Back In 2001, Warren Buffett shared what has proven to be “the best single measure of where Stock valuations stand at any given moment” — the very simple market capitalization-to-GDP ratio.
This well-known ratio has been defined as the “Buffett Indicator” which compares the size of the Stock market to that of the economy. A high ratio indicates the Stock Market is an overvalued market.
The chart above shows on February 11, 2021, the ratio reached an all-time high, indicating that the U.S. stock market is currently strongly overvalued.
There are other other indicators as well that warn Stock investors to beware!