Is this a stock market bubble or just another cycle of fear and greed repeating itself? History offers clues.
Multiple asset classes have surged to new highs this year: equities, gold, silver, Australian property and even Bitcoin (BTC).
With markets flying, the noise is growing louder: are we in a stock market bubble? Or are we just witnessing another leg in a powerful bull market driven by innovation and AI?
The truth is, it doesn’t really matter which camp you’re in. What matters is how you behave when everyone around you is losing their heads.
Emotional investing, driven by fear or greed, rarely ends well.
Why predictions are BS
Every few months, a new chorus of experts predicts the next crash. It’s almost a tradition.
Fund managers, influencers, and economic commentators all have reasons to make bold calls — attention, clicks, or funds under management.
Calling a crash might be wrong 19 times out of 20, but get it right once and you’ll be quoted for life.
Take Jeremy Grantham, for example — the billionaire who famously warned of the dot-com crash and the Global Financial Crisis. He was right on both. The issue? He’s been forecasting market collapses almost every year since. As the saying goes, he’s “called 98 of the last 3 crashes.”
Grantham’s prowess isn’t in question; it’s the incentives around him that are. Predicting markets isn’t an investing strategy; it’s a marketing strategy.
As John Templeton, one of the most respected investors of all time, put it:
“In all my 55 years on Wall Street… I was never able to say when the market would go up or down. Nor was I able to find anybody on Earth whose opinion I would value on the subject.”
At the same time, Seth Klarman reminds us that:
“At the root of all financial bubbles is a good idea carried to excess.”
AI, energy transition, and digital infrastructure are all good ideas, perhaps great ones. But good ideas, fuelled by emotion and leverage, can quickly morph into bubbles when investors forget that trees don’t grow to the sky.
Listen to investors who focus on investing, not predicting
If predictions are noise, then preparation is signal. The world’s best investors don’t try to forecast the market; they prepare for whatever comes next.
Timing markets has long been folly
Every cycle, someone swears, “this time is different.” Yet history always rhymes.
Warren Buffett observed:
“The tour we’ve taken through the last century proves that market irrationality of an extreme kind periodically erupts — and compellingly suggests that investors wanting to do well had better learn how to deal with the next outbreak.”
In other words, bubbles are inevitable yet survivable.
Howard Marks expands on why:
“One of the important factors behind the fluctuation between bull and bear markets… is that investor memory has to fail us – and fail universally – in order for the extremes to be reached.”
Every generation forgets the pain of the last crash and convinces itself that this time, the irrational exuberance is justified. It never is. Yet instead of trying to predict when the next crash will hit, Marks suggests investors should focus on how they’ll respond to one.
Missing the best days ruins returns
When fear creeps in, many investors try to “wait it out” — selling when the headlines turn scream that everything is a risk and planning to buy back in when things “feel safer.”
However, history shows that this approach is one of the most costly mistakes an investor can make.
According to Vanguard’s 2025 research, if you’d stayed invested in the Australian share market from April 2000 to May 2025, you would have earned an average annual return of around 8.2% (including dividends).
- Miss just 10 of the best trading days, and that return drops to roughly 6% per year, about one quarter less.
- Miss 20 of the best days, and returns fall to 4.3%, nearly half.
- Miss 30 of the best days, and you’re left with only 2.8%, a reduction of almost two-thirds.
And here’s the catch: the best trading days often occur right after the worst ones. That means investors who panic-sell during volatility are most likely to be sitting in cash while the market rebounds.
Vanguard found that the vast majority of the 20 best days on the ASX since 2000 occurred during major downturns — the Global Financial Crisis, the COVID-19 panic, and even the sharp corrections of 2022 and 2024.
So when you try to “time” the market, you often miss its most powerful recoveries.
As Peter Lynch famously said:
“People who exit the stock market to avoid a decline are odds-on favourites to miss the next rally.”
And Bill Miller summed it up perfectly:
“No one can consistently buy at the low or sell at the high (except liars), and lowest average cost wins.”
The best investors prepare, not predict.
Warren Buffett again:
“I make no attempt to forecast the general market — my efforts are devoted to finding undervalued securities.”
And as Howard Marks warns:
“One of the biggest mistakes you can make is to think that overpriced and going down tomorrow are synonymous. Markets that are overpriced often keep going.”
In other words, markets can stay “irrational” for a long time. Waiting for a correction that never comes can be just as costly as panic-selling in one that does.
The antidote is preparation: understanding what you own, why you own it, and how you’ll act when markets inevitably test your patience (in either direction).
Choose calm over chaos
Whether we’re in a bubble, a bull market, or something in between doesn’t matter nearly as much as how you behave in it. Human emotion — not market data — drives most poor decisions. Investors who stay calm, rational, and focused on the long term are the ones who end up owning the assets that others sell in panic.
As Buffett might say, your temperament matters more than your IQ.
When the noise is loudest, step back, zoom out, and remember: the market rewards patience, not predictions.
