Market Valuation Hits New High? Warren Buffett Indicator Approaching 230% Warning

The valuation level of the US stock market has risen to an astonishing height. According to the latest data, the Warren Buffett Indicator (the ratio of the total market capitalization of the US stock market to GDP) has climbed to 223%-224%, with some data sources even indicating it is approaching 230%. This figure has broken historical records, surpassing the peak during the 2000 internet bubble and far exceeding the rebound high after the 2021 pandemic.

**Historical Benchmark: How Far Are We from Risk?**

These numbers may look alarming, but understanding their significance requires comparing them to historical context. The long-term equilibrium range for the Warren Buffett Indicator is about 80%-100%, with 100%-120% generally considered relatively healthy and reasonably valued. When the indicator exceeds 120%, the market is already in a relatively overvalued state. Currently surpassing 220% indicates that stock market valuations have inflated to an extreme level relative to economic fundamentals.

**Significance of the Indicator: Why Does Warren Buffett Care So Much?**

The Warren Buffett Indicator is regarded as one of the most reliable tools for measuring market valuation because it reflects the relative relationship between the stock market and the real economy. When the total market capitalization far exceeds economic output, the implicit logic is that market participants' expectations for future earnings are overly inflated. Warren Buffett has long used this as a core reference for judging whether the market is overvalued, and its importance is self-evident.

This record-breaking level warrants serious consideration from every market participant.