You’re Trading Because TikTok Said So… Aren’t You?

When Euphoria Takes Over the Market

Have you ever noticed how, when the stock market keeps going up, everyone suddenly becomes a 'money expert'? The colleague who keeps commenting on how they can't afford things is now sharing their trading wins; news headlines glow with record highs; even your favourite apps start nudging you to invest 'before it’s too late'! It feels exciting—almost contagious, doesn’t it?

That feeling, right there, is what makes market booms so powerful—and sometimes, so dangerous.

Oh, so the market’s flying high again—big surprise! The Stock Market hit fresh all-time highs this year, with the S&P 500 index (top 500 American companies) and Nasdaq index (top American Tech companies) leading the charge up nearly 10% thanks to that AI craze and some Fed rate cuts. Gold, the classic safe haven, strutted to a dazzling $4,379 an ounce, smashing records amid trade tensions, devaluation of currency and rate-cut hopes. Cryptocurrencies, after flirting with crazy highs—Bitcoin near $108,000 and Ethereum around $3,800—just took a wild $370 billion flash crash ride this month. Even Greater London Property’s nudging upward with prices near £300,000. Yeah, it’s all high-flying excitement—but watch that bubble.

When stock markets show constant upward gains, euphoria spreads quickly. Conversations shift from ordinary topics to how much someone has earned from their investments—short-term or long-term—rarely mentioning actual strategy or style. Everyone talks about the recent highs, not the reasoning behind them.

Soon, financial headlines spotlight market records. TV stations and mainstream news segments celebrate the 'booming stock market'. Excitement spreads like wildfire—everyone wants a piece of the action.

'The market is a device for transferring money from the impatient to the patient' - Warren Buffett

I am not predicting a bubble. I have zero interest in doing so, and I place zero attention to people who claim they can. History tells us there is no point in predicting the unpredictable. There is zero point in market timing. However, if you are in a position with a spare lump sum of money ready to pour into the market, just take a second and look around you...

The Lure of Easy Profits

As enthusiasm grows, stock trading apps and brokers ramp up advertising, especially targeting newcomers. They offer free 'first-trade credits' or sign-up bonuses to hook beginners into trading. These companies benefit every time a user buys or sells a stock, since broker commissions and transaction fees keep flowing, regardless of the investor’s profit or loss.

Even if your portfolio drops by 50%, the platform still profits from your trades. Their business model thrives on trading volume, not your success.

In 2021, for example, the Financial Conduct Authority (FCA) reported a 400% increase in new retail trading accounts compared with 2019, reflecting how strong markets pull in inexperienced investors at record highs.

Market Cycles and the “Rising Tide” Effect

As I mentioned in a previous Instagram post—“A Rising Tide Lifts All Boats”—markets move in cycles. After a crash, stocks often become undervalued. Bargain opportunities attract large inflows of new money, which pushes prices higher.

When enough people pile in, this buying pressure triggers a feedback loop:

• Price rises attract attention.

• Attention fuels demand.

• Demand drives prices even higher.

In short, momentum replaces valuation as the key motivator. Investors expect the past few months’ performance to continue indefinitely. When that pattern plays out across thousands of stocks at once, it creates a market-wide FOMO (fear of missing out) frenzy.

The Psychology of Biases Behind the Frenzy

With stock apps on every phone, more people than ever are responding to Recency bias—our tendency to believe recent trends will continue. As markets rise, investors anchor on the newest price (Anchoring bias) and seek only information that confirms their belief that things will keep going up (Confirmation bias).

'Look, I was right—it’s gone up, it will keep rising!'

At this stage, people make rash trading decisions based on information so accessible to them (Availability bias).

Friends, colleagues, radio presenters, and TV anchors all echo the same optimism. When positive stories dominate our environment, we start believing they reflect reality. Before long, the market becomes a herd, and prices detach from fundamentals.

When Valuations Defy Reality

Eventually, stock prices climb far beyond the growth of the underlying businesses. This creates a self-fulfilling overvaluation.

A company growing earnings 5% a year might see its stock price soar 50%, simply because more traders are chasing momentum, not value. Historically, metrics like the Shiller P/E ratio (I will introduce these terms in coming posts) have shown that markets trading 50–70% above their long-term average often experience 20–30% corrections within the next few years.

The Risk–Reward Imbalance - When Downside Risk Outweighs the Upside Potential

This brings us to the crucial point about short-term reward versus downside risk.

When prices are very high, the probability of smaller future gains (say, another 5%) is far outweighed by the risk of a 20–30% price correction. Buying near market peaks means taking bad odds—high risk for relatively low expected return or the big stock market drop/correction.

5 Questions you should ask yourself when you buy into market highs:

• 'Can I stomach a price drop?'

• 'Will I buy more when it drops by 30%? Or will I panic sell?'

• 'How much more for it to go up before I sell?'

• 'What is my investment thesis and time horizon?'

• 'How soon would I need this money I am using to buy at market highs?'

Remember: markets move in cycles. For long-term investors, discipline and valuation awareness matter far more than excitement. Buying into euphoria usually means buying the dream just before it fades.

I am obsessed about long term constant investing. So I am buckled up and ready for the roller-coaster ride, and I will keep investing rain or shine. Wait... am I predicting a market correction? Lol