No Result
View All Result
SUBMIT YOUR ARTICLES
  • Login
Tuesday, October 21, 2025
TheAdviserMagazine.com
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
No Result
View All Result
TheAdviserMagazine.com
No Result
View All Result
Home Market Research Business

The ‘Warren Buffett Indicator’ has surged above 200%, meaning the market’s price is far ahead of the economy’s size

by TheAdviserMagazine
3 weeks ago
in Business
Reading Time: 3 mins read
A A
The ‘Warren Buffett Indicator’ has surged above 200%, meaning the market’s price is far ahead of the economy’s size
Share on FacebookShare on TwitterShare on LInkedIn



The “Warren Buffett Indicator” is a simple yardstick that compares the total U.S. stock market’s value to the size of the U.S. economy. It’s recently surged above 200%, a level Buffett once warned is like “playing with fire,” signaling stretched valuations versus economic output. It’s soared because market values have risen far faster than GDP, driven by mega-cap gains and optimism, pushing the ratio to roughly 217%—well above long-term norms and prior peaks—suggesting elevated risk if profits or growth don’t keep up.

What the Indicator is

It’s the ratio of total U.S. stock market capitalization (often proxied by the Wilshire 5000) divided by U.S. GDP, giving a quick read on whether stocks look expensive relative to the economy’s size.

Buffett popularized it two decades ago, calling it “probably the best single measure” of broad market valuation at a point in time, which is why it carries his name today.

Why it’s above 200%

Current estimates put the ratio around 217% as of mid‑2025, far above its historical trend and prior highs, implying stocks have grown much faster than the economy itself.

Elevated readings reflect powerful runs in large-cap names and AI‑related enthusiasm, which lift market cap faster than GDP expands: A setup that can be fragile if earnings or growth slow.

How to read it, in plain terms

Think of it as a price tag for the whole stock market compared to America’s economic “paycheck;” when the price tag is double the paycheck, expectations are sky-high and disappointments can sting more.

Historically, very high ratios have coincided with later periods of weaker returns, but timing is tricky—markets can stay expensive for a while, so it’s a caution sign, not a countdown clock.

The ratio has limits: Many big U.S. companies earn a lot overseas, interest rates and profit margins matter, and the series can stay elevated during long bull markets, so it’s best used alongside other metrics.

Still, crossing 200% is unusual and underscores future returns may be lower if multiples compress or growth cools, echoing Buffett’s long-standing preference for value and margin of safety.

Growth cools in the decades-long bull market

Fortune‘s Nick Lichtenberg reports U.S. stocks’ total value has surged to roughly 363% of GDP—far above the 212% peak of the dot-com era—amid a decades-long bull market propelled by AI enthusiasm, mega-cap gains, and soaring P/E multiples rather than robust profit growth, with the S&P 500 recently trading near 30x trailing GAAP earnings as earnings barely outpace inflation.

JPMorgan Asset Management’s David Kelly argues most gains since the mid-1980s stem from a rising profit share of GDP and higher multiples, creating “increasingly lofty” scaffolding that may be unsustainable, echoing broader critiques of U.S. financialization since the Reagan era. The AI boom is central: The GPT-5 launch underwhelmed, a summer selloff erased $1 trillion, many GenAI projects fail in practice, data-center buildouts are matching consumer spending’s GDP boost, and AI unicorns tally $2.7 trillion in valuations despite thin revenues. These prompt warnings today’s leaders may be more overvalued than 1990s dot-com names.

All this comes as growth cools—with H1 2025 GDP around 1.75% and weakening jobs data—undercutting the case for elevated prices and leading strategists to advise diversification beyond U.S. mega-caps into international equities, core fixed income, and alternatives, even as Kelly concedes timing is uncertain after a remarkably long bull run.

Buffett’s playbook

A reading above 200% means the market’s price is far ahead of the economy’s size, increasing the odds returns normalize if growth or earnings don’t match the optimism embedded in prices.

In Buffett’s playbook, this backdrop favors quality, cash generation, strong moats, and the patience to wait for “fat pitches,” rather than chasing what’s already run.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

Fortune Global Forum returns Oct. 26–27, 2025 in Riyadh. CEOs and global leaders will gather for a dynamic, invitation-only event shaping the future of business. Apply for an invitation.



Source link

Tags: AheadBuffettEconomysIndicatormarketsMeaningPriceSizesurgedWarren
ShareTweetShare
Previous Post

NKE Earnings: Nike Q1 2026 profit drops, but beats estimates

Next Post

Financial Habits That Create Wealth

Related Posts

edit post
‘If there’s no bottom rung on the ladder, it’s really hard to leap up’: Nonprofits focused on Gen Z employment get m Citi Foundation windfall

‘If there’s no bottom rung on the ladder, it’s really hard to leap up’: Nonprofits focused on Gen Z employment get $25m Citi Foundation windfall

by TheAdviserMagazine
October 21, 2025
0

Young jobseekers, challenged by a rapidly changing labor market, are having a tough time. The U.S. unemployment rate for 22-...

edit post
RTX raises 2025 adjusted EPS outlook to .10–.20 as backlog hits 1B amid strong demand (NYSE:RTX)

RTX raises 2025 adjusted EPS outlook to $6.10–$6.20 as backlog hits $251B amid strong demand (NYSE:RTX)

by TheAdviserMagazine
October 21, 2025
0

Seeking Alpha's Disclaimer: The earnings call insights are compilations of earnings call transcripts and other content available on the Seeking...

