of these factors working together to produce a euphoric bubble, as you weigh your options for how to keep your portfolio protected in the event that the hot market finally cools off — or worse, the bubble pops.\n\n### 1\\. A story has captured the market’s imagination\nA compelling story is one of the best frameworks for creating a stock bubble. The dot-com bubble of the late 1990s had one: “The internet changes everything.” The housing bubble of the 2000s had one: “Real estate never declines in price.” Even the 19th century’s railway mania promised that the massive benefits of the railroads would transform travel and transportation.\n\nThese so-called story stocks promise to transform the world, and while the promised benefits may ultimately arrive, they tend to take a lot longer than the stock promoters would have you believe.\n\nThe benefits of the internet eventually arrived, but not before effectively destroying hundreds of dot-com companies that had poor business models. And even the survivors get caught up in the frenzy, with the stocks of eventual leaders such as [Amazon](https:\/\/www.bankrate.com\/investing\/how-to-invest-in-stocks\/) (AMZN) being bid up to astronomical levels before eventually falling along with the other stocks in the over-hyped sectors.\n\n**Where we see it today:** There’s no question that the biggest story in the stock market over the past two years has been the rise of artificial intelligence and its potential to impact many industries. AI may change many aspects of how we work and live, but exactly how the future will play out is still unclear. [Cryptocurrency](https:\/\/www.bankrate.com\/investing\/what-is-cryptocurrency\/) is another area that has bubbly qualities, in part because there are not underlying cash flows to help analysts determine a coin’s fair value, if it has any at all.\n\n### 2\\. Prices rise regardless of news\nThe story is important because it offers a theme to build investors’ hopes and dreams on. It also provides a guide for what’s to come and how the new transformational industry might develop. But what if reality differs from the story? Investors will surely adjust their expectations, right?\n\nIn a bubble, it’s as if every bit of information verifies the story, so stock prices rise regardless of the news. A company hits its earnings estimates? The stock climbs. And if it misses earnings estimates by a mile? It still climbs. The story stocks seem unbreakable, and they are for a time.\n\nAnd so sharp-eyed investors are calibrating reality to the story in order to see if they fit. When stocks rise but the long-term future looks clearly worse, long-term investors should be extra careful.\n\n**Where we see it today:** Stocks have seen tremendous gains the past couple of years and excitement seemed to reach new heights following the reelection of President Donald Trump. Investors bid stocks higher with the expectation that deregulation and a more business-friendly administration would result in a surge in growth. Trump even toured the New York Stock Exchange. When [talk of tariffs](https:\/\/www.bankrate.com\/taxes\/trump-tariffs-explained\/) picked up, they were initially dismissed as a negotiating tactic. But soon stocks fell as investors became more concerned about the outlook for growth, then they bounced as investors decided tariffs wouldn’t be as bad as expected.\n\n### 3\\. Other asset prices are soaring, too\nOften in a bubble market, it’s not just stocks that are soaring; it’s other assets, too. Flush with cash from their stock successes, a booming economy or easy money, speculators rush out to [buy other highly risky alternative assets](https:\/\/www.bankrate.com\/investing\/popular-alternative-investments\/).\n\nDuring these times you may see the prices of collectibles skyrocketing. Promoters may try to hype up “new asset classes” by highlighting how investible sports cards are, or how art from the great masters never seems to decline in value. Assets such as these produce no cash flow and so turning a profit hinges entirely on finding someone else to pay more for them than you did.\n\nAnd the definition of “investible” assets continues to grow: luxury handbags, shoes, Pokémon cards, Beanie Babies, wine, video game cartridges, [digital art through NFTs](https:\/\/www.bankrate.com\/investing\/what-is-an-nft-non-fungible-token\/) and the list goes on and on.\n\n**Where we see it today:** With thousands of possible examples, cryptocurrencies have seen a flood of interest as speculators and promoters rush to the space to cash in. Cryptocurrency has a total market valuation of around \\$3.8 trillion as of July 2025, with [Bitcoin](https:\/\/www.bankrate.com\/investing\/what-is-bitcoin\/) accounting for the lion’s share of that figure. Of course, it’s not just digital assets that have piqued interest — shoes and handbags have seen soaring prices lately, too.\n\n## 4\\. New traders say that old investors ‘don’t get it’\nWhen the taxi driver, the hairstylist and the grocery clerk are giving you investing tips, it’s a good sign that an investment thesis has spilled over to the mainstream and is attracting less sophisticated retail traders looking for a buck and who are motivated by fear of missing out (FOMO). And they may well succeed — for a period of time.\n\nIn the rush to build hype, breathless promoters will say, “This time it’s different.” But it rarely is.\n\n> \"The time when seasoned investors start to worry the market may have moved unsustainably high is when they see a rush of newer investors into the market and where FOMO is overriding the fundamentals. When new investors are piling into excessively risky investment such as stocks with no earnings track record, or in some cases, no revenue, that is an indicator that trouble could be looming.\"\n> \n> — Greg McBride, CFA, Bankrate chief financial analyst\n\nThis new breed of trader will explain to you why [Warren Buffett](https:\/\/www.bankrate.com\/investing\/warren-buffett-stocks-berkshire-hathaway-portfolio-13f-filing\/) doesn’t “get” the new paradigm and that Buffett and other similarly “old school” investors are behind the curve. This new crowd may have been trading for just a few months, but they insist they understand the markets.\n\nYet it was Buffett who endured similar barbs from inexperienced traders in the dot-com bust and then came through it all. He avoided much of the housing debacle, too. Buffett was perched on a war chest and took advantage of ailing banks that needed cash and confidence during the 2008 financial crisis.\n\nPro gamblers love popular horse races such as the Kentucky Derby, because they bring easy money to the track, allowing the real handicappers to take it. So it is with investing, too.\n\n**Where we see it today:** As investors cheered stocks to new highs in 2024, one notable investor was increasingly taking his chips off the table. Warren Buffett’s [Berkshire Hathaway was mostly a seller of stocks](https:\/\/www.bankrate.com\/investing\/warren-buffett-stocks-berkshire-hathaway-portfolio-13f-filing\/) in 2024, with the company’s cash position ballooning to north of \\$300 billion. Buffett frequently advises against timing the market, but it’s worth noting that he couldn’t find attractive uses for his large cash pile last year, even as other investors let the good times roll.\n\n### 5\\. Stock valuations in the top percentiles\nDuring the last phases of a stock bubble, the prices are all out of proportion to reality. Valuations are in the highest percentiles, as measured historically. By measuring on a relative basis, you get a better sense of how things match up to the bubbles of the past and whether a solid bull run is more likely to burst or continue, albeit with a more modest sense of “animal spirits.”\n\nIt’s important to recognize that a price rise alone is not sufficient to say something is in a bubble. A stock can rise 100 percent and not be in a bubble if its underlying fundamentals have improved significantly. Or if we start from a low valuation (for example, from the bottom of the pandemic) and then measure after a solid bull run, we’re sure to get gaudy figures that might make you think of a bubble.\n\nHowever, it’s easy to cherry-pick price increases and say that we’re in a bubble, without looking at the broader context. Stocks could climb for a long while as profits continue to rise.\n\n**Where we see it today:** There’s no question that stock valuations are high. By one measure, the cyclically adjusted price-to-earnings ratio, the S\\&P 500 has only traded at a higher valuation twice, in October 2021 and December 1999. In October, Goldman Sachs forecast that equity returns over the next decade would average around 3 percent a year, far from the double-digit returns investors have gotten used to. High valuations don’t guarantee an immediate crash or correction, but it’s probably time for investors to lower their expectations for stocks.\n\n## What is a stock market bubble?\nA stock market bubble is a speculative frenzy when stock prices vastly exceed the fundamental value of the companies underlying them. A market as a whole can also be in a bubble if traders buy assets seemingly regardless of their value. Similarly, individual stocks can be in a bubble when investors bid up their prices well beyond what’s justified by the underlying business performance.\n\nA stock bubble is not merely overvaluation, which can occur even during normal periods as markets become mildly overextended. Instead, a bubble is a period of massive overvaluation, when speculators become inflamed by “animal spirits” and heedlessly bid up stocks. Often these periods are driven by a new business story that promises to revolutionize the world.