Buffett Indicator: Sweden Stock Market Valuations and Expected Future Returns
Updated at Sun, 24 Jan 2021 20:30:05 -0600
Country:
Sweden (updated daily) check out
Global Overview for detailed methodology.
The Stock Market is
Significantly Overvalued.
Ratio of total market cap over GