Latest news with #BuffettIndicator
Business Insider
17 hours ago
- Business
- Business Insider
Warren Buffett may be cashing in stocks ahead of a storm, and could buy them back after it hits, top strategist says
Warren Buffett may be cashing in stocks because he sees a storm on the horizon — and could buy them back once prices tumble, a senior market strategist says. The "Oracle of Omaha" has a "history of selling out of the stock market" when economic and financial indicators are "signaling a bear market or a recession is coming," Wedbush's chief investment strategist, Paul Dietrich, told Business Insider. Buffett's Berkshire Hathaway has been a net seller of stocks for 11 straight quarters, even though the market has "soared" to new highs in that period, Dietrich added. The investor's conglomerate offloaded $212 billion of shares while only buying $34.5 billion, meaning its net disposals exceeded $177 billion — more than the market value of BlackRock or Boeing. Buffett also halted stock buybacks for the last four quarters as he no longer saw Berkshire stock as cheap, Dietrich said. The pause marks a big change from Berkshire's peak repurchases of over $20 billion in both 2020 and 2021. Berkshire's share sales and lack of buybacks have contributed to its cash pile, which more than tripled to a record $344 billion over the three years to June 30. Warren Buffett built up cash before the 2008 financial crisis and the dot-com crash Buffett has jettisoned stocks and gone to cash ahead of past downturns, Dietrich said. Berkshire grew its cash pile from around $11 billion in 1997 to $35 billion in 1998, and ramped up its net stock sales from $700 million in 1999 to $2.7 billion in 2000, ahead of the dot-com crash. The corporate titan had grown its cash pile to more than $70 billion when the financial crisis struck. It fell to about $52 billion by the end of 2008 as Buffett made a series of lucrative deals during the disaster. Berkshire ramped up its net stock purchases from around $5 billion in 2006 to $11 billion in 2007 as it capitalized on depressed asset prices. Buffett sounded cautious about the market during Berkshire's annual meeting in May, Dietrich said. Before his shock announcement that he intended to step down as CEO at the end of this year, Buffett bemoaned the lack of potential bargains as asset valuations continued to rise. Dietrich said the " Buffett Indicator" may be alarming the Berkshire CEO. The gauge, which compares the US stock market's value to the US economy's size, has surged to historic highs of above 210%, he said. That means the combined market capitalization of all actively traded US stocks is more than double the latest quarterly estimate of US GDP. Buffett once wrote that buying stocks at readings approaching 200% would be "playing with fire." The Wall Street veteran recalled Buffett's famous advice to "be fearful when others are greedy, and be greedy when others are fearful," saying the Berkshire chief is preparing to pounce once valuations fall to attractive levels. Dietrich said Buffett would use his cash pile "to eventually buy back Apple and the other shares he has sold — but at a major discount —after the current nose-bleed stock market highs eventually come back down to earth." Berkshire Hathaway didn't immediately respond to a request for comment from Business Insider.
Yahoo
10-08-2025
- Business
- Yahoo
At 207%, the Warren Buffett indicator says the stock market could crash!
Billionaire investor Warren Buffett has shared a lot of wisdom throughout his successful career. However, one gem to come off his desk is the Buffett Indicator – a simple comparison of the US stock market's total value divided by US GDP. As Buffett puts it, the indicator is 'probably the best single measure of where valuations stand at any given moment'. And for value investors, knowing when the stock market is overpriced is a powerful advantage, even when relying only on index funds. However, looking at the Buffett Indicator today might cause some concern. US stocks are expensive Historically, his Indicator has sat between 90% and 135%. This healthy range generally indicates that US stocks are fairly-to-slightly overvalued and presents an ideal window of opportunity to top up on investments. But following the tremendous artificial intelligence (AI)-driven returns of 2023 and 2024, the indicator's been rising. So much so that it now sits at a whopping 207%! That's the highest it's ever been since records began in the 1970s. And it's even higher than the 194% peak seen in late 2021, right before US stocks experienced one of the most severe market corrections seen in over a decade. That would certainly explain why Buffett and his team at investment vehicle Berkshire Hathaway have been busy selling stocks lately. In fact, the firm just marked its 11th consecutive quarter of being a net seller, with positions such as Bank of America, Citigroup, and Capital One all getting trimmed, or outright sold off. So could another stock market downturn be just around the corner? Panic isn't a strategy The stretched valuation of US stocks definitely creates cause for concern. However, there's no guarantee a crash or correction will actually materialise. Therefore, panic selling everything today likely isn't a sensible strategy, and it's why Buffett, despite higher selling activity, still has plenty of capital invested in the US stock market. In fact, he recently added $549m of Domino's Pizza (NASDAQ:DPZ) to its investment portfolio. His investment thesis is relatively simple. As the world's largest pizza delivery company, Domino's runs a 99% franchised business model. Combining this with its recurring ingredient & supply chain revenue and its high-margin royalty income, the business is highly cash generative. And what's more, the firm's proven to be quite recession-resistant since people tend to eat pizza during both the good times and the bad. Of course, Buffett still highlighted some notable risks. Rising labour and ingredient prices do put pressure on profit margins, and the general shift towards healthier dining could erode demand over time. Nevertheless, he sees ample long-term potential for steady gains here. And given his track record of success, investors may want to take a closer look. Will the stock market crash in 2025? There's no way of knowing whether the stock market will take a nosedive later this year. Even with the Buffett Indicator at sky-high levels, Berkshire's investment in Domino's suggests there are still bargains to be found among US stocks. Therefore, investors could be well served to follow in Buffett's footsteps, not by panic-selling, but by trimming overvalued positions to maintain portfolio diversification and hunting for hidden bargains. The post At 207%, the Warren Buffett indicator says the stock market could crash! appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025 Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
02-08-2025
- Business
- Yahoo
The Stock Market Has Never Been Pricier, According to Warren Buffett's Favorite Valuation Tool -- and History Is Clear What Happens Next
Key Points The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average have endured a bumpy ride in 2025, filled with historic moves in both directions. The "Buffett Indicator" just reached its highest level in 55 years -- and historical precedent serves as a warning for Wall Street. Warren Buffett is a long-term investor for one key reason: He understands that economic and stock market cycles aren't linear. 10 stocks we like better than S&P 500 Index › Though the stock market has been a bona fide wealth creator for well over a century, this doesn't mean stocks rise in an orderly fashion. Through the first seven months of 2025, investors have been taken on quite the historic ride. In early April, the iconic S&P 500 (SNPINDEX: ^GSPC) shed 10.5% of its value in just two trading sessions, which marked its fifth-steepest two-day percentage decline dating back to 1950. The struggle was also felt by the growth-focused Nasdaq Composite (NASDAQINDEX: ^IXIC) and ageless Dow Jones Industrial Average (DJINDICES: ^DJI), which respectively fell into a bear market (Nasdaq) and correction territory (Dow). However, Wall Street's relatively short-lived swoon sparked by President Donald Trump's tariff and trade policy quickly gave way to a booming bull market. The S&P 500 has enjoyed one of its strongest three-month returns in 75 years, with it and the Nasdaq Composite blasting to numerous record-closing highs. But though optimism is high, so are stock valuations. Based on billionaire Warren Buffett's favorite valuation tool, the stock market has never been pricier -- and history is crystal clear what comes next for stocks. A grim reality: The stock market has never been more expensive To preface the following discussion, "value" is something of a subjective term. What you believe is a bargain might be viewed as pricey by another investor. This subjectivity toward stock valuations is what makes the stock market so dynamic and unpredictable. For most investors, the traditional price-to-earnings (P/E) ratio is the go-to when valuing stocks. The P/E ratio is arrived at by dividing a company's share price by its trailing-12-month earnings per share (EPS). Generally, a lower P/E ratio equates to a perceived-to-be cheaper stock -- but comparisons need to be made among a company's peers to confirm this. While the P/E ratio is a fantastic tool for quickly evaluating mature businesses, it loses its luster during recessions or when attempting to value growth stocks. For Berkshire Hathaway's (NYSE: BRK.A)(NYSE: BRK.B) billionaire CEO Warren Buffett, no valuation tool holds more historical importance than the market cap-to-GDP ratio. This measure adds up the total value of all publicly traded companies and divides it by U.S. gross domestic product (GDP). Ideally, a lower number is indicative of cheaper valuations for equities. In a rare interview with Fortune magazine nearly a quarter-century ago, Buffett referred to the market cap-to-GDP ratio as "probably the best single measure of where valuations stand at any given moment." Perhaps unsurprisingly, given the Oracle of Omaha's investment success at Berkshire Hathaway, this valuation measure became known as the "Buffett Indicator." Recently, the Buffett Indicator has pushed to never-before-seen levels. When back-tested to 1970, the Buffett Indicator has averaged a reading of 85%, which is to say that the aggregate value of all stocks has averaged about 85% of U.S. GDP spanning 55 years. In recent trading sessions, this ratio has pushed above 213%, equating to a roughly 151% premium to its mean since 1970. Previous instances where the Buffett Indicator decisively moved to new highs were eventually followed by significant pullbacks in the benchmark S&P 500, Nasdaq Composite, and Dow Jones Industrial Average. For example, the Buffett Indicator topped out at 195.62% on Nov. 7, 2021, just two months prior to the 2022 bear market taking shape. This bear market eventually lopped 25% off of the broad-based S&P 500, and even more from the growth-heavy Nasdaq. On March 23, 2000, immediately prior to the bursting of the dot-com bubble, the Buffett Indicator rocketed to 144.25%, representing a mammoth increase from the sub-60% range it had settled into in December 1994. The S&P 500 and Nasdaq respectively lost 49% and 78% when the dot-com bubble burst. The point being that premium valuations have historically been a warning to Wall Street that it's not a matter of "if" but "when" significant downside pressure on equities returns. Even though it's been a very long time since Buffett has referenced the market-cap-to-GDP ratio, his actions speak loudly. Through the end of March 2025, he's been a net seller of stocks for 10 consecutive quarters, to the cumulative tune of $174.4 billion. Berkshire's billionaire chief is a stickler for value, and he's struggling to find a good deal on Wall Street. The historical warning signs couldn't be more evident for investors. Warren Buffett is a long-term investor for a reason! Although historical precedent couldn't be clearer, it's important for investors not to be too focused on short-term directional movements. While Buffett has been a very selective buyer for nearly three years, he and his trusted top advisors continue to hold dozens of stocks for the long term. For decades, Berkshire Hathaway's billionaire chief has approached nearly all of his investments with the idea that he'll be holding for years, if not considerably longer. The reason for approaching investments this way is simple: Economic and stock market cycles aren't linear. The Oracle of Omaha isn't oblivious to the fact that economic downturns and stock market corrections are going to occur. He just understands that time is working in his favor. Since the end of World War II nearly 80 years ago, the average U.S. recession has lasted only 10 months, and the longest downturn on record endured for just 18 months. In comparison, the typical period of economic growth clocks in at approximately five years, with two growth spurts surpassing the decade mark. Buffett and his team have listened to what history has to say and angled Berkshire Hathaway's investment portfolio to take advantage of long-winded economic expansions. This disparity observed in economic cycles is readily visible in the stock market, as well. In June 2023, which is when the S&P 500 officially entered a new bull market following its 2022 bear market tumble, the analysts at Bespoke Investment Group published a data set on X (formerly Twitter) comparing the length of every S&P 500 bull and bear market dating back to the start of the Great Depression (September 1929). In total, there were 27 separate bull and bear market events covering this nearly 94-year period. Whereas the average S&P 500 bear market resolved in just 286 calendar days, or less than 10 months, the typical bull market endured for 1,011 calendar days, or roughly two years and nine months. The reason Warren Buffett doesn't spend too much of his time worrying about inevitable stock market downturns is because they're short-lived. He relies on this numbers game to put the odds of making money on Wall Street decisively in his favor. Even if history repeats and the priciest stock market on record comes tumbling down at some point in the not-too-distant future, historical precedent also shows that, over multidecade timelines, the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average can be counted on to move progressively higher. Do the experts think S&P 500 Index is a buy right now? The Motley Fool's expert analyst team, drawing on years of investing experience and deep analysis of thousands of stocks, leverages our proprietary Moneyball AI investing database to uncover top opportunities. They've just revealed their to buy now — did S&P 500 Index make the list? When our Stock Advisor analyst team has a stock recommendation, it can pay to listen. After all, Stock Advisor's total average return is up 1,036% vs. just 181% for the S&P — that is beating the market by 855.09%!* Imagine if you were a Stock Advisor member when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $625,254!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,090,257!* The 10 stocks that made the cut could produce monster returns in the coming years. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 29, 2025 Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy. The Stock Market Has Never Been Pricier, According to Warren Buffett's Favorite Valuation Tool -- and History Is Clear What Happens Next was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
09-07-2025
- Business
- Yahoo
The Buffett Indicator Is at Its Highest Level Ever. History Shows Investors Should Brace Themselves for What the Stock Market Might Do Next.
