No One Knows If the Market Is Too High—But Your Emotions Probably Are
A few simple rules can help you stay on track when it seems like there are bubbles everywhere.
Signs of bubbly markets are everywhere. Commission-free apps have encouraged home-bound speculators to try their hand at trading tech stocks and options. Bitcoin soars—and plunges—on a daily basis. Gen Z and millennial investors have turned to the viral video app TikTok, where the hashtag #stocktok has 351 million views and everybody seems to be on the verge of becoming a “Teslanaire.”
Initial public offerings set a record last year. On Dec. 10, Airbnb Inc. rallied 113% above its offering price in one of the biggest one-day pops on record for a U.S. IPO. Just two days earlier, DoorDash Inc. went public and saw its stock rise 86%. Wall Street is offering customers ever more creative ways to amp up their exposure to hot investments: JPMorgan Chase & Co. is pitching to investment advisers structured notes that provide a leveraged bet on three popular exchange-traded funds from Ark Investment Management. Two of those ETFs are in turn heavily invested in Tesla Inc., whose stock rose more than 743% in 2020 and trades at 1,309 times it’s trailing 12-month earnings.