19 days ago • Posted by Martin Boujol
Are we in a stock market bubble?
According to Warren Buffett, the best single measure to see where valuations stand at any given moment is found by looking at the market value of all publicly traded companies as percentage of the GDP. He initially said this in a Fortune interview in 2001, shortly after the burst of the tech bubble. As we can see on the chart below, this ratio - measured with the broad Wilshire 5000 - is significantly higher now than it was during the tech bubble burst. If we follow Buffett's rule, this could be a dark sign of things to come.
Source: U.S. Bureau of Economic Analysis, Wilshire Associates, Statista