Warren Buffett's Favorite Stock Valuation Gauge Just Hit an All-Time High. What Should Investors Do?

The market just passed another milestone that has a lot of people uneasy. The Warren Buffett indicator, which adds up the total market capitalization (market cap) of all publicly traded U.S. companies and divides it by the country's gross domestic product (GDP), has pushed well past 200%, a level Buffett has in the past called "playing with fire." Buffett in 2001 called this ratio "probably the best single measure of where valuations stand at any given moment," because it captures the entire stock market's value relative to the size of the economy. Going back to 1970, it has averaged about 85%. While the Buffett indicator is not necessarily a timing tool, its current level does tell us that stocks as a group are expensive relative to the economy. Continue readingWeiter zum vollständigen Artikel bei MotleyFool Weiter zum vollständigen Artikel bei MotleyFool