type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation.
Wikipedia
en.wikipedia.org › wiki › Stock_market_bubble
Stock market bubble - Wikipedia
November 14, 2025 - This type of thinking helps to further propagate the bubble whereby everyone is investing with the intent of finding a greater fool. Still, some analysts cite the wisdom of crowds and say that price movements really do reflect rational expectations of fundamental returns. Large traders become powerful enough to rock the boat, generating stock market bubbles.
CMC Markets
cmcmarkets.com › home › learn to trade › trading guides › stock market bubbles
What is a stock market bubble and how do I trade it?
A stock market bubble is when share prices of stocks rapidly keep climbing to a point where they far exceed their intrinsic value or their earnings. This price bubble, based on speculation, can include all equities in a stock market or those from a specific sector.
What exactly happens when an stock market bubble "bursts".
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January 9, 2021Is the market a bubble?
Nothing making sense right now....I remain cash heavy and lurk! More on reddit.com
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January 21, 2025Are we in a AI bubble right now?
If a startup only puts AI on their name and that's sufficent for raising profits and investments, then it's a bubble. More on reddit.com
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May 5, 2025What if this really is like the dot com bubble?
This isn’t like the dot com bubble. I was working for a tech company at the time. The chairman made a speech about an Internet product we were working on (which was vaporware, as the guys working on it didn’t know anything about the Internet and couldn’t code their way out of a paper bag), but it didn’t stop to stock from going from 50 cents to $20 in a few months. One guy I knew made millions as the CTO for a company with a bunch of right out of college kids on skateboards that tried to get people to sign themselves up for spam email. A lot of people cashed out and got rich before the crash, but neither company survived the bust. Most of the dot com companies were more or less fake and disappeared after a while. Where the dot com bubble was mainly garage companies that got insane amounts of funding from any crazy idea that had the word Internet, the AI bubble is mainly being driven by giant companies. Google, Microsoft, Meta, Amazon, etc… aren’t going anywhere if AI turns out not to work out. They’ll either make crazy amounts of money on AI or just go back to making crazy amounts of money with their current businesses. For them all the investments are coming from cash flow and are as much an insurance policy as anything. Just in case AI does work out they are afraid of being left behind and that’s worth billions for them. Also the hype is totally different. The Internet was the information super highway that would connect the world and let us all do great things. AI they are hyping it as: It’s really dangerous, will eliminate everyone’s jobs and take over the world from us old fashioned humans, so great let’s go spend billions recklessly with no guardrails and see what happens. The whole thing is making this obsolete human scratch his head and wonder what’s wrong with these people. More on reddit.com
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April 23, 2025What happens when a stock market bubble pops?
All stock market bubbles will eventually pop, which leads to a stock market crash. This causes share prices to drop suddenly, along with major index valuations such as the Dow Jones Industrial Average or S&P 500.
cmcmarkets.com
cmcmarkets.com › home › learn to trade › trading guides › stock market bubbles
What is a stock market bubble and how do I trade it?
What is the primary cause of a stock market bubble?
Generally, a stock market bubble is caused by speculative investing and trading, but not always. Increased speculation can cause assets to see their values increase far beyond what might be expected, leading to a bubble.
sofi.com
sofi.com › learn › content › what-causes-a-stock-market-bubble
What Causes a Stock Market Bubble? | SoFi
How do you make money from a stock market bubble?
There is no guarantee that you will profit from a stock market bubble, but investors should try and diversify their portfolio as much as possible with assets from other sectors, such as bonds and ETFs. You could also look for sectors that fare well in a bear market, known as “defensive stocks”, such as utility, food or pharmaceutical stocks.
cmcmarkets.com
cmcmarkets.com › home › learn to trade › trading guides › stock market bubbles
What is a stock market bubble and how do I trade it?
Videos
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The Long View: How to Spot a Market Bubble - YouTube
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Is The Stock Market in a Bubble? - YouTube
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Market Crash Signals Flashing But This Sector Is About To Explode ...
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Major Warning Signs Of This Stock Market Bubble - YouTube
Investopedia
investopedia.com › terms › b › bubble.asp
Understanding Economic Bubbles: How They Form and Burst, With Examples
August 25, 2025 - Bubbles are typically attributed ... behavior is debated. In equities markets and economies, bubbles shift resources to rapidly growing areas, and when the bubble bursts, resources shift again, causing prices to drop.