edit post
Chesky says OpenAI tools not ready for ChatGPT tie-up with Airbnb app

Chesky says OpenAI tools not ready for ChatGPT tie-up with Airbnb app

by TheAdviserMagazine
October 21, 2025
0

Airbnb Inc. Chief Executive Officer Brian Chesky said he didn’t integrate his company’s online travel app with OpenAI’s ChatGPT because the startup’s...

edit post
Israel generative AI co Moonshot raises m

Israel generative AI co Moonshot raises $10m

by TheAdviserMagazine
October 21, 2025
0

Israeli generative AI startup Moonshot AI has completed a $10 million seed financing round. The company has developed a...

edit post
State Comptroller: 50% of homes not in Tax Authority database

State Comptroller: 50% of homes not in Tax Authority database

by TheAdviserMagazine
October 21, 2025
0

The State Comptroller’s report has dedicated an extensive chapter to "holes in the data" in the real estate sector,...

edit post
Cramer Recommends Apple

Cramer Recommends Apple

by TheAdviserMagazine
October 21, 2025
0

frender / iStock via Getty Images Apple Inc. (NASDAQ: AAPL) stock rallied 4% yesterday on the back of research that...

Next Post
edit post
Financial Habits That Create Wealth

Financial Habits That Create Wealth

edit post
Recruiters caution against using AI to write job postings because it’s been trained on ‘crappy’ descriptions

Recruiters caution against using AI to write job postings because it's been trained on 'crappy' descriptions

  • Trending
  • Comments
  • Latest
edit post
77-year-old popular furniture retailer closes store locations

77-year-old popular furniture retailer closes store locations

October 18, 2025
edit post
Pennsylvania House of Representatives Rejects Update to Child Custody Laws

Pennsylvania House of Representatives Rejects Update to Child Custody Laws

October 7, 2025
edit post
What to Do When a Loved One Dies in North Carolina

What to Do When a Loved One Dies in North Carolina

October 8, 2025
edit post
Probate vs. Non-Probate Assets: What’s the Difference?

Probate vs. Non-Probate Assets: What’s the Difference?

October 17, 2025
edit post
California Attorney Pleads Guilty For Role In 2M Ponzi Scheme

California Attorney Pleads Guilty For Role In $912M Ponzi Scheme

October 15, 2025
edit post
Baby Boomers Are Flocking to This Florida Town — but Not for the Weather

Baby Boomers Are Flocking to This Florida Town — but Not for the Weather

October 9, 2025
edit post
Don’t Let Your Clients Leave Their Retirement Behind

Don’t Let Your Clients Leave Their Retirement Behind

0
edit post
Supporting the Supporters: Promoting Educators’ Mental Health – Faculty Focus

Supporting the Supporters: Promoting Educators’ Mental Health – Faculty Focus

0
edit post
Partial Payment Installment Agreements Explained  

Partial Payment Installment Agreements Explained  

0
edit post
Earnings Summary: Regions Financial Corp Q3 2025 adjusted profit rises 11%

Earnings Summary: Regions Financial Corp Q3 2025 adjusted profit rises 11%

0
edit post
‘If there’s no bottom rung on the ladder, it’s really hard to leap up’: Nonprofits focused on Gen Z employment get m Citi Foundation windfall

‘If there’s no bottom rung on the ladder, it’s really hard to leap up’: Nonprofits focused on Gen Z employment get $25m Citi Foundation windfall

0
edit post
New Resources Show House Budget Would Slash Medicaid, Despite Voters’ Support of Program

New Resources Show House Budget Would Slash Medicaid, Despite Voters’ Support of Program

0
edit post
‘If there’s no bottom rung on the ladder, it’s really hard to leap up’: Nonprofits focused on Gen Z employment get m Citi Foundation windfall

‘If there’s no bottom rung on the ladder, it’s really hard to leap up’: Nonprofits focused on Gen Z employment get $25m Citi Foundation windfall

October 21, 2025
edit post
5 Signs That Look Like Aging but Could Signal Infection

5 Signs That Look Like Aging but Could Signal Infection

October 21, 2025
edit post
How to Turn Your Bucket List Into an Investment Plan

How to Turn Your Bucket List Into an Investment Plan

October 21, 2025
edit post
New Trezor Safe 7 Boasts Quantum-Resistant Design and Dual Secure Elements

New Trezor Safe 7 Boasts Quantum-Resistant Design and Dual Secure Elements

October 21, 2025
edit post
RTX raises 2025 adjusted EPS outlook to .10–.20 as backlog hits 1B amid strong demand (NYSE:RTX)

RTX raises 2025 adjusted EPS outlook to $6.10–$6.20 as backlog hits $251B amid strong demand (NYSE:RTX)

October 21, 2025
edit post
How Progressives Broke the Constitution and Praised Themselves for It

How Progressives Broke the Constitution and Praised Themselves for It

October 21, 2025
The Adviser Magazine

The first and only national digital and print magazine that connects individuals, families, and businesses to Fee-Only financial advisers, accountants, attorneys and college guidance counselors.

CATEGORIES

  • 401k Plans
  • Business
  • College
  • Cryptocurrency
  • Economy
  • Estate Plans
  • Financial Planning
  • Investing
  • IRS & Taxes
  • Legal
  • Market Analysis
  • Markets
  • Medicare
  • Money
  • Personal Finance
  • Social Security
  • Startups
  • Stock Market
  • Trading

LATEST UPDATES

  • ‘If there’s no bottom rung on the ladder, it’s really hard to leap up’: Nonprofits focused on Gen Z employment get $25m Citi Foundation windfall
  • 5 Signs That Look Like Aging but Could Signal Infection
  • How to Turn Your Bucket List Into an Investment Plan
  • Our Great Privacy Policy
  • Terms of Use, Legal Notices & Disclosures
  • Contact us
  • About Us

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.