\n\nMany investors may find it helpful to [work with a financial advisor](https:\/\/www.bankrate.com\/investing\/financial-advisors\/how-to-choose-a-financial-advisor\/) during times of market uncertainty, like when stocks might be in a bubble. You can develop a financial plan that will set you on a path toward reaching your financial goals.\n\n## Why should you care about stock market bubbles?\nIt’s important to recognize when a stock market bubble may be happening, though it’s not always obvious, except in retrospect. Recognizing a bubble is important because it allows you to:\n\n- **Avoid losing money.** While many speculators make money during a bubble, only the ones who recognize a bubble has formed actually keep their money and avoid jumping back into the bubbly stocks.\n- **Prepare for a market decline.** If you see a bubble has formed, it can help you navigate your portfolio through it. You can move your investments from high-risk picks to low-risk picks, or even sell out of the market altogether. By knowing that a bubble has formed, you can take steps to limit your exposure to it.\n- **Ready your personal finances.** Sometimes a stock bubble can lead to spillover effects in the broader economy. When a bubble bursts, it often precedes a downturn in the economy, creating a recession that can lead to job loss. So a widespread bubble can be a potential indicator that the economy may be approaching its local peak. You can get your finances in order to help withstand this potential downturn.\n\nUnderstanding whether a stock market bubble is developing can be useful to help navigate your investments, as well as your personal financial situation.\n\n## Examples of a stock market bubble\nThe U.S. has experienced at least two major market bubbles in the recent past. Bubbles and the financial losses they create tend to scar participants for decades.\n\n- **The dot-com bubble:** In the period of 1999-2000, the promise of the internet led many traders to buy anything even tangentially connected to it, even if the company did not have a legitimate business plan. While some business behemoths eventually emerged from the bubble — Amazon, for example — many dot-coms quickly became dot-bombs, fading completely into bankruptcy. Other dot-com companies that did survive lost 90 percent or more of their value and never fully recovered from the carnage.\n- **The housing bubble:** In the period following the dot-com bubble, housing began to appreciate rapidly, powered by low interest rates (which existed as a way to soften the effect of the dot-com burst) and the belief that real estate never declines in value. Housing prices appreciated, as did the stocks of many businesses associated with real estate, including construction companies, banks and a variety of specialty finance firms. When the bubble burst and housing prices plummeted, homeowners and banks were left with assets that were worth much less than they were purchased for. The resulting devastation left the economy reeling for many years.\n\nOther classic examples of bubbles include the 17th century Dutch tulip mania, Japan’s real estate and stock bubble in the 1980s, the 18th century South Sea bubble and the U.S. stock market of the 1920s, which [preceded the Great Depression](https:\/\/www.bankrate.com\/investing\/biggest-stock-market-crashes-in-us-history\/). In addition, many analysts think cryptocurrency is a bubble because these digital tokens are not backed by any assets or cash flow.\n\n## How to avoid losing money when a market bubble bursts\nIt’s not always easy to avoid losing money when a market bubble bursts. In many cases, when one sector is massively inflated, it spills over and affects many other industries. For example, in the bear market of 2007-2009, an inflated housing market led to a market-wide decline in stocks. However, many stocks unrelated to housing recovered relatively quickly in the years following the decline, and eventually even many banks and other businesses recovered, too.\n\nHere are a few ways to avoid losing money in a bubble:\n\n- **Avoid bubble stocks.** This advice is easier said than done when a speculative frenzy grips traders, and you’re derided for not understanding the “new economy.”\n- **Own stock in non-bubble companies.** One of the best ways to avoid losing money in a bubble, while still being invested, is to own stock in companies that are unrelated to the bubble, if that’s possible. However, sometimes even the bubble spills over into unrelated companies.\n- **Buy value stocks.** Value stocks are often a good place to be when a market bubble bursts, because they do not have extreme expectations built into their prices. Without those expectations, [value stocks](https:\/\/www.bankrate.com\/investing\/best-etfs\/) often don’t decline as much as bubble stocks do when the market bursts, and they may even rise as investors shift to them.\n- **Buy solid companies.** By investing in high-performing companies, especially those unrelated to the bubble, you may be able to escape the carnage when the bubble pops.\n\nWhile it may be possible to dodge the worst when a bubble pops, often it’s not entirely avoidable, because even good stocks can decline in the short term. That’s why it’s vital to think long term and [invest for the long term](https:\/\/www.bankrate.com\/investing\/best-long-term-investments\/). Buy solid companies and then take advantage of downturns and buy them when a bubble bursts.\n\n## Bottom line\nWhen stocks are soaring, it can be easy to overlook the increasing dangers posed by their valuation. It’s easy to get caught up in the euphoria, and high prices seem to lead to even higher prices. The party swirls on, until one day it doesn’t. So the world’s best investors focus on controlling their emotions as the market rises (and falls) so that they can coolly recognize when they need to buy and when they need to tread carefully.\n\n*Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.*\n\nDid you find this page helpful?\n\nHelp us improve our content","meta_canonical":null}

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Meta Title	5 Sure-Fire Signs Of A Stock Market Bubble \| Bankrate
Meta Description	The stock market has been on a tear over the past two years. Could we be in a stock market bubble? Here are five signs to look for., The stock market has been on a tear over the past two years. Could we be in a stock market bubble? Here are five signs to look for.
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Boilerpipe Text	The stock market has been on a tear for more than two years, with the S&P 500 increasing roughly 25 percent in both 2023 and 2024. The momentum has continued this year as stocks have continued to “melt up,” with bullish investors putting a floor under the market. But with this market melt-up leaving stocks at elevated valuations and the uncertainty around the impact of tariffs on the economy, some investors may be concerned about a potential bubble. In bull markets that seem to go on endlessly, it’s important not to become complacent. Here are five signs to look for to judge whether we’re in bubble market territory and what we’ll likely see if we’re there. Watch for these tell-tale signs of a stock market bubble There’s an old saying on Wall Street: “No one rings a bell at the top.” It means that only in retrospect does it become obvious for most market participants that the market has peaked. But while there may be no bell at the top, observant investors can pick up on many indicators that show when the market is in nosebleed territory. You’ll want to see many of these factors working together to produce a euphoric bubble, as you weigh your options for how to keep your portfolio protected in the event that the hot market finally cools off — or worse, the bubble pops. 1. A story has captured the market’s imagination A compelling story is one of the best frameworks for creating a stock bubble. The dot-com bubble of the late 1990s had one: “The internet changes everything.” The housing bubble of the 2000s had one: “Real estate never declines in price.” Even the 19th century’s railway mania promised that the massive benefits of the railroads would transform travel and transportation. These so-called story stocks promise to transform the world, and while the promised benefits may ultimately arrive, they tend to take a lot longer than the stock promoters would have you believe. The benefits of the internet eventually arrived, but not before effectively destroying hundreds of dot-com companies that had poor business models. And even the survivors get caught up in the frenzy, with the stocks of eventual leaders such as Amazon (AMZN) being bid up to astronomical levels before eventually falling along with the other stocks in the over-hyped sectors. Invest Search Icon Where we see it today: There’s no question that the biggest story in the stock market over the past two years has been the rise of artificial intelligence and its potential to impact many industries. AI may change many aspects of how we work and live, but exactly how the future will play out is still unclear. Cryptocurrency is another area that has bubbly qualities, in part because there are not underlying cash flows to help analysts determine a coin’s fair value, if it has any at all. 2. Prices rise regardless of news The story is important because it offers a theme to build investors’ hopes and dreams on. It also provides a guide for what’s to come and how the new transformational industry might develop. But what if reality differs from the story? Investors will surely adjust their expectations, right? In a bubble, it’s as if every bit of information verifies the story, so stock prices rise regardless of the news. A company hits its earnings estimates? The stock climbs. And if it misses earnings estimates by a mile? It still climbs. The story stocks seem unbreakable, and they are for a time. And so sharp-eyed investors are calibrating reality to the story in order to see if they fit. When stocks rise but the long-term future looks clearly worse, long-term investors should be extra careful. Invest Search Icon Where we see it today: Stocks have seen tremendous gains the past couple of years and excitement seemed to reach new heights following the reelection of President Donald Trump. Investors bid stocks higher with the expectation that deregulation and a more business-friendly administration would result in a surge in growth. Trump even toured the New York Stock Exchange. When talk of tariffs picked up, they were initially dismissed as a negotiating tactic. But soon stocks fell as investors became more concerned about the outlook for growth, then they bounced as investors decided tariffs wouldn’t be as bad as expected. 