what is a melt up 
a melt up is a sustained and often unexpected improvement in the investment performance of an asset or asset class driven partly by a stampede of investors who don t want to miss out on its rise rather than by fundamental improvements in the economy gains that a melt up creates are considered to be unreliable indications of the direction the market is ultimately headed melt ups often precede meltdowns understanding melt ups and nuances of economic indicatorsignoring melt ups and meltdowns and instead focusing on fundamental factors begins with an understanding of economic indicators economic indicators come in the forms of leading indicators and lagging indicators these are all forms of economic indicators which investors follow to forecast the direction of the stock market and overall health of the u s economy leading indicators are factors that will shift before the economy starts to follow a particular pattern for example the consumer confidence index cci is a leading indicator that reflects consumer perceptions and attitudes are they spending freely do they feel like they have less cash to work with a rise or fall of this index is a strong indication of the future level of consumer spending which accounts for 70 of the economy additional leading indicators include the durable goods report dgr developed from a monthly survey of heavy manufacturers and the purchasing managers index pmi another survey based indicator that economists watch to predict gross domestic product gdp growth lagging indicators shift only after the economy has begun to follow a particular pattern these are often technical indicators that trail the price movements of their underlying assets certain examples of lagging indicators are a moving average crossover and a series of bond defaults melt ups and fundamental investingmany investors attempt to avoid melt ups and their impact on investor emotions when placing bets by instead focusing on the fundamentals of companies warren buffett for example is a famous value investor who made his fortune by careful attention to companies financial statements even amid economic turmoil he focused on corporate value and price was the company on solid financial footing how experienced and reliable was the management and was it over or under priced these questions often help investors focus on intrinsic value over hype example of melt upsfinancial analysts saw the run up in the stock market in early 2010 as a possible melt up because unemployment rates continued to be high both residential and commercial real estate values continued to suffer and retail investors continued to take money out of stocks more examples of melt ups occurred during the great depression when the stock market rose and fell several times despite a generally weak economy according to research by wealth managers stocks fell by more than 80 between 1929 and 1932 but they posted returns of more than 90 in july and august of 1932 and the trend continued over the next six months 