Warren Buffett Labeled It 'Playing With Fire' When The Indicator Named After Him Reached 140% — Cut To Today And Its Over 200%: Is A Downturn Looming?

The Buffett Indicator – a market valuation measure – is signaling potential danger as it surpasses levels witnessed during the Dot-Com Bubble and the Great Financial Crisis.

What Happened: This indicator, attributed to Berkshire Hathaway Inc (NYSE:BRK) (NYSE:BRK) CEO Warren Buffett, compares the market capitalization of stocks to the Gross Domestic Product (GDP) to determine if equities are overvalued or undervalued.

The total market index, tracked by the Wilshire 5000, and the U.S. GDP are used to calculate this ratio. The Wilshire 5000, a market-cap-weighted index, tracks all U.S. publicly traded companies, which includes more than 3,000 firms. The higher the ratio, the more overvalued the market is deemed to be.

Data from Longtermtrends reveals that the current Wilshire 5000-to-GDP ratio stands at approximately 208%, surpassing levels seen prior to both the Dot-Com Bubble and the Great Financial Crisis.

See Also: S&P ...

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