Lately, some financial-market experts have been using the phrase “blowoff top” to describe how prices for certain assets have behaved. While blowoff tops aren’t an everyday occurrence, they can have an impact on investors—potentially producing big profits or devastating losses.
So, what are they? Blowoff tops can be—but aren’t always—the last stage of an asset bubble. Many market rallies begin with asset prices trending higher at roughly the same rate. But if their growth rate speeds up enough, that growth ends dramatically with a blowoff top. “While nothing is 100% absolute, most bull markets and bubbles do end in a final cathartic blowoff top,” says Shawn Hackett, president of Hackett Financial Advisors Inc.