S&P 500 / GDP Ratio — Buffett Indicator Variant
Track the S&P 500 to GDP ratio. This Buffett Indicator variant compares stock market levels to economic output — a key overvaluation warning signal.
Current Value
Trigger Level: >0.20 = historically overvalued
Historical Trend
AI Analysis
Today's S&P 500/GDP ratio stands at 0.2382, marking a significant increase from the low of 0.2 recorded on May 12. This upward trend over the past few weeks indicates a rising market valuation that has accelerated from 0.2346 on May 24 to today's value, suggesting that the markets are outpacing GDP growth and are historically overvalued. This trend raises concerns about recession risk, as the ratio exceeding 0.20 signals potential overvaluation. The consistent increase in the ratio, especially the jump from 0.2363 on May 29 to 0.2382 today, suggests that investor sentiment may be overly optimistic, which could lead to a market correction if economic fundamentals do not support such valuations.
What is the S&P 500/GDP?
The S&P 500/GDP ratio divides the S&P 500 index level by nominal GDP (in billions). It measures whether equity markets are growing faster than the underlying economy.
Why It Matters for Recession Risk
Warren Buffett called the total market cap/GDP ratio 'the best single measure of where valuations stand.' When markets significantly outpace GDP growth, it signals unsustainable valuations and heightened crash risk.
Historical Context
This ratio was around 0.05 in the 1980s, peaked at 0.15 during the dot-com bubble, and has exceeded 0.20 in recent years as market growth has dramatically outpaced GDP growth.
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