3. Other asset prices are soaring, too Often in a bubble market, it’s not just stocks that are soaring; it’s other assets, too. Flush with cash from their stock successes, a booming economy or easy money, speculators rush out to buy other highly risky alternative assets . During these times you may see the prices of collectibles skyrocketing. Promoters may try to hype up “new asset classes” by highlighting how investible sports cards are, or how art from the great masters never seems to decline in value. Assets such as these produce no cash flow and so turning a profit hinges entirely on finding someone else to pay more for them than you did. And the definition of “investible” assets continues to grow: luxury handbags, shoes, Pokémon cards, Beanie Babies, wine, video game cartridges, digital art through NFTs and the list goes on and on. Invest Search Icon Where we see it today: With thousands of possible examples, cryptocurrencies have seen a flood of interest as speculators and promoters rush to the space to cash in. Cryptocurrency has a total market valuation of around $3.8 trillion as of July 2025, with Bitcoin accounting for the lion’s share of that figure. Of course, it’s not just digital assets that have piqued interest — shoes and handbags have seen soaring prices lately, too. 4. New traders say that old investors ‘don’t get it’ When the taxi driver, the hairstylist and the grocery clerk are giving you investing tips, it’s a good sign that an investment thesis has spilled over to the mainstream and is attracting less sophisticated retail traders looking for a buck and who are motivated by fear of missing out (FOMO). And they may well succeed — for a period of time. In the rush to build hype, breathless promoters will say, “This time it’s different.” But it rarely is. The time when seasoned investors start to worry the market may have moved unsustainably high is when they see a rush of newer investors into the market and where FOMO is overriding the fundamentals. When new investors are piling into excessively risky investment such as stocks with no earnings track record, or in some cases, no revenue, that is an indicator that trouble could be looming. — Greg McBride, CFA, Bankrate chief financial analyst This new breed of trader will explain to you why Warren Buffett doesn’t “get” the new paradigm and that Buffett and other similarly “old school” investors are behind the curve. This new crowd may have been trading for just a few months, but they insist they understand the markets. Yet it was Buffett who endured similar barbs from inexperienced traders in the dot-com bust and then came through it all. He avoided much of the housing debacle, too. Buffett was perched on a war chest and took advantage of ailing banks that needed cash and confidence during the 2008 financial crisis. Pro gamblers love popular horse races such as the Kentucky Derby, because they bring easy money to the track, allowing the real handicappers to take it. So it is with investing, too. Invest Search Icon Where we see it today: As investors cheered stocks to new highs in 2024, one notable investor was increasingly taking his chips off the table. Warren Buffett’s Berkshire Hathaway was mostly a seller of stocks in 2024, with the company’s cash position ballooning to north of $300 billion. Buffett frequently advises against timing the market, but it’s worth noting that he couldn’t find attractive uses for his large cash pile last year, even as other investors let the good times roll. 5. Stock valuations in the top percentiles During the last phases of a stock bubble, the prices are all out of proportion to reality. Valuations are in the highest percentiles, as measured historically. By measuring on a relative basis, you get a better sense of how things match up to the bubbles of the past and whether a solid bull run is more likely to burst or continue, albeit with a more modest sense of “animal spirits.” It’s important to recognize that a price rise alone is not sufficient to say something is in a bubble. A stock can rise 100 percent and not be in a bubble if its underlying fundamentals have improved significantly. Or if we start from a low valuation (for example, from the bottom of the pandemic) and then measure after a solid bull run, we’re sure to get gaudy figures that might make you think of a bubble. However, it’s easy to cherry-pick price increases and say that we’re in a bubble, without looking at the broader context. Stocks could climb for a long while as profits continue to rise. Invest Search Icon Where we see it today: There’s no question that stock valuations are high. By one measure, the cyclically adjusted price-to-earnings ratio, the S&P 500 has only traded at a higher valuation twice, in October 2021 and December 1999. In October, Goldman Sachs forecast that equity returns over the next decade would average around 3 percent a year, far from the double-digit returns investors have gotten used to. High valuations don’t guarantee an immediate crash or correction, but it’s probably time for investors to lower their expectations for stocks. What is a stock market bubble? A stock market bubble is a speculative frenzy when stock prices vastly exceed the fundamental value of the companies underlying them. A market as a whole can also be in a bubble if traders buy assets seemingly regardless of their value. Similarly, individual stocks can be in a bubble when investors bid up their prices well beyond what’s justified by the underlying business performance. A stock bubble is not merely overvaluation, which can occur even during normal periods as markets become mildly overextended. Instead, a bubble is a period of massive overvaluation, when speculators become inflamed by “animal spirits” and heedlessly bid up stocks. Often these periods are driven by a new business story that promises to revolutionize the world. Many investors may find it helpful to work with a financial advisor during times of market uncertainty, like when stocks might be in a bubble. You can develop a financial plan that will set you on a path toward reaching your financial goals. Why should you care about stock market bubbles? It’s important to recognize when a stock market bubble may be happening, though it’s not always obvious, except in retrospect. Recognizing a bubble is important because it allows you to: Avoid losing money. While many speculators make money during a bubble, only the ones who recognize a bubble has formed actually keep their money and avoid jumping back into the bubbly stocks. Prepare for a market decline. If you see a bubble has formed, it can help you navigate your portfolio through it. You can move your investments from high-risk picks to low-risk picks, or even sell out of the market altogether. By knowing that a bubble has formed, you can take steps to limit your exposure to it. Ready your personal finances. Sometimes a stock bubble can lead to spillover effects in the broader economy. When a bubble bursts, it often precedes a downturn in the economy, creating a recession that can lead to job loss. So a widespread bubble can be a potential indicator that the economy may be approaching its local peak. You can get your finances in order to help withstand this potential downturn. Understanding whether a stock market bubble is developing can be useful to help navigate your investments, as well as your personal financial situation. Examples of a stock market bubble The U.S. has experienced at least two major market bubbles in the recent past. Bubbles and the financial losses they create tend to scar participants for decades. The dot-com bubble: In the period of 1999-2000, the promise of the internet led many traders to buy anything even tangentially connected to it, even if the company did not have a legitimate business plan. While some business behemoths eventually emerged from the bubble — Amazon, for example — many dot-coms quickly became dot-bombs, fading completely into bankruptcy. Other dot-com companies that did survive lost 90 percent or more of their value and never fully recovered from the carnage. The housing bubble: In the period following the dot-com bubble, housing began to appreciate rapidly, powered by low interest rates (which existed as a way to soften the effect of the dot-com burst) and the belief that real estate never declines in value. Housing prices appreciated, as did the stocks of many businesses associated with real estate, including construction companies, banks and a variety of specialty finance firms. When the bubble burst and housing prices plummeted, homeowners and banks were left with assets that were worth much less than they were purchased for. The resulting devastation left the economy reeling for many years. Other classic examples of bubbles include the 17th century Dutch tulip mania, Japan’s