US market cap / GDP (Buffett indicator)
Aggregate US equity market capitalisation as % of GDP.
Reading
Highest reading in the postwar series, by a wide margin. Buffett once called this 'probably the best single measure of where valuations stand at any given moment.'
Thresholds
- watch175 — exceeds the 2000 dotcom peak
- alarm230 — exceeds the 2021 peak by a wide margin
Context
Why this matters
The cap-to-GDP ratio is the cleanest answer to "how big has the equity market gotten relative to the economy underwriting it." It does not depend on an earnings estimate or a margin assumption — both denominator and numerator are observable aggregates. It also has the longest demonstrated correlation with subsequent ten-year returns of any single measure with this much postwar history, which is why Buffett singled it out.
Who watches this
- Warren Buffett — the indicator's namesake; called it "probably the best single measure of where valuations stand at any given moment" in 2001
- Paul Tudor Jones — flagged 252% on his April 2025 Invest Like the Best appearance as the highest he had seen in his career
- John Hussman — runs a sister measure (Wilshire/GVA) that adjusts for nonresidential capital structure; tracks both monthly
- Jeffrey Gundlach — references the ratio in DoubleLine's webcasts
- Howard Marks (Oaktree) — uses it in his memos when arguing the index, not the median stock, is the exposure that matters
Recent history
Reached the highest reading in the postwar series in early 2026, roughly 50% above the 2000 dotcom peak depending on which series. The published Buffett-indicator series has been above 200% almost continuously since 2021, but the level extended sharply through 2025 on the AI-narrative leg.
What would change my read
A return to the 175% band — the prior 2000 peak — would require either a ~30% index drawdown or sustained nominal GDP growth meaningfully above current trend. The historical resolution mechanism for cap/GDP this extreme is the former, not the latter.