What is the Buffett Indicator?
The Buffett Indicator is a renowned metric used to assess whether the current stock market is overheated or undervalued. It was highlighted by the legendary investor Warren Buffett in a 2001 interview with Forbes magazine. This indicator measures the ratio of the total market capitalization of the stock market to the Gross Domestic Product (GDP). Buffett pointed out that this ratio is the best indicator for determining whether the overall stock market is overvalued or undervalued. This indicator often appears in various media reports, especially when the figures are at extreme levels.