A market valuation metric popularized by Warren Buffett is at an all-time high of roughly 208%. Buffett has said that anytime this indicator approaches 200%, investors are "playing with fire." History has proven Buffett right in the past. 10 stocks we like better than S&P 500 Index › Even after Warren Buffett steps down as CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), his legacy will live on. So will an indicator that bears his name. Buffett told Fortune magazine in 2001 that this metric, now known as the Buffett indicator, is "probably the best single measure of where valuations stand at any given moment." And now the Buffett indicator is at the highest level ever, sending a warning. The Buffett indicator is the ratio of the total market cap of all U.S. stocks to U.S. gross domestic product (GDP). When Buffett first talked about this ratio in 1999, he used gross national product (GNP), which measures the total value of goods and services produced by a country's residents both inside and outside the country. GDP is more widely used than GNP as a measure of the U.S. economy and has replaced GNP in calculating the Buffett indicator. In a sense, the Buffett indicator is similar to the most widely used stock valuation metric -- the price-to-earnings ratio. Instead of the share price of a single stock, the total market cap of all U.S. stocks is used. Instead of the earnings generated by a single company, the metric uses the total value generated by everyone in the U.S. With the Buffett indicator and the price-to-earnings ratio, a lower number reflects a more attractive valuation. Buffett hinted at an ideal range for his namesake metric in the 2001 Fortune article, saying, "If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you." As you might have guessed, the Buffett indicator isn't anywhere close to the 70% to 80% range right now. It's slightly over 208% -- the highest level the indicator has ever reached. If you want to know why Buffett isn't buying many stocks these days, the Buffett indicator probably explains it. He noted in 2001, "If the ratio approaches 200% -- as it did in 1999 and a part of 2000 -- you are playing with fire." Today, the indicator isn't just approaching 200%; it has risen above that dangerous threshold. Buffett's concern about a high market valuation as measured by the Buffett indicator has been justified by history. He mentioned the indicator spiking in 1999 and 2000, reaching what was then an all-time high. Many investors remember what happened soon afterward. The dot-com bubble burst, with the S&P 500 (SNPINDEX: ^GSPC) plunging nearly 50% below its previous peak by late 2002. The Buffett indicator again came close to hitting 200% in November 2021. Within a matter of weeks, the S&P 500 began to sink and eventually fell as much as 25%. These historical precedents aren't encouraging for investors. However, the Buffett indicator isn't great at predicting short-term stock market moves. For example, the indicator has been above its level in early 2000 (right before the dot-com bubble burst) for most of the period since 2018. During this time, the S&P 500 has soared more than 130%, albeit with significant volatility. However, there's no getting around the fact that U.S. stocks are historically expensive. The Buffett indicator isn't the only metric that reflects this. The S&P 500 Shiller CAPE ratio, popularized by Yale economics professor Robert Shiller, is near its third-highest level ever. Stock valuations don't tend to remain above historic levels for too long. Sooner or later, they will return to a more normal range. With the Buffett indicator at an all-time high, investors probably should brace themselves for what the stock market might do over the near term and almost certainly will do eventually -- revert to the mean. Before you buy stock in S&P 500 Index, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and S&P 500 Index wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $695,481!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $969,935!* Now, it's worth noting Stock Advisor's total average return is 1,053% — a market-crushing outperformance compared to 179% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of July 7, 2025 Keith Speights has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy. The Buffett Indicator Is at Its Highest Level Ever. History Shows Investors Should Brace Themselves for What the Stock Market Might Do Next. was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Globe and Mail
09-07-2025
- Business
- Globe and Mail
The Buffett Indicator Is at Its Highest Level Ever. History Shows Investors Should Brace Themselves for What the Stock Market Might Do Next.
