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 to GDP ratio stands at 0.2184, continuing a downward trend from a peak of 0.2935 in April 2021. This represents a significant decline of approximately 25.5% over the past five years, indicating that the market is now historically overvalued as it remains above the 0.20 threshold. This persistent decline in the ratio suggests an increasing recession risk, as the market's valuation is not supported by corresponding GDP growth, pointing to potential economic weakness ahead. The downward trajectory reinforces concerns about sustainability in market performance relative to economic fundamentals.
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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