Between Euphoria and Reality

Financial markets rarely move in a straight line. Periods of euphoria alternate with moments of fear and disappointment. The tendency to believe that “this time is different” remains persistent. Yet history repeatedly shows that bubbles can form anywhere, even when everything looks rosy.

The dot-com era at the end of the 1990s is a classic example. Technology companies were richly valued based on dreams instead of profits. The belief that the internet would rewrite all economic rules led to an unprecedented boom. When reality returned, much of that value evaporated—not because technology wasn’t important, but because expectations were unrealistic.

Around 2007, the world saw another scenario. The housing market seemed invincible. Everyone believed that real estate prices could only rise. Banks built complex products on a foundation that ultimately proved weaker than expected. The result was a crisis that spread rapidly around the world and left deep scars. The lesson was clear: even seemingly solid markets can be the core of a bubble.

Today, there are once again areas where the consensus is strikingly euphoric. Artificial intelligence is a prime example. The technology undeniably has an unprecedented impact on businesses and economies. Yet the rapid rise in valuations in some parts of the market raises questions. Of course, AI will increase productivity worldwide, but the question remains whether everything that is currently popular will live up to those expectations.

The luxury market is also experiencing strong growth, driven by consumers who value exclusivity. But even here, it is wise to pay attention to signs of overheating. In the past, luxury stocks rarely followed a straight upward path. A slowdown in demand or an economic cooling can quickly impact valuations.

Cryptocurrencies form another interesting example. After sharp declines, more and more investors are returning. There is certainly innovation, but the sector remains sensitive to sentiment and speculation. These types of markets often move faster than traditional sectors and therefore also carry greater risks.

What all these examples have in common is the human tendency toward simplicity. The desire to believe in stories that sound too good to be true. That makes markets vulnerable to bubbles. Booms feel safer than they are, while moments of pessimism often offer opportunities.

A healthy dose of realism therefore remains essential. Not because there is anything wrong with growth, but because every tree eventually stops growing. The key is to recognize when excitement turns into exaggeration, and when reality no longer matches the story being told.

Markets will always move between hope and fear. It is precisely that rhythm that creates both opportunities and risks. Those who are willing to look beyond the noise will discover that the best returns often do not arise during euphoria, but in the periods that follow. Disclaimer

This article is intended for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial products. The opinions expressed reflect the views of the author at the time of publication and are subject to change without notice. Always consult a qualified financial advisor before making investment decisions.