The Warren Buffett Indicator, a key measure of the U.S. stock market’s valuation, has reached a level that the legendary investor once cautioned was akin to “playing with fire.”
Warren Buffett Indicator Hits 217%, Signaling Overvalued Market
The Warren Buffett Indicator, which compares the total U.S. stock market value to the size of the U.S. economy, has surpassed 200%, Fortune reported. This surge, driven by the rapid rise in market values compared to GDP, has pushed the ratio to around 217%, well above historical norms.
The rise in the Warren Buffett Indicator coincides with an extended bull market driven by AI excitement, strong mega-cap performance, and elevated P/E ratios. As a result, the total value of U.S. stocks has climbed to around 363% of GDP, well above the 212% peak seen during the dot-com boom.
JPMorgan’s David Kelly told the publication that most gains since the mid-1980s come from rising profit shares and higher multiples, creating “increasingly lofty” foundations that may …