Buffet Indicator Model
Model Summary
The Buffet Indicator is a valuation metric which represents the ratio of stock market capitalization to Nominal Gross Domestic Product (NGDP). Stock market capitalization is based on the Wilshire 5000. The indicator was initially proposed by Warren Buffet and Carol Loomis in 2001 in the article “Warren Buffet on the Stock Market” in Fortune magazine.
| US Market Value | $46.34T |
| US GDP | $24T |
| Buffet Indicator Value | 193% |
| Conclusion | Significantly Overvalued |
Cyclically Adjusted Price-to-Earnings (CAPE) Ratio
Model Summary
The CAPE Ratio is a valuation metric which measures the relative price of the S&P 500 against average 10-year earnings, adjusted for inflation. This indicator was developed and introduced by Noble laureate economist Robert Shiller and co-author John Campbell in their 1998 paper “Valuation Ratios and the Long-Run Stock Market Outlook”.
| S&P 500 Price (November 2022) | 3850 |
| Average 10-Year EPS | $136.42 |
| CAPE Ratio | 28.22 |
| Conclusion | Overvalued |