real estate and stock bubble in the 1980s, the 18th century South Sea bubble and the U.S. stock market of the 1920s, which preceded the Great Depression . In addition, many analysts think cryptocurrency is a bubble because these digital tokens are not backed by any assets or cash flow. How to avoid losing money when a market bubble bursts It’s not always easy to avoid losing money when a market bubble bursts. In many cases, when one sector is massively inflated, it spills over and affects many other industries. For example, in the bear market of 2007-2009, an inflated housing market led to a market-wide decline in stocks. However, many stocks unrelated to housing recovered relatively quickly in the years following the decline, and eventually even many banks and other businesses recovered, too. Here are a few ways to avoid losing money in a bubble: Avoid bubble stocks. This advice is easier said than done when a speculative frenzy grips traders, and you’re derided for not understanding the “new economy.” Own stock in non-bubble companies. One of the best ways to avoid losing money in a bubble, while still being invested, is to own stock in companies that are unrelated to the bubble, if that’s possible. However, sometimes even the bubble spills over into unrelated companies. Buy value stocks. Value stocks are often a good place to be when a market bubble bursts, because they do not have extreme expectations built into their prices. Without those expectations, value stocks often don’t decline as much as bubble stocks do when the market bursts, and they may even rise as investors shift to them. Buy solid companies. By investing in high-performing companies, especially those unrelated to the bubble, you may be able to escape the carnage when the bubble pops. While it may be possible to dodge the worst when a bubble pops, often it’s not entirely avoidable, because even good stocks can decline in the short term. That’s why it’s vital to think long term and invest for the long term . Buy solid companies and then take advantage of downturns and buy them when a bubble bursts. Bottom line When stocks are soaring, it can be easy to overlook the increasing dangers posed by their valuation. It’s easy to get caught up in the euphoria, and high prices seem to lead to even higher prices. The party swirls on, until one day it doesn’t. So the world’s best investors focus on controlling their emotions as the market rises (and falls) so that they can coolly recognize when they need to buy and when they need to tread carefully. Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation. Did you find this page helpful? Info Icon Help us improve our content
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[Investing](https://www.bankrate.com/investing/) › 2. 5 sure-fire signs of a stock market bubble Advertiser Disclosure # 5 sure-fire signs of a stock market bubble ![James Royal, Ph.D.](https://www.bankrate.com/2021/10/26151853/James-Royal-headshot-scaled-square.jpg?auto=webp&quality=85&width=24&height=24&fit=cover&enable=upscale&crop=1:1,smart) ![Brian Baker, CFA](https://www.bankrate.com/2021/05/20103456/brian-baker.jpg?auto=webp&quality=85&width=24&height=24&fit=cover&enable=upscale&crop=1:1,smart) ![Brian Beers](https://www.bankrate.com/2019/05/06102103/b-beers-headshot1.jpg?auto=webp&quality=85&width=24&height=24&fit=cover&enable=upscale&crop=1:1,smart) Written by James Royal, Ph.D. ![](https://www.bankrate.com/2021/10/26151853/James-Royal-headshot-scaled-square.jpg?auto=webp&quality=85&width=64&height=64&fit=cover&enable=upscale&crop=1:1,smart) [James Royal, Ph.D.](https://www.bankrate.com/authors/james-royal/) Former Principal Writer, Investing and Wealth Management Expertise - • Investing - • Wealth management Former Bankrate principal writer and editor James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. [Read more](https://www.bankrate.com/authors/james-royal/) - [Connect with James Royal, Ph.D. on Twitter](https://twitter.com/JimRoyalPhD) - [Connect with James Royal, Ph.D. on LinkedIn](https://www.linkedin.com/in/james-royal-phd-809b929/) - [Get in contact with James Royal, Ph.D. via Email](mailto:jroyal@redventures.com) Close [James Royal, Ph.D.](https://www.bankrate.com/authors/james-royal/) and Brian Baker, CFA , ![](https://www.bankrate.com/2021/05/20103456/brian-baker.jpg?auto=webp&quality=85&width=64&height=64&fit=cover&enable=upscale&crop=1:1,smart) [Brian Baker, CFA](https://www.bankrate.com/authors/brian-baker-cfa/) Former Senior Writer, Investing and Retirement Expertise - • Investing - • Wealth management 16 Years of experience Brian Baker covered investing and retirement for Bankrate. He is a CFA Charterholder and previously worked in equity research at a buyside investment firm. Baker is passionate about helping people make sense of complicated financial topics so that they can better plan for their financial futures. [Read more](https://www.bankrate.com/authors/brian-baker-cfa/) - [Connect with Brian Baker, CFA on Twitter](https://twitter.com/briandbaker1) - [Connect with Brian Baker, CFA on LinkedIn](https://www.linkedin.com/in/brian-baker-cfa-1019779) - [Get in contact with Brian Baker, CFA via Email](mailto:brbaker@redventures.com) Close [Brian Baker, CFA](https://www.bankrate.com/authors/brian-baker-cfa/), Edited by Brian Beers ![](https://www.bankrate.com/2019/05/06102103/b-beers-headshot1.jpg?auto=webp&quality=85&width=64&height=64&fit=cover&enable=upscale&crop=1:1,smart) [Brian Beers](https://www.bankrate.com/authors/brian-beers/) Former Managing Editor Expertise - • Investing - • Banking Brian Beers is a former managing editor for Bankrate. He oversaw editorial coverage of banking, investing, the economy and all things money. [Read more](https://www.bankrate.com/authors/brian-beers/) - [Connect with Brian Beers on Twitter](https://twitter.com/brian_beers) - [Connect with Brian Beers on LinkedIn](https://www.linkedin.com/in/brian-beers/) Close [Brian Beers](https://www.bankrate.com/authors/brian-beers/) Published on July 18, 2025 \\| 8 min read Bankrate is always editorially independent. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Here's an explanation for how we make money . Our Bankrate promise is to ensure everything we publish is objective, accurate and trustworthy. ![A trader on the floor of the New York Stock Exchange looking at at a monitor with a concerned look on their face.](https://www.bankrate.com/brp/2024/01/06122702/5-sure-fire-signs-of-a-stock-market-bubble.jpg?auto=webp&optimize=high&crop=16:9) Michael M. Santiago/Getty Images Table of contents - [Watch for these tell-tale signs of a stock market bubble](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#signs) - [What is a stock market bubble?](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#what-is) - [Why should you care about stock market bubbles?](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#why) - [Examples of a stock market bubble](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#examples) - [How to avoid losing money when a market bubble bursts](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#bursts) Table of contents Back to top The stock market has been on a tear for more than two years, with the [S\&P 500](https://www.bankrate.com/investing/how-to-buy-sp-500-index-fund/) increasing roughly 25 percent in both 2023 and 2024. The momentum has continued this year as stocks have continued to “melt up,” with bullish investors putting a floor under the market. But with this market melt-up leaving stocks at elevated valuations and the uncertainty around the impact of tariffs on the economy, some investors may be concerned about a potential bubble. In bull markets that seem to go on endlessly, it’s important not to become complacent. Here are five signs to look for to judge whether we’re in bubble market territory and what we’ll likely see if we’re there. ## ![](https://navi.cohesionapps.com/display?write_key=wk_2M3TlVcWbz8i1RTZjLkSmbWfyQC&adId=50a6c197db&req=https%3A%2F%2Fwww.bankrate.com%2Finvesting%2Fsigns-of-stock-market-bubble%2F&ref=) ## Watch for these tell-tale signs of a stock market bubble There’s an old saying on Wall Street: “No one rings a bell at the top.” It means that only in retrospect does it become obvious for most market participants that the market has peaked. But while there may be no bell at the top, observant investors can pick up on many indicators that show when the market is in nosebleed territory. You’ll want to see many of these factors working together to produce a euphoric bubble, as you weigh your options for how to keep your portfolio protected in the event that the hot market finally cools off — or worse, the bubble pops. ### 1\. A story has captured the market’s imagination A compelling story is one of the best frameworks for creating a stock bubble. The dot-com bubble of the late 1990s had one: “The internet changes everything.” The housing bubble of the 2000s had one: “Real estate never declines in price.” Even the 19th century’s railway mania promised that the massive benefits of the railroads would transform travel and transportation. These so-called story stocks promise to transform the world, and while the promised benefits may ultimately arrive, they tend to take a lot longer than the stock promoters would have you believe. The benefits of the internet eventually arrived, but not before effectively destroying hundreds of dot-com companies that had poor business models. And even the survivors get caught up in the frenzy, with the stocks of eventual leaders such as [Amazon](https://www.bankrate.com/investing/how-to-invest-in-stocks/) (AMZN) being bid up to astronomical levels before eventually falling along with the other stocks in the over-hyped sectors. Where we see