Buffett indicator: US market capitalization to GDP
The Buffett indicator divides the market capitalization of all US stocks by nominal GDP. In Fortune in 2001 Buffett called it probably the best single measure of where valuations stand. Below 80 % buying worked well, he said; near 200 % you are playing with fire.
History since 1989
What it says today
Above the dot-com peak. The band the market has lived in since 2020. 100 % of the history sits at or below today's value.
Stocks are worth less than three quarters of annual GDP. Last seen at the 2009 low.
Stock prices roughly match the economy. The level of the 1990s before the dot-com bubble.
Stocks run ahead of the economy. The market sat around 100 % from 2013 to 2016.
The 2000 peak and the years 2017 to 2019.
Above the dot-com peak. The band the market has lived in since 2020.
Where it stood at key moments
| Moment | Value | Band |
|---|---|---|
| Dot-com bubble peak (March 2000) | 147 % | Expensive |
| Post-bubble low (October 2002) | 66 % | Cheap |
| Pre-crisis peak (October 2007) | 107 % | Rather expensive |
| Financial crisis low (March 2009) | 48 % | Cheap |
| Covid crash low (March 2020) | 103 % | Rather expensive |
| Bear market low (October 2022) | 134 % | Expensive |
| Today | 233 % | Very expensive |
What it measures
The numerator is the Wilshire 5000 index, which covers practically every publicly traded US stock; one index point corresponds to roughly one billion dollars of capitalization. The denominator is nominal annualized GDP from the last published quarter. The ratio says how many years of economic output the market is pricing.
History since 1989: the dot-com peak in March 2000 around 140 %, the financial-crisis low in March 2009 under 60 %, November 2021 above 200 %. Since 2020 the indicator has stayed above every historical peak.
How to read it
The indicator speaks about a ten-year horizon, not the next quarter. From levels above 150 % the real returns of the following decade were historically low or negative; from levels under 80 % they were high. It is useless for timing: a market in the expensive band lasts for years.
Comparisons must stay within an era. Corporate profits are a larger share of GDP today than in the 1980s, roughly 40 % of S&P 500 revenue is earned outside the US and never enters US GDP, and the share of companies listed on an exchange has changed. The average since 1989 is therefore a better yardstick than Buffett's 80 % of 2001.
When it failed
Since 2013 the indicator has been continuously above 100 % and since 2017 in the band Buffett described as playing with fire. The S&P 500 has more than tripled in that time. Whoever left the market on the indicator's word in 2013 missed the best decade since the 1990s.
Buffett himself has not cited the indicator in recent years, and Berkshire Hathaway holds record cash for other reasons: a lack of large deals at a sensible price, not a macro signal. The indicator is most useful as a warning that long-term returns will be lower, not as an order to sell.
How to read market indicators
The seven indicators in the Indicators section say how expensive, frightened or tired the market as a whole is. What the bands mean, why none of them times the market, and how to combine them with the Fair Price Index.
Learn moreTerms in the glossary
The market as a whole is expensive. Which stocks are not?
Fair Price Index values thousands of stocks against their intrinsic value and shows which ones trade below it right now.
Open Fair Price IndexMethod and source
- Numerator: the Wilshire 5000 index (Yahoo Finance, ^W5000), monthly since 1989 and daily for the last year.
- Denominator: nominal annualized US GDP (FRED, series GDP), the last quarter carried forward until the next release.
- Value = capitalization / GDP × 100. Annual readings match the World Bank series for market capitalization to GDP.
- Bands follow Buffett's Fortune article of December 2001 and the usual analyst split.
Source: Wilshire 5000 and US GDP (FRED) · Updated September 16, 2026
Frequently asked questions
Other indicators
The indicators describe the market as a whole from public data. They say where the market stands against its history, not what it does next month, and each of them has failed before. They are not investment advice. Learn more