The key points are:
Investment markets are driven by more than just fundamentals. Investor psychology plays a huge role and helps explain why asset prices go through periodic booms and busts & why they can react in extreme ways to events.
The key for investors is to be aware of the role of investor psychology and its influence on them.
The best defence is to be aware of past market cycles (so nothing comes as a surprise) and to avoid being sucked into booms and spat out in busts. If an investor is looking to trade, they should try and buy when the crowd is panicking and sell when it’s euphoric.