Market Wisdom
Market Signs of a Top & Bottom
Markets donโt ring a bell at the top or the bottom โ but they do leave clues. Use this checklist as a sentiment + behavior dashboard, not a timing tool.
๐ฉ Signs of Market Tops Crowded + Euphoric
- Large number of IPOs
- Rapidly rising prices
- High merger & acquisition activity
- Easy availability of credit
- Optimistic covers of newspapers & magazines
- Higher than average trading volumes
- Historically high valuation multiples
- Art & luxury markets booming
- Financial media viewership soars
- โThis time is differentโ declared
- Amateur investors move into equities
- Speculative asset prices spike
- Record venture capital funding
๐ฑ Signs of Market Bottoms Exhaustion + Fear
- No mergers and acquisitions
- No IPOs
- Low venture capital funding
- Historically low P/E & EV/EBITDA multiples
- Many companies trading below book value
- Speculative asset prices down huge
- Central banks easing for 6+ months
- Recession officially declared
- Previously favorite sectors are hated
- Credit only available to high-quality borrowers
- Amateur investors filled with caution
- Negative covers of newspapers and magazines
- Negative and depressed consumer sentiment
Want a simple way to translate โflowโ into a plan? Pair this checklist with your strategy, asset allocation rules, and a rebalancing schedule.
๐งญ How Fiscal Investors Use This Signal, Donโt Panic
- Count the boxes. The more that are โtrue,โ the tighter your risk management should be.
- Trim the froth first. Reduce exposure to the most speculative names before touching your core.
- Raise your quality bar. Favor cash flow, balance sheet strength, and durable demand.
- Rebalance, donโt predict. Tops are processes โ your job is positioning, not fortune-telling.
- Build dry powder. Cash is optionality โ especially when crowding is extreme.
- Stick to your plan. If you need it in 12โ24 months, it shouldnโt be in high-volatility assets.
Rule of thumb: When confidence is loud, risk is often hiding in plain sight.