it today: There’s no question that the biggest story in the stock market over the past two years has been the rise of artificial intelligence and its potential to impact many industries. AI may change many aspects of how we work and live, but exactly how the future will play out is still unclear. [Cryptocurrency](https://www.bankrate.com/investing/what-is-cryptocurrency/) is another area that has bubbly qualities, in part because there are not underlying cash flows to help analysts determine a coin’s fair value, if it has any at all. MORE: [How to turn \$1,000 into \$1 million, according to a top wealth advisor](https://www.bankrate.com/investing/best-ways-to-invest-1000/) ### 2\. Prices rise regardless of news The story is important because it offers a theme to build investors’ hopes and dreams on. It also provides a guide for what’s to come and how the new transformational industry might develop. But what if reality differs from the story? Investors will surely adjust their expectations, right? In a bubble, it’s as if every bit of information verifies the story, so stock prices rise regardless of the news. A company hits its earnings estimates? The stock climbs. And if it misses earnings estimates by a mile? It still climbs. The story stocks seem unbreakable, and they are for a time. And so sharp-eyed investors are calibrating reality to the story in order to see if they fit. When stocks rise but the long-term future looks clearly worse, long-term investors should be extra careful. Where we see it today: Stocks have seen tremendous gains the past couple of years and excitement seemed to reach new heights following the reelection of President Donald Trump. Investors bid stocks higher with the expectation that deregulation and a more business-friendly administration would result in a surge in growth. Trump even toured the New York Stock Exchange. When [talk of tariffs](https://www.bankrate.com/taxes/trump-tariffs-explained/) picked up, they were initially dismissed as a negotiating tactic. But soon stocks fell as investors became more concerned about the outlook for growth, then they bounced as investors decided tariffs wouldn’t be as bad as expected. ### 3\. Other asset prices are soaring, too Often in a bubble market, it’s not just stocks that are soaring; it’s other assets, too. Flush with cash from their stock successes, a booming economy or easy money, speculators rush out to [buy other highly risky alternative assets](https://www.bankrate.com/investing/popular-alternative-investments/). During these times you may see the prices of collectibles skyrocketing. Promoters may try to hype up “new asset classes” by highlighting how investible sports cards are, or how art from the great masters never seems to decline in value. Assets such as these produce no cash flow and so turning a profit hinges entirely on finding someone else to pay more for them than you did. And the definition of “investible” assets continues to grow: luxury handbags, shoes, Pokémon cards, Beanie Babies, wine, video game cartridges, [digital art through NFTs](https://www.bankrate.com/investing/what-is-an-nft-non-fungible-token/) and the list goes on and on. Where we see it today: With thousands of possible examples, cryptocurrencies have seen a flood of interest as speculators and promoters rush to the space to cash in. Cryptocurrency has a total market valuation of around \$3.8 trillion as of July 2025, with [Bitcoin](https://www.bankrate.com/investing/what-is-bitcoin/) accounting for the lion’s share of that figure. Of course, it’s not just digital assets that have piqued interest — shoes and handbags have seen soaring prices lately, too. Learn more: [Best ways to get free financial advice](https://www.bankrate.com/investing/financial-advisors/how-to-get-free-financial-advice/) ## 4\. New traders say that old investors ‘don’t get it’ When the taxi driver, the hairstylist and the grocery clerk are giving you investing tips, it’s a good sign that an investment thesis has spilled over to the mainstream and is attracting less sophisticated retail traders looking for a buck and who are motivated by fear of missing out (FOMO). And they may well succeed — for a period of time. In the rush to build hype, breathless promoters will say, “This time it’s different.” But it rarely is. > "The time when seasoned investors start to worry the market may have moved unsustainably high is when they see a rush of newer investors into the market and where FOMO is overriding the fundamentals. When new investors are piling into excessively risky investment such as stocks with no earnings track record, or in some cases, no revenue, that is an indicator that trouble could be looming." > > — Greg McBride, CFA, Bankrate chief financial analyst This new breed of trader will explain to you why [Warren Buffett](https://www.bankrate.com/investing/warren-buffett-stocks-berkshire-hathaway-portfolio-13f-filing/) doesn’t “get” the new paradigm and that Buffett and other similarly “old school” investors are behind the curve. This new crowd may have been trading for just a few months, but they insist they understand the markets. Yet it was Buffett who endured similar barbs from inexperienced traders in the dot-com bust and then came through it all. He avoided much of the housing debacle, too. Buffett was perched on a war chest and took advantage of ailing banks that needed cash and confidence during the 2008 financial crisis. Pro gamblers love popular horse races such as the Kentucky Derby, because they bring easy money to the track, allowing the real handicappers to take it. So it is with investing, too. Where we see it today: As investors cheered stocks to new highs in 2024, one notable investor was increasingly taking his chips off the table. Warren Buffett’s [Berkshire Hathaway was mostly a seller of stocks](https://www.bankrate.com/investing/warren-buffett-stocks-berkshire-hathaway-portfolio-13f-filing/) in 2024, with the company’s cash position ballooning to north of \$300 billion. Buffett frequently advises against timing the market, but it’s worth noting that he couldn’t find attractive uses for his large cash pile last year, even as other investors let the good times roll. ![](https://navi.cohesionapps.com/display?write_key=wk_2M3TlVcWbz8i1RTZjLkSmbWfyQC&adId=e52860307a&req=https%3A%2F%2Fwww.bankrate.com%2Finvesting%2Fsigns-of-stock-market-bubble%2F&ref=) ### 5\. Stock valuations in the top percentiles During the last phases of a stock bubble, the prices are all out of proportion to reality. Valuations are in the highest percentiles, as measured historically. By measuring on a relative basis, you get a better sense of how things match up to the bubbles of the past and whether a solid bull run is more likely to burst or continue, albeit with a more modest sense of “animal spirits.” It’s important to recognize that a price rise alone is not sufficient to say something is in a bubble. A stock can rise 100 percent and not be in a bubble if its underlying fundamentals have improved significantly. Or if we start from a low valuation (for example, from the bottom of the pandemic) and then measure after a solid bull run, we’re sure to get gaudy figures that might make you think of a bubble. However, it’s easy to cherry-pick price increases and say that we’re in a bubble, without looking at the broader context. Stocks could climb for a long while as profits continue to rise. Where we see it today: There’s no question that stock valuations are high. By one measure, the cyclically adjusted price-to-earnings ratio, the S\&P 500 has only traded at a higher valuation twice, in October 2021 and December 1999. In October, Goldman Sachs forecast that equity returns over the next decade would average around 3 percent a year, far from the double-digit returns investors have gotten used to. High valuations don’t guarantee an immediate crash or correction, but it’s probably time for investors to lower their expectations for stocks. ## ## What is a stock market bubble? A stock market bubble is a speculative frenzy when stock prices vastly exceed the fundamental value of the companies underlying them. A market as a whole can also be in a bubble if traders buy assets seemingly regardless of their value. Similarly, individual stocks can be in a bubble when investors bid up their prices well beyond what’s justified by the underlying business performance. A stock bubble is not merely overvaluation, which can occur even during normal periods as markets become mildly overextended. Instead, a bubble is a period of massive overvaluation, when speculators become inflamed by “animal spirits” and heedlessly bid up stocks. Often these periods are driven by a new business story that promises to revolutionize the world. Many investors may find it helpful to [work with a financial advisor](https://www.bankrate.com/investing/financial-advisors/how-to-choose-a-financial-advisor/) during times of market uncertainty, like when stocks might be in a bubble. You can develop a financial plan that will set you on a path toward reaching your financial goals. Get started: [Match with an advisor who can help you achieve your financial goals](https://advisormatch.bankrate.com/questionnaire?am_type=BR&amp%3Bamp%3Butm_source=BRarticle) ## ## Why should you care about stock market bubbles? It’s important to recognize when a stock market bubble may be happening, though it’s not always obvious, except in retrospect. Recognizing a bubble is important because it allows you to: - Avoid losing money. While many speculators make money during a bubble, only the ones who recognize a bubble has formed actually keep their money and avoid jumping back into the bubbly stocks. - Prepare for a market decline. If you see a bubble has formed, it can