Investopedia
investopedia.com › articles › stocks › 10 › 5-steps-of-a-bubble.asp
Understanding the 5 Stages of an Economic Bubble
October 15, 2025 - The term "bubble," in an economic context, generally refers to a situation where the price for something—an individual stock, a financial asset, or even an entire sector, market, or asset class—exceeds its fundamental value by a large margin.
Angel One
angelone.in › knowledge-center › share-market › what-is-stock-market-bubble
What is Stock Market Bubble | Angel One
In economics, the phrase "bubble" refers to a scenario in which the price of something—a single stock, a financial asset, or could be an entire sector, market, or asset class—significantly exceeds its underlying value.
U.S. News
money.usnews.com › investing › term › stock-market-bubble
Stock Market Bubble Definition | Investing Dictionary | U.S. News
December 11, 2023 - Recognizing a market bubble in real time and predicting its bursting is very difficult, but there are certain red flags for investors to monitor. Bubbles are typically marked by a prevalent story, such as the idea that a new technology or new way of thinking has permanently transformed the market. ... Low commission rates start at $0 for U.S. listed stocks & ETFs*. Margin loan rates from 4.83% to 5.83%.
Russell Investments
russellinvestments.com › content › ri › us › en › insights › russell-research › 2024 › 05 › bursting-the-myth-understanding-market-bubbles.html
Bursting The Myth: Understanding Market Bubbles | Russell Investments
May 29, 2024 - In contrast, a market bubble is marked by unsustainable price increases unsupported by underlying fundamentals. When the bubble bursts, prices crash, causing significant and often permanent losses for investors. If a stock's price is high and appears likely to fall, that doesn’t necessarily ...
SoFi
sofi.com › learn › content › what-causes-a-stock-market-bubble
What Causes a Stock Market Bubble? | SoFi
September 5, 2025 - This content may include information ... market bubbles occur when speculative trading and investing, fueled by what could be called irrational exuberance, leads to big increases in values for certain assets....
SmartAsset
smartasset.com › investing › stock-market-bubble
Stock Market Bubbles: Definition and Examples - SmartAsset
May 30, 2023 - They’re buying in hopes of selling while the price is still high. This leads to a cycle of trading based on criteria that has nothing to do with the fundamentals of the companies being traded. If this cycle goes on too long it can profoundly overvalue the underlying assets, creating a stock market bubble that will eventually burst.
Reddit
reddit.com › r/investing › what exactly happens when an stock market bubble "bursts".
r/investing on Reddit: What exactly happens when an stock market bubble "bursts".
January 9, 2021 -
With all of the talk floating around on pretty much any investing related subreddit of the bubble that we are likely in, it is always mentioned that this bubble will inevitably burst and it is always said that is coming soon. I am somewhat new to investing and I don't understand what happens when it bursts. What drives the prices down so dramatically in almost the entire stock market? I understand that it is probably not as simple as one thing every time, but in history, what has been the causes and what could likely be the cause for our future bubble burst?
