Buffett Indicator
Buffett's own metric. Above 100% = overvalued. Above 150% = 'playing with fire.' Currently: playing with something.
Warren Buffett described this ratio — total stock market capitalization divided by GDP — as 'probably the best single measure of where valuations stand at any given moment,' in a 2001 Fortune article. The ratio exceeded 100% in the late 1990s dot-com bubble and subsequently crashed. It recovered, crossed 150% pre-pandemic, and has remained structurally elevated since. The current reading implies aggregate equity prices are nearly double the underlying annual economic output of the country whose companies they represent.
Wilshire 5000 Total Market Full Cap Index (WILL5000IND) as a proxy for total US market capitalization, divided by US Nominal GDP (GDP series). Both series from FRED. Expressed as a percentage. Updated quarterly on GDP release. Live readings via FRED API when key is configured.