help you navigate your portfolio through it. You can move your investments from high-risk picks to low-risk picks, or even sell out of the market altogether. By knowing that a bubble has formed, you can take steps to limit your exposure to it. - Ready your personal finances. Sometimes a stock bubble can lead to spillover effects in the broader economy. When a bubble bursts, it often precedes a downturn in the economy, creating a recession that can lead to job loss. So a widespread bubble can be a potential indicator that the economy may be approaching its local peak. You can get your finances in order to help withstand this potential downturn. Understanding whether a stock market bubble is developing can be useful to help navigate your investments, as well as your personal financial situation. ## ## Examples of a stock market bubble The U.S. has experienced at least two major market bubbles in the recent past. Bubbles and the financial losses they create tend to scar participants for decades. - The dot-com bubble: In the period of 1999-2000, the promise of the internet led many traders to buy anything even tangentially connected to it, even if the company did not have a legitimate business plan. While some business behemoths eventually emerged from the bubble — Amazon, for example — many dot-coms quickly became dot-bombs, fading completely into bankruptcy. Other dot-com companies that did survive lost 90 percent or more of their value and never fully recovered from the carnage. - The housing bubble: In the period following the dot-com bubble, housing began to appreciate rapidly, powered by low interest rates (which existed as a way to soften the effect of the dot-com burst) and the belief that real estate never declines in value. Housing prices appreciated, as did the stocks of many businesses associated with real estate, including construction companies, banks and a variety of specialty finance firms. When the bubble burst and housing prices plummeted, homeowners and banks were left with assets that were worth much less than they were purchased for. The resulting devastation left the economy reeling for many years. Other classic examples of bubbles include the 17th century Dutch tulip mania, Japan’s real estate and stock bubble in the 1980s, the 18th century South Sea bubble and the U.S. stock market of the 1920s, which [preceded the Great Depression](https://www.bankrate.com/investing/biggest-stock-market-crashes-in-us-history/). In addition, many analysts think cryptocurrency is a bubble because these digital tokens are not backed by any assets or cash flow. ## ## How to avoid losing money when a market bubble bursts It’s not always easy to avoid losing money when a market bubble bursts. In many cases, when one sector is massively inflated, it spills over and affects many other industries. For example, in the bear market of 2007-2009, an inflated housing market led to a market-wide decline in stocks. However, many stocks unrelated to housing recovered relatively quickly in the years following the decline, and eventually even many banks and other businesses recovered, too. Here are a few ways to avoid losing money in a bubble: - Avoid bubble stocks. This advice is easier said than done when a speculative frenzy grips traders, and you’re derided for not understanding the “new economy.” - Own stock in non-bubble companies. One of the best ways to avoid losing money in a bubble, while still being invested, is to own stock in companies that are unrelated to the bubble, if that’s possible. However, sometimes even the bubble spills over into unrelated companies. - Buy value stocks. Value stocks are often a good place to be when a market bubble bursts, because they do not have extreme expectations built into their prices. Without those expectations, [value stocks](https://www.bankrate.com/investing/best-etfs/) often don’t decline as much as bubble stocks do when the market bursts, and they may even rise as investors shift to them. - Buy solid companies. By investing in high-performing companies, especially those unrelated to the bubble, you may be able to escape the carnage when the bubble pops. While it may be possible to dodge the worst when a bubble pops, often it’s not entirely avoidable, because even good stocks can decline in the short term. That’s why it’s vital to think long term and [invest for the long term](https://www.bankrate.com/investing/best-long-term-investments/). Buy solid companies and then take advantage of downturns and buy them when a bubble bursts. ## Bottom line When stocks are soaring, it can be easy to overlook the increasing dangers posed by their valuation. It’s easy to get caught up in the euphoria, and high prices seem to lead to even higher prices. The party swirls on, until one day it doesn’t. So the world’s best investors focus on controlling their emotions as the market rises (and falls) so that they can coolly recognize when they need to buy and when they need to tread carefully. Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation. Did you find this page helpful? Why we ask for feedback Your feedback helps us improve our content and services. It takes less than a minute to complete. Your responses are anonymous and will only be used for improving our website. Help us improve our content Yes No Thank you for your feedback\! Your input helps us improve our content and services. Cite us Share this article Share this article Close ![](https://www.bankrate.com/2021/10/26151853/James-Royal-headshot-scaled-square.jpg?auto=webp&quality=85&width=96&height=96&fit=cover&enable=upscale&crop=1:1,smart) Written by [James Royal, Ph.D.](https://www.bankrate.com/authors/james-royal/) Former Principal Writer, Investing and Wealth Management - [Connect with James Royal, Ph.D. on Twitter](https://twitter.com/JimRoyalPhD) - [Connect with James Royal, Ph.D. on LinkedIn](https://www.linkedin.com/in/james-royal-phd-809b929/) - [Get in contact with James Royal, Ph.D. via Email](mailto:jroyal@redventures.com) [Read more from James](https://www.bankrate.com/authors/james-royal/) Former Bankrate principal writer and editor James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. ![](https://www.bankrate.com/2021/05/20103456/brian-baker.jpg?auto=webp&quality=85&width=96&height=96&fit=cover&enable=upscale&crop=1:1,smart) Co-written by [Brian Baker, CFA](https://www.bankrate.com/authors/brian-baker-cfa/) Former Senior Writer, Investing and Retirement - [Connect with Brian Baker, CFA on Twitter](https://twitter.com/briandbaker1) - [Connect with Brian Baker, CFA on LinkedIn](https://www.linkedin.com/in/brian-baker-cfa-1019779) - [Get in contact with Brian Baker, CFA via Email](mailto:brbaker@redventures.com) [Read more from Brian](https://www.bankrate.com/authors/brian-baker-cfa/) Brian Baker covered investing and retirement for Bankrate. He is a CFA Charterholder and previously worked in equity research at a buyside investment firm. Baker is passionate about helping people make sense of complicated financial topics so that they can better plan for their financial futures. ![A trader on the floor of the New York Stock Exchange looking at at a monitor with a concerned look on their face.](https://www.bankrate.com/brp/2024/01/06122702/5-sure-fire-signs-of-a-stock-market-bubble.jpg?auto=webp&optimize=high&crop=16:9) Michael M. Santiago/Getty Images Bankrate is always editorially independent. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Here's an explanation for how we make money . Our Bankrate promise is to ensure everything we publish is objective, accurate and trustworthy. Table of contents - [Watch for these tell-tale signs of a stock market bubble](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#signs) - [What is a stock market bubble?](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#what-is) - [Why should you care about stock market bubbles?](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#why) - [Examples of a stock market bubble](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#examples) - [How to avoid losing money when a market bubble bursts](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#bursts) Back to top ## You may also like ![U.S. President Donald Trump answers a reporters question during a meeting with Israeli Prime Minister Benjamin in the Oval Office of the White House on April 7, 2025 in Washington, DC.](https://www.bankrate.com/brp/2025/04/09172224/Trumps-90day-tariff-pause-leads-to-booming-stocks-Should-investors-stay-on-guard-300x169.jpg) [Trump’s 90-day tariff ‘pause’ leads to wild reversal in markets — should investors stay on guard?](https://www.bankrate.com/investing/trump-tariff-pause-impacts-markets/) Investing By [James Royal, Ph.D.](https://www.bankrate.com/authors/james-royal/) 3 min read ![Stock market ticker](https://www.bankrate.com/2019/03/22142110/How-to-trade-stocks.jpg) [How to trade stocks: A beginner’s guide](https://www.bankrate.com/investing/how-to-trade-stocks/) Investing By [James Royal, Ph.D.](https://www.bankrate.com/authors/james-royal/) 8 min read ![Man working from home](https://www.bankrate.com/2023/04/06163032/GettyImages-169816890.jpeg) [7 proven strategies to identify potential breakout stocks and boost your investment portfolio](https://www.bankrate.com/investing/ways-to-identify-breakout-stocks/) Investing By [Bob Haegele](https://www.bankrate.com/authors/bob-haegele/) 3 min read ![Tips to find safer stocks](https://www.bankrate.com/2022/06/30141838/GettyImages-1340533768.jpg) [5 tips to find safer stocks amid recession fears](https://www.bankrate.com/investing/tips-to-find-safe-stocks/) Investing By [Bob Haegele](https://www.bankrate.com/authors/bob-haegele/) 4 min read ## [Bankrate logo](https://www.bankrate.com/) ### About - [About us](https://www.bankrate.com/about/) - [Leadership](https://www.bankrate.com/leadership/) - [Press room](https://www.bankrate.com/press-releases/) - [Bankrate Data Center](https://www.bankrate.com/data-center/) - [Careers](https://www.bankrate.com/careers/) - [Site map](https://www.bankrate.com/corporate/site-map/) ### Help - [Compare rates](https://www.bankrate.com/compare-rates/) - [Latest news](https://www.bankrate.com/news/) - [Popular topics](https://www.bankrate.com/popular-finance-topics/) - [Advertise with us](https://www.bankrate.com/media-kit/) ### Legal - [Privacy policy](https://www.bankrate.com/privacy/) - Cookie settings - [Do Not Sell or Share My Personal Information](https://www.bankrate.com/do-not-sell-or-share-my-personal-information/) - [Consumer Health Information Privacy Policy](https://www.bankrate.com/consumer-health-information-privacy-policy/) - [Understanding Bankrate’s averages](https://www.bankrate.com/understanding-bankrates-rate-averages/) - [Terms of use](https://www.bankrate.com/terms/) - [GLBA annual notice](https://www.bankrate.com/glba-notice/) - [California Consumer Financial Privacy Notice](https://www.bankrate.com/2022/02/15094901/california-notice.pdf) - [Licenses](https://www.bankrate.com/licenses/) ### How we make money Bankrate.com is an independent, advertising-supported publisher and comparison service. 