Buffet’s Favorite Indicator Screams “Sell”!
By John Del Vecchio and Brad Lamensdorf
Buffet’s Favorite Indicator Screams “Sell”! The favorite market indicator of Warren Buffett, the richest investor in the world, has flashed a screaming sell signal. The total market cap of the Wilshire 5000 relative to gross domestic product (GDP), is now at generational highs.
Take a look at the chart below.
The ratio of market value to GDP stands at 144%. That’s over 2.5x where it stood at the depths of the financial crisis in 2008-09! Not only that, it now exceeds the extreme levels of the market back during the Internet Bubble.
We all know how that ended. Trillions of dollars wiped out from investors’ accounts before the market normalized and it was time to buy shares again.
The current levels of market value to GDP are not just high, they are at extremes.
Market extremes on both ends provide great opportunity for outsized returns with lower risk.
Right now, the risk is to the downside.
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