Buffett Indicator At An Alarming Ratio Show 47

Warren Buffett, the famous stock market investor and billionaire, developed a stock market indicator that came to be known as the “Buffett Indicator.”

From Carmen Ang a writer at the website Visual Capitalist said, “This ratio, now commonly known as the Buffett Indicator, compares the size of the stock market to that of the economy. A high ratio indicates an overvalued market—and as of February 11, 2021, the ratio has reached all-time highs, indicating that the U.S. stock market is currently strongly overvalued.”

 How this ratio is calculated is by dividing the value of the stock market by gross domestic product (GDP). The article states that the ratio is sitting at 228% which is 88% higher than historical averages. 

The article went on to state that the low interest environment is one culprit of the ratio being so high. If you enjoy charts, you may enjoy reading the article linked here.

With alarming news like this, it’s important to understand the why in how you are invested. Then you can know if your allocations are correct for your purposes.

If you haven’t evaluated how your portfolio is allocated lately, I’d be happy to review it with you and evaluate whether you’re likely to meet your goals or not. If you’d like to talk through this, please  call our office at 864.641.7955.

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