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Table of contents - [Watch for these tell-tale signs of a stock market bubble](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#signs) - [What is a stock market bubble?](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#what-is) - [Why should you care about stock market bubbles?](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#why) - [Examples of a stock market bubble](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#examples) - [How to avoid losing money when a market bubble bursts](https://www.bankrate.com/investing/signs-of-stock-market-bubble/#bursts) Quick citation guide Select a citation to automatically copy to clipboard. APA: Royal, J., & Baker, CFA, B. (2025, July 18). 5 sure-fire signs of a stock market bubble. Bankrate. Retrieved April 14, 2026, from https://www.bankrate.com/investing/signs-of-stock-market-bubble/ Copied to clipboard\! MLA: Royal, James & Brian Baker, CFA. "5 sure-fire signs of a stock market bubble." Bankrate. 18 July 2025, https://www.bankrate.com/investing/signs-of-stock-market-bubble/. Copied to clipboard\! Chicago: Royal, James & Brian Baker, CFA. "5 sure-fire signs of a stock market bubble." Bankrate. July 18, 2025. https://www.bankrate.com/investing/signs-of-stock-market-bubble/. Copied to clipboard\! ![](https://www.facebook.com/tr?id=1805085980359671&ev=PageView&noscript=1) ![](https://www.facebook.com/tr?id=1564326531369118&ev=PageView&noscript=1)
Readable Markdown	The stock market has been on a tear for more than two years, with the [S\&P 500](https://www.bankrate.com/investing/how-to-buy-sp-500-index-fund/) increasing roughly 25 percent in both 2023 and 2024. The momentum has continued this year as stocks have continued to “melt up,” with bullish investors putting a floor under the market. But with this market melt-up leaving stocks at elevated valuations and the uncertainty around the impact of tariffs on the economy, some investors may be concerned about a potential bubble. In bull markets that seem to go on endlessly, it’s important not to become complacent. Here are five signs to look for to judge whether we’re in bubble market territory and what we’ll likely see if we’re there. ## Watch for these tell-tale signs of a stock market bubble There’s an old saying on Wall Street: “No one rings a bell at the top.” It means that only in retrospect does it become obvious for most market participants that the market has peaked. But while there may be no bell at the top, observant investors can pick up on many indicators that show when the market is in nosebleed territory. You’ll want to see many of these factors working together to produce a euphoric bubble, as you weigh your options for how to keep your portfolio protected in the event that the hot market finally cools off — or worse, the bubble pops. ### 1\. A story has captured the market’s imagination A compelling story is one of the best frameworks for creating a stock bubble. The dot-com bubble of the late 1990s had one: “The internet changes everything.” The housing bubble of the 2000s had one: “Real estate never declines in price.” Even the 19th century’s railway mania promised that the massive benefits of the railroads would transform travel and transportation. These so-called story stocks promise to transform the world, and while the promised benefits may ultimately arrive, they tend to take a lot longer than the stock promoters would have you believe. The benefits of the internet eventually arrived, but not before effectively destroying hundreds of dot-com companies that had poor business models. And even the survivors get caught up in the frenzy, with the stocks of eventual leaders such as [Amazon](https://www.bankrate.com/investing/how-to-invest-in-stocks/) (AMZN) being bid up to astronomical levels before eventually falling along with the other stocks in the over-hyped sectors. Where we see it today: There’s no question that the biggest story in the stock market over the past two years has been the rise of artificial intelligence and its potential to impact many industries. AI may change many aspects of how we work and live, but exactly how the future will play out is still unclear. [Cryptocurrency](https://www.bankrate.com/investing/what-is-cryptocurrency/) is another area that has bubbly qualities, in part because there are not underlying cash flows to help analysts determine a coin’s fair value, if it has any at all. ### 2\. Prices rise regardless of news The story is important because it offers a theme to build investors’ hopes and dreams on. It also provides a guide for what’s to come and how the new transformational industry might develop. But what if reality differs from the story? Investors will surely adjust their expectations, right? In a bubble, it’s as if every bit of information verifies the story, so stock prices rise regardless of the news. A company hits its earnings estimates? The stock climbs. And if it misses earnings estimates by a mile? It still climbs. The story stocks seem unbreakable, and they are for a time. And so sharp-eyed investors are calibrating reality to the story in order to see if they fit. When stocks rise but the long-term future looks clearly worse, long-term investors should be extra careful. Where we see it today: Stocks have seen tremendous gains the past couple of years and excitement seemed to reach new heights following the reelection of President Donald Trump. Investors bid stocks higher with the expectation that deregulation and a more business-friendly administration would result in a surge in growth. Trump even toured the New York Stock Exchange. When [talk of tariffs](https://www.bankrate.com/taxes/trump-tariffs-explained/) picked up, they were initially dismissed as a negotiating tactic. But soon stocks fell as investors became more concerned about the outlook for growth, then they bounced as investors decided tariffs wouldn’t be as bad as expected. ### 3\. Other asset prices are soaring, too Often in a bubble market, it’s not just stocks that are soaring; it’s other assets, too. Flush with cash from their stock successes, a booming economy or easy money, speculators rush out to [buy other highly risky alternative assets](https://www.bankrate.com/investing/popular-alternative-investments/). During these times you may see the prices of collectibles skyrocketing. Promoters may try to hype up “new asset classes” by highlighting how investible sports cards are, or how art from the great masters never seems to decline in value. Assets such as these produce no cash flow and so turning a profit hinges entirely on finding someone else to pay more for them than you did. And the definition of “investible” assets continues to grow: luxury handbags, shoes, Pokémon cards, Beanie Babies, wine, video game cartridges, [digital art through NFTs](https://www.bankrate.com/investing/what-is-an-nft-non-fungible-token/) and the list goes on and on. Where we see it today: With thousands of possible examples, cryptocurrencies have seen a flood of interest as speculators and promoters rush to the space to cash in. Cryptocurrency has a total market valuation of around \$3.8 trillion as of July 2025, with [Bitcoin](https://www.bankrate.com/investing/what-is-bitcoin/) accounting for the lion’s share of that figure. Of course, it’s not just digital assets that have piqued interest — shoes and handbags have seen soaring prices lately, too. ## 4\. New traders say that old investors ‘don’t get it’ When the taxi driver, the hairstylist and the grocery clerk are giving you investing tips, it’s a good sign that an investment thesis has spilled over to the mainstream and is attracting less sophisticated retail traders looking for a buck and who are motivated by fear of missing out (FOMO). And they may well succeed — for a period of time. In the rush to build hype, breathless promoters will say, “This time it’s different.” But it rarely is. > "The time when seasoned investors start to worry the market may have moved unsustainably high is when they see a rush of newer investors into the market and where FOMO is overriding the fundamentals. When new investors are piling into excessively risky investment such as stocks with no earnings track record, or in some cases, no revenue, that is an indicator that trouble could be looming." > > — Greg McBride, CFA, Bankrate chief financial analyst This new breed of