Buffett Indicator

When the total value of the stock market runs far above the size of the real economy, stocks are priced for corporate profits to grow faster than GDP has historically allowed — a position that eventually corrects. Warren Buffett called this the single best measure of overall market valuation for a reason: it's simple, hard to game, and grounded in the idea that markets can't permanently detach from the economy that feeds them. Useful as a broad-strokes compass for whether to lean toward risk or caution at an index level, especially when combined with CAPE. The chart plots how far the ratio sat above or below its long-run trend, measured in standard deviations, with the ratio itself on the tooltip. Plotting the distance rather than its rank is what lets you see 1999 and today as different heights instead of both pinned at the top. The percentile beside it is a different cut: it ranks each month against only the history available up to that date, so the structural drift since the 1990s is absorbed by a refitted trend rather than leaving every modern reading at 100. The market-cap input is the Fed's nonfinancial corporate equity series rather than the Wilshire 5000 — slightly narrower, but it tracks the popular versions closely.