Key Points A market valuation metric popularized by Warren Buffett is at an all-time high of roughly 208%. Buffett has said that anytime this indicator approaches 200%, investors are "playing with fire." History has proven Buffett right in the past. 10 stocks we like better than S&P 500 Index › Even after Warren Buffett steps down as CEO of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), his legacy will live on. So will an indicator that bears his name. Buffett told Fortune magazine in 2001 that this metric, now known as the Buffett indicator, is "probably the best single measure of where valuations stand at any given moment." And now the Buffett indicator is at the highest level ever, sending a warning. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » What is the Buffett indicator? The Buffett indicator is the ratio of the total market cap of all U.S. stocks to U.S. gross domestic product (GDP). When Buffett first talked about this ratio in 1999, he used gross national product (GNP), which measures the total value of goods and services produced by a country's residents both inside and outside the country. GDP is more widely used than GNP as a measure of the U.S. economy and has replaced GNP in calculating the Buffett indicator. In a sense, the Buffett indicator is similar to the most widely used stock valuation metric -- the price-to-earnings ratio. Instead of the share price of a single stock, the total market cap of all U.S. stocks is used. Instead of the earnings generated by a single company, the metric uses the total value generated by everyone in the U.S. With the Buffett indicator and the price-to-earnings ratio, a lower number reflects a more attractive valuation. Buffett hinted at an ideal range for his namesake metric in the 2001 Fortune article, saying, "If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you." History lessons As you might have guessed, the Buffett indicator isn't anywhere close to the 70% to 80% range right now. It's slightly over 208% -- the highest level the indicator has ever reached. If you want to know why Buffett isn't buying many stocks these days, the Buffett indicator probably explains it. He noted in 2001, "If the ratio approaches 200% -- as it did in 1999 and a part of 2000 -- you are playing with fire." Today, the indicator isn't just approaching 200%; it has risen above that dangerous threshold. Buffett's concern about a high market valuation as measured by the Buffett indicator has been justified by history. He mentioned the indicator spiking in 1999 and 2000, reaching what was then an all-time high. Many investors remember what happened soon afterward. The dot-com bubble burst, with the S&P 500 (SNPINDEX: ^GSPC) plunging nearly 50% below its previous peak by late 2002. ^SPX data by YCharts The Buffett indicator again came close to hitting 200% in November 2021. Within a matter of weeks, the S&P 500 began to sink and eventually fell as much as 25%. ^SPX data by YCharts Will the stock market crash again soon? These historical precedents aren't encouraging for investors. However, the Buffett indicator isn't great at predicting short-term stock market moves. For example, the indicator has been above its level in early 2000 (right before the dot-com bubble burst) for most of the period since 2018. During this time, the S&P 500 has soared more than 130%, albeit with significant volatility. However, there's no getting around the fact that U.S. stocks are historically expensive. The Buffett indicator isn't the only metric that reflects this. The S&P 500 Shiller CAPE ratio, popularized by Yale economics professor Robert Shiller, is near its third-highest level ever. S&P 500 Shiller CAPE Ratio data by YCharts Stock valuations don't tend to remain above historic levels for too long. Sooner or later, they will return to a more normal range. With the Buffett indicator at an all-time high, investors probably should brace themselves for what the stock market might do over the near term and almost certainly will do eventually -- revert to the mean. Should you invest $1,000 in S&P 500 Index right now? Before you buy stock in S&P 500 Index, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and S&P 500 Index wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $695,481!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $969,935!* Now, it's worth noting Stock Advisor 's total average return is1,053% — a market-crushing outperformance compared to179%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 7, 2025