trader will explain to you why [Warren Buffett](https://www.bankrate.com/investing/warren-buffett-stocks-berkshire-hathaway-portfolio-13f-filing/) doesn’t “get” the new paradigm and that Buffett and other similarly “old school” investors are behind the curve. This new crowd may have been trading for just a few months, but they insist they understand the markets. Yet it was Buffett who endured similar barbs from inexperienced traders in the dot-com bust and then came through it all. He avoided much of the housing debacle, too. Buffett was perched on a war chest and took advantage of ailing banks that needed cash and confidence during the 2008 financial crisis. Pro gamblers love popular horse races such as the Kentucky Derby, because they bring easy money to the track, allowing the real handicappers to take it. So it is with investing, too. Where we see it today: As investors cheered stocks to new highs in 2024, one notable investor was increasingly taking his chips off the table. Warren Buffett’s [Berkshire Hathaway was mostly a seller of stocks](https://www.bankrate.com/investing/warren-buffett-stocks-berkshire-hathaway-portfolio-13f-filing/) in 2024, with the company’s cash position ballooning to north of \$300 billion. Buffett frequently advises against timing the market, but it’s worth noting that he couldn’t find attractive uses for his large cash pile last year, even as other investors let the good times roll. ### 5\. Stock valuations in the top percentiles During the last phases of a stock bubble, the prices are all out of proportion to reality. Valuations are in the highest percentiles, as measured historically. By measuring on a relative basis, you get a better sense of how things match up to the bubbles of the past and whether a solid bull run is more likely to burst or continue, albeit with a more modest sense of “animal spirits.” It’s important to recognize that a price rise alone is not sufficient to say something is in a bubble. A stock can rise 100 percent and not be in a bubble if its underlying fundamentals have improved significantly. Or if we start from a low valuation (for example, from the bottom of the pandemic) and then measure after a solid bull run, we’re sure to get gaudy figures that might make you think of a bubble. However, it’s easy to cherry-pick price increases and say that we’re in a bubble, without looking at the broader context. Stocks could climb for a long while as profits continue to rise. Where we see it today: There’s no question that stock valuations are high. By one measure, the cyclically adjusted price-to-earnings ratio, the S\&P 500 has only traded at a higher valuation twice, in October 2021 and December 1999. In October, Goldman Sachs forecast that equity returns over the next decade would average around 3 percent a year, far from the double-digit returns investors have gotten used to. High valuations don’t guarantee an immediate crash or correction, but it’s probably time for investors to lower their expectations for stocks. ## What is a stock market bubble? A stock market bubble is a speculative frenzy when stock prices vastly exceed the fundamental value of the companies underlying them. A market as a whole can also be in a bubble if traders buy assets seemingly regardless of their value. Similarly, individual stocks can be in a bubble when investors bid up their prices well beyond what’s justified by the underlying business performance. A stock bubble is not merely overvaluation, which can occur even during normal periods as markets become mildly overextended. Instead, a bubble is a period of massive overvaluation, when speculators become inflamed by “animal spirits” and heedlessly bid up stocks. Often these periods are driven by a new business story that promises to revolutionize the world. Many investors may find it helpful to [work with a financial advisor](https://www.bankrate.com/investing/financial-advisors/how-to-choose-a-financial-advisor/) during times of market uncertainty, like when stocks might be in a bubble. You can develop a financial plan that will set you on a path toward reaching your financial goals. ## Why should you care about stock market bubbles? It’s important to recognize when a stock market bubble may be happening, though it’s not always obvious, except in retrospect. Recognizing a bubble is important because it allows you to: - Avoid losing money. While many speculators make money during a bubble, only the ones who recognize a bubble has formed actually keep their money and avoid jumping back into the bubbly stocks. - Prepare for a market decline. If you see a bubble has formed, it can help you navigate your portfolio through it. You can move your investments from high-risk picks to low-risk picks, or even sell out of the market altogether. By knowing that a bubble has formed, you can take steps to limit your exposure to it. - Ready your personal finances. Sometimes a stock bubble can lead to spillover effects in the broader economy. When a bubble bursts, it often precedes a downturn in the economy, creating a recession that can lead to job loss. So a widespread bubble can be a potential indicator that the economy may be approaching its local peak. You can get your finances in order to help withstand this potential downturn. Understanding whether a stock market bubble is developing can be useful to help navigate your investments, as well as your personal financial situation. ## Examples of a stock market bubble The U.S. has experienced at least two major market bubbles in the recent past. Bubbles and the financial losses they create tend to scar participants for decades. - The dot-com bubble: In the period of 1999-2000, the promise of the internet led many traders to buy anything even tangentially connected to it, even if the company did not have a legitimate business plan. While some business behemoths eventually emerged from the bubble — Amazon, for example — many dot-coms quickly became dot-bombs, fading completely into bankruptcy. Other dot-com companies that did survive lost 90 percent or more of their value and never fully recovered from the carnage. - The housing bubble: In the period following the dot-com bubble, housing began to appreciate rapidly, powered by low interest rates (which existed as a way to soften the effect of the dot-com burst) and the belief that real estate never declines in value. Housing prices appreciated, as did the stocks of many businesses associated with real estate, including construction companies, banks and a variety of specialty finance firms. When the bubble burst and housing prices plummeted, homeowners and banks were left with assets that were worth much less than they were purchased for. The resulting devastation left the economy reeling for many years. Other classic examples of bubbles include the 17th century Dutch tulip mania, Japan’s real estate and stock bubble in the 1980s, the 18th century South Sea bubble and the U.S. stock market of the 1920s, which [preceded the Great Depression](https://www.bankrate.com/investing/biggest-stock-market-crashes-in-us-history/). In addition, many analysts think cryptocurrency is a bubble because these digital tokens are not backed by any assets or cash flow. ## How to avoid losing money when a market bubble bursts It’s not always easy to avoid losing money when a market bubble bursts. In many cases, when one sector is massively inflated, it spills over and affects many other industries. For example, in the bear market of 2007-2009, an inflated housing market led to a market-wide decline in stocks. However, many stocks unrelated to housing recovered relatively quickly in the years following the decline, and eventually even many banks and other businesses recovered, too. Here are a few ways to avoid losing money in a bubble: - Avoid bubble stocks. This advice is easier said than done when a speculative frenzy grips traders, and you’re derided for not understanding the “new economy.” - Own stock in non-bubble companies. One of the best ways to avoid losing money in a bubble, while still being invested, is to own stock in companies that are unrelated to the bubble, if that’s possible. However, sometimes even the bubble spills over into unrelated companies. - Buy value stocks. Value stocks are often a good place to be when a market bubble bursts, because they do not have extreme expectations built into their prices. Without those expectations, [value stocks](https://www.bankrate.com/investing/best-etfs/) often don’t decline as much as bubble stocks do when the market bursts, and they may even rise as investors shift to them. - Buy solid companies. By investing in high-performing companies, especially those unrelated to the bubble, you may be able to escape the carnage when the bubble pops. While it may be possible to dodge the worst when a bubble pops, often it’s not entirely avoidable, because even good stocks can decline in the short term. That’s why it’s vital to think long term and [invest for the long term](https://www.bankrate.com/investing/best-long-term-investments/). Buy solid companies and then take advantage of downturns and buy them when a bubble bursts. ## Bottom line When stocks are soaring, it can be easy to overlook the increasing dangers posed by their valuation. It’s easy to get caught up in the euphoria, and high prices seem to lead to even higher prices. The party swirls on, until one day it doesn’t. So the world’s best investors focus on controlling their emotions as the market rises (and falls) so that they can coolly recognize when they need to buy and when they need to tread carefully. Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation. Did you find this page helpful? Help us improve our content
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