When stocks fall like today!

When stocks fall 30-50%, many sellers exit, leading to a pause in rapid declines. That doesn’t mean underperformance is ending. It is just that the fall may slow down and stretch over one to two years. Prices can still decline gradually as investors reassess and accept new lower valuations. Every cycle shows similar signs of excess, even though the sectors involved change. The classic red flags include overstretched valuations, rapid stock price surges, new retail investors entering, large capital raises from savvy business owners and PE funds cashing out. Narrative-driven investing is where fundamentals take a backseat, and any valuation is justified by a story. When stocks flood the market, it overwhelms demand. Primary market activity spikes, absorbing the enthusiasm of momentum-driven investors. Smart money exits, stocks lose momentum, and weak holders capitulate. Sentiment shifts and even low volumes can trigger steep declines.