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"it is always mentioned that this bubble will inevitably burst and it is always said that is coming soon" It has been "imminent" and "inevitable" for half a decade on here and then when you do actually get a fairly major decline (December 2018, March of 2020), at the bottom people are certain it's going lower and get very frustrated when the rebound happens. 'It is instead the emergence of unknown unknowns - new and novel risk factors that investors were not previously aware of and had not factored into their expectations/risk appetites, that drive crashes. A crash occurs because it triggers a rapid and synchronous de-risking of portfolios, as people react to the new, unanticipated risk factor, and reposition their portfolios to reflect the increased degree of uncertainty, including the endogenous uncertainty associated with extreme asset price volatility itself (i.e. regardless of its cause, many investors cannot/will not tolerate extremely high degrees of volatility/price declines, and this creates the feedback loop necessary for a crash to occur - i.e. when selling and falling prices beget yet more selling, as de-risking accelerates). Investors get scared, and they decide to increase their cash allocations from (say) 5% to 20%, to 'preserve capital' in the face of the newly-uncertain environment, and 'prepare for future opportunities amidst the coming downturn'. They do this because they believe an abundance of caution to now be warranted given what has become an extremely uncertain/risky outlook, and also because they mistakenly believe that because the economic fallout is likely to last quite some time, that markets will also inevitably continue to go down/remain weak for a long time to come as well. Ego, 'future opportunities' will be significant, and cash will allow them to take advantage of them. The problem with this perspective and behaviour is that it is classic 'first-level thinking', instead of the more desirable second-level thinking necessary in markets (hat tip Howard Marks). What investors fail to understand is that it is precisely the synchronised move to higher cash allocations and a more defensive positioning mirroring their cautious outlook - which they themselves were very much a part of - that caused the market to crash in the first place. If everyone increases cash allocations from 5% to 20% at the same time, markets will crash, regardless of the cause. And that has absolutely been the case, from retail to institutional investors, to insurance companies and other institutions alike (QBE Insurance, for instance, recently came out and said they had "materially de-risked the investment book including exiting all equities, emerging market and high yield debt"; HK Exchanges similarly exited 100% of its equity exposure in March and early April). The thoughtful market observer would ask the question, so what happens next? Most of these investors don't plan to continue to hold 20% cash indefinitely. They are looking to re-deploy it back into equities at a time they perceive to be more opportune. What they really mean when they say that is 'when the outlook is less uncertain and they feel more comfortable', but what they overlook is that sellers will also feel more comfortable at this point; however, the important practical point is that it means they will be future net buyers of equities. Furthermore, they have already sold as much stock as they want/need to sell in order to feel comfortable with their remaining exposure in the face of what they expect will be considerable economic fallout in the medium term. Given their already very cautious outlook, it is therefore unlikely they will sell a whole lot more in the future. What has happened at this point is that a previously unknown unknown has now become a known unknown, and consequently is now already factored into investor risk appetite and market positioning, and so it ceases to have much impact on market prices. And this is true regardless of whether the underlying economy is weak or not, because the economy does not drive stocks prices - demand and supply do. At this point, and in contrast to the intuitions most recently-scared investors harbour, a further market crash actually becomes extremely unlikely, and those sitting in cash hoping for more of the same are very likely to have their hopes dashed. This is why markets almost always bottom well before the real economy, and recover in a manner that confounds most investors. Right when the majority of investors have just finished selling down, raising cash, and positioning themselves cautiously and in preparation for the 'coming downturn' and the 'buying opportunities' sure to emerge therefrom, markets start to rally and the opportunities they had hoped and expected to encounter swiftly disappear. The buying opportunities are not created by the economic downturn per se, but investors preparing for the economic downturn by raising cash. They are left high and dry holding a bunch of cash. They are confused, and perhaps even angry at the market for behaving so irrationally, and ignoring how bad things are in the real economy. They claim investors are ignoring economic realities. They say the rally must be a dead cat bounce. They say bear market rallies are common and investors are being fooled by it. They say investors are too optimistic on the speed of the recovery. They say it's because investors are overly acclimated to 'buying the dip', etc. They use every excuse they can muster to avoid admitting to themselves the sad reality that they may have sold at the bottom, just like patsies do every bear market. What they are really doing is hoping markets go back down so they have a second chance to buy stocks as cheap as they were recently trading, but with so many cashed-up investors similarly hoping for a further pull back, such an outcome is inherently self-defeating. There is simply too much cash on the sidelines waiting for an opportunity to buy the second dip for markets to go down enough to retest their lows." ( https://lt3000.blogspot.com/2020/05/coronavirus-update-from-unknown-unknown.html )
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Think about how markets actually work Buyers and sellers exchange assets (in this case cash for stocks), and they are always matched 50-50. If you have a situation where they are more buyers than sellers, the price goes up, and vice-versa What normally happens is that, if prices go down (if there are more sellers than buyers at $x), new buyers are soon found at lower levels and at same time sellers disappear. Hence the price stabilises, or reverses and starts to rise again In a crash, that imbalance of buyers and sellers doesn't correct itself. Instead, more sellers than buyers appear as the price finds lower levels. That can cause a cascade effect, which is the crash
Yahoo!
ca.finance.yahoo.com › news › look-key-signs-stock-market-162133841.html
Look out for these key signs of a stock market bubble
October 23, 2025 - Certainly, some areas of the market, such as quantum computing and others, are acting like some bubbles. Bubbles are often characterized by a flood of new stock issues or high-premium acquisitions that often mark market tops.
USA Today
usatoday.com › story › money › 2025 › 11 › 21 › stock-market-ai-bubble-sp-500-nasdaq-tech › 87393129007
The AI bubble could be real. Is it time to trade stocks for cash?
November 21, 2025 - It’s an analogy to the overhyped markets of 2008 and 1999, which crashed when the bubbles burst. Lately, there's talk of an AI bubble, a runup in the prices of tech stocks fueled by enthusiasm over artificial intelligence.
CNBC
cnbc.com › 2025 › 11 › 24 › ai-bubble-markets-could-face-everything-bubble-as-selloff-rages-on.html
Could markets be facing an 'everything bubble'? Investors are divided
November 24, 2025 - Dan Hanbury, who co-manages the Global Strategic Equity strategy at investment manager Ninety One, told CNBC markets could actually be facing what he termed an "everything bubble." He pointed to the combination of overvalued stocks and a normalization of interest rates as driving the trend.
Seeking Alpha
seekingalpha.com › home › market outlook › today's market
Market Bubbles: A Rational Guide To An Irrational Market | Seeking Alpha
November 24, 2025 - However, from a broader perspective, market bubbles also carry active value. Valuations can exceed what you consider reasonable and remain elevated for longer than you anticipate. If you think it might be a bubble, you’re already ahead of most investors. But timing it? That’s luck, not skill. ... We’re hearing it everywhere: AI is in a bubble. The surge in capital, the parabolic stock ...
AEI
aei.org › home › when will the stock market bubble burst?
When Will the Stock Market Bubble Burst? | American Enterprise Institute - AEI
November 19, 2025 - Herb Stein famously said that when something cannot go on forever, it will stop. This would seem to be true of today’s ever-inflating stock market bubble. The real question is not whether this bubble will burst. Rather, it is how and when that will happen. According to today’s conventional wisdom, the bubble will only burst when the Federal Reserve starts to tighten monetary policy.
Kiplinger
kiplinger.com › home › investing › stocks › value stocks
How to Spot a Bubble in Stocks | Kiplinger
2 days ago - A double is a bubble. Colas has a simple rule of thumb to identify unsustainably high prices in a range of markets. Whenever the S&P 500 doubles in three years or less, stock prices decline shortly thereafter.
CMC Markets
cmcmarkets.com › en-gb › shares › stock-market-bubble
A Complete Guide to Stock Market Bubbles | CMC Markets
July 8, 2025 - A stock market bubble is when share prices of stocks rapidly keep climbing to a point where they far exceed their intrinsic value or their earnings. This price bubble, based on speculation, can include all equities in a stock market or those ...
ROGER MONTGOMERY
rogermontgomery.com › is-there-a-stockmarket-bubble-here-are-the-warning-signs
Is there a stock market bubble? Here are the warning signs « ROGER MONTGOMERY
October 22, 2025 - The most straightforward definition of a bubble is asset prices climbing far above some measure of value, such as earnings, dividends, gross-value-added or discounted cashflows. Robert Shiller’s famous CAPE ratio, which compares stock prices ...
Fidelity
fidelity.co.uk › markets-insights › markets › uk › 10-scenarios-for-surviving-a-stock-market-bubble
10 scenarios for surviving a stock market bubble | Fidelity UK
November 21, 2025 - Although this looks like a terrible outcome, it is one that many investors risk. That’s because the longer a bubble goes on, the harder it can be to resist the temptation to swap your well-balanced portfolio for something a bit racier. Doing so at the top of the market is a recipe for disaster as the chart below shows.
X
x.com › RayDalio › status › 1991500536856576200
Ray Dalio on X: "The Big Dangers of Big Bubbles with Big Wealth Gaps" / X
Bubbles pop because the money flowing into the asset begins to dry up and the holders of stocks and/or other wealth assets need to sell them to get money for some purpose (most commonly for debt service payments). ... After bubbles pop, when there isn’t enough money and credit to meet financial asset holders’ needs, the markets and economy decline, and internal social and political disruptions typically increase.