Acclaimed hedge fund manager Warren Buffett once said that the total market capitalization-to-GDP ratio is “probably the best single measure of where valuations stand at any given moment.” The ratio, which is commonly referred to as the “Buffett Indicator,” divides the total market cap of all U.S. stocks by its gross domestic product (GDP) and just reached an all-time high of 216.8%, according to LongTermTrends. That’s well above its average of 85% since 1970.
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When including private companies in total market capitalization, the ratio sits at a record high of 328.7% as well.
S&P 500 Pushes Back Against 2% Drawdown, Poor Seasonality
The ratio signals caution on the valuation of U.S. stocks, raising concern about how long the market can trade at these levels without a pullback. The S&P 500 (SPX) hasn’t sustained a 2% drawdown in 107 trading sessions, the longest period since July 2024, according to Bloomberg.
“There’s a lot of willingness for investors to shake off any bad news — for now — but complacency is a risk to the stock rally,” said Kayne Anderson Rudnick portfolio manager Julie Biel.
The benchmark index has even managed to resist poor September seasonality, returning 3.2% month-to-date. September has historically been the worst-performing month of the year, according to Carson Group.
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