Are we seeing danger signs?

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Over valuation of the stock market following the warren buffet yardstick

Why Does it Matter?

The Buffett Indicator expresses the value of the US stock market in terms of the size of the US economy. If the stock market value is growing much faster than the actual economy, then it may be in a bubble.

Total US Stock Market Value = $62.29T
Annualized GDP = $29.55T

Buffett Indicator = $62.29T$29.55T = 211%

This ratio fluctuates over time since the value of the stock market can be very volatile, but GDP tends to grow much more predictably. The current ratio of 211% is approximately 66.99% (or about 2.2 standard deviations) above the historical trend line, suggesting that the stock market is Strongly Overvalued relative to GDP.

This is hugely important as we look to invest. The number one rule of investing is “buy low and sell high” Should we be buying right now? I think not! Billionaires across the country are cashing out of the market.

Your comments are always welcome, James

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