Warren Buffett’s Favourite Market Gauge Is Flashing Overvalued Market as It Hits 182%
By A Path to Forever Financial Freedom (3Fs)  •  August 8, 2023
The stock market has been running red hot in the past few weeks as investors bet on the resurgence of AI, interest rate cuts, and a potential soft landing to the economy, averting the much-feared recession. As a result of this, Warren Buffett’s favourite market gauge is flashing red, signalling that US stocks are overvalued relative to their historical valuation in the market. As of 31 Jul 2023, the Buffett indicator ratio hits 182% at an approximate +1.7 standard deviation above the historical mean. In a Fortune article back in 2001, Buffett once said that stocks would be fairly valued at a 100% reading, and if investors are buying at roughly 70% to 80% level, it will be an absolute steal entry price that would work out nicely in the long term. Buffett, however, warned that investors would be buying at an overvalued market and “playing with fire” when the indicator is near the 200% mark....
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By A Path to Forever Financial Freedom (3Fs)
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