... Buffett Indicator – the ratio of the total market capitalization of U.S. stocks to the country's GDP – continues to break historical records. Its current value exceeds historical norms by more than two standard deviations , indicating extreme market overvaluation. This indicator has long surpassed levels observed during the dot-com bubble of the late 1990s and before the 2008 financial crisis, serving as a warning signal of a potential stock market bubble. What is the Buffett Indicator and what does ...

... prices to be temporarily excessive. This approach stands in stark contrast to many corporations that repurchase their shares at any price: the fundamentally-minded Buffett refrains from using shareholders' capital to invest in overvalued assets. The Market is Overvalued: Buffett Awaits a Correction In his annual letter and at the 2025 shareholders' meeting, Warren Buffett indicated that the American stock market is currently overvalued, and there are almost no interesting opportunities for substantial investments ...

... market valuation. It is calculated as the ratio of the current stock price to the average earnings over the past 10 years, adjusted for inflation. The historical average CAPE value for the S&P 500 is approximately 15.2, and when the ratio exceeds 30, the market is considered overvalued. A high CAPE ratio suggests that investors are willing to pay significantly more for each unit of corporate earnings, indicating an unrealistic optimism. Historically, periods of high CAPE values have been succeeded either by long-term stagnation ...

... share on the stock exchange. If the internal valuation is significantly higher than the market, it is concluded that the share is undervalued and has room for growth - it can be bought. If the calculated value is below the quotation, it means that the market has overvalued this security - a decline is likely, and it is not worth investing (or it makes sense to sell the existing securities). It is also advisable at this stage to compare shares of different companies with each other: having assessed several options,...

... fortunes—those of Carnegie, Rockefeller, Buffett, and Gates—were amassed by owning just one asset. Yet, the most popular advice that a retail investor receives is to do the opposite: to maintain a broadly diversified portfolio of assets. 2. The stock market can be overvalued, yet it can become even more overvalued before it begins to decline. And even when it is already falling, it may still be at levels higher than they are today. 3. We build our plans based on average indicators—average stock market returns,...