Ryan Marks, CAIA
Senior Client Analyst, Assistant Vice President
Get to Know Ryan
As markets continue to reach new all time highs many investors are wondering how much more runway is left for the current 8-year bull market. While different valuation metrics will tell different stories, it can be helpful to look at what Warren Buffett has dubbed the single best measure of long term market valuations.
For this week’s chart of the week we take a look at the “Buffett Indicator” which consists of the Wilshire 5000 index market cap divided by the quarterly nominal GDP of the U.S. Economy. As of the third quarter, the reading stood at 121%, just below its two decade high and 45 year two standard deviation average. These readings would suggest that the market is overbought. However, there is no perfect market indicator, so while the Buffett Indicator can be used as a sign of caution to investors who are considering committing further funds to U.S. Equities, it should not be relied upon as an exclusive predictor of future market returns. Although the Buffett Indicator suggests that valuation levels are high, positive earnings growth began to emerge in late 2016 and could provide further support for current valuations if companies can deliver on profit projections. These statistics will be watched closely as the year unfolds to gauge future direction of the U.S. equity market.
In 2017 the global economy underwent a synchronized move upward and investors saw equities throughout the world generate double-digit returns….
Health systems today face significant challenges, further complicating an ever-changing landscape. Some of the most notable trends we see in…
In an effort to attract capital and encourage long-term investments in low-income urban and rural communities, Congress reformed the Tax…
Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.
We respect your privacy. We will never share or sell your information.
If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.Contact Us >