Part 3/10:

Such sky-high valuations raise the question: are these prices justified, or are we witnessing the creation of a market bubble? Historically, assets that experience rapid and sustained increases often face sharp corrections, and the signs of an impending bubble include excessive valuations, irrational risk-taking, and widespread retail participation.

Signs of a Market Bubble

Financial experts point out several red flags indicative of bubble formation:

• Rapid and Unsustainable Price Rises: When stock prices climb in a straight line over an extended period without meaningful pullbacks, it suggests overbuying.

• Excessive Valuations: When valuations detach from fundamental metrics, such as earnings and cash flow, exuberance can dominate rational analysis.