It compares the total US stock market value to the country's GDP. A ratio above 100% suggests an overvalued market, while below 100% indicates undervaluation. For example, as of January 31, 2024, the Buffett Indicator was at 184%, signaling an overvalued market. This metric helps assess if the stock market is growing faster than the economy, potentially indicating a bubble. Despite its simplicity, it offers insights into market valuation trends. Buffett initially proposed this indicator in 2001, highlighting its significance in gauging market valuations.
Reveen : Thanks for the summary of this metric.