👉️ Stock Market Recap: AI Disruption & Tariff Worries 😟 

👉️ How to Spot a Market Bubble Before It Pops: Learn How to Spot the Warning Signs Before It’s Too Late ⚠️ 

👉️ The Profit Academy: Your Edge in the Market 📈

Stock Market Recap: AI Disruption & Tariff Worries

China's DeepSeek AI Shockwave: DeepSeek, a Chinese AI firm, announced a large language model that rivals U.S. AI giants at a lower cost. This shook U.S. markets, especially chipmakers, despite restrictions on Chinese AI chip access. Is DeepSeek good enough to push out the U.S.?

Tech Sector Hit Hard: The S&P 500 tech sector dropped 4.6% this past week, its biggest decline in 4 months, with Nvidia, Micron, and Broadcom leading losses. Apple managed to squeak out a small gain on strong earnings, preventing further losses.

Other Sectors Thrive: Despite tech struggles, consumer discretionary stocks and communications saw gains. Cruise lines also performed well.

Market Ends Lower: The S&P 500 lost 1% for the week, with additional pressure from Trump’s new tariffs on U.S. trading partners Canada and Mexico.

How to Spot a Market Bubble Before It Pops

Imagine it’s 1999.

The internet is the future, and every company with a “.com” in its name is skyrocketing.

Your neighbour just quit his job to day trade stocks, and your cousin, who once lost his wallet 3 times in one week, is now giving you stock tips. RED FLAG.

Fast forward a year and the bubble bursts, wiping out billions of dollars from shareholders.

The dot-com crash was brutal, but it wasn’t the first, and it definitely won’t be the last.

So how do you spot a bubble before it bursts? Let’s break it down so you can protect yourself and all of the wealth you’ve worked so hard to build.

Step 1: The Hype Machine Is in Overdrive 🔥 

If your Uber driver, your barista, and your high school friend who failed Econ 101 are all raving about the same stock or sector, it’s time to take a step back and pause.

When an investment goes mainstream and people start believing “it can only go up,” history tells us it’s often too good to be true.

Stay aware of who is talking about what stocks at what time.

Step 2: Sky-High Valuations with No Justification 📈 

A company making zero profit but trading at 100x earnings? No thank you.

We’re seeing it time and time again in this market.

When investors stop caring about fundamentals and start buying just because “everyone else is,” you’re entering dangerous territory.

The market might keep going up, but in the end, gravity always wins.

Step 3: Easy Money & Cheap Credit 💰️ 

Bubbles usually form when borrowing is easy and interest rates are low.

Why?

Because people start using leverage to buy assets they can’t afford, driving prices even higher.

When money becomes cheap, people lose all common sense.

But when central banks tighten monetary policy (a fancy way of saying “raise interest rates”), the party stops, and the bubble starts to deflate.

Step 4: Overconfidence & “This Time Is Different” Thinking 🤔 

Every major bubble, from the 1929 crash to the 2008 housing crisis, was fuelled by a belief that old rules no longer apply today.

When you hear phrases like, “This time is different” or “The fundamentals have changed,” it’s time to be skeptical.

History might not repeat itself exactly, but it most definitely rhymes.

Step 5: The Sudden, Sharp Drop 📉 

The final stage of a bubble is when investors realize they might be holding overpriced assets.

Most investors don’t even realize they are, which is the sad part.

A small dip can quickly turn into a panic as people rush for the exit signs. And they do so even quicker when they’re over leveraged with debt.

By the time the average investor reacts, it’s often too late. And just like that, you’ve lost everything you built.

What Can You Do?

• Stay grounded in fundamentals: if a company isn’t making money, ask yourself why it’s worth so much. If the numbers don’t check out and you can’t find a reason why the companies price keeps going up, then stay away.

• Diversify your investments: don’t put all your eggs in the same overheated basket. Eventually that basket will break and so will all of your eggs. Diversify by asset class, sector and geographically. But be cautious not to over-diversify, A.K.A “diworsification”. I wrote a post on this, explaining what it means and how to avoid it. You can read it here.

• Have an exit strategy: if you’re riding a bubble, know when to get off before it bursts. Most investors don’t know when to sell and its a problem. Before you buy a stock, you should have an idea of when or why you’d sell. When - when the price hits a certain point. Why - if something material has changed in the company that goes against your initial thesis.

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See you in the next one.

Alex (The Dividend Dominator)
Founder and CEO of Dividend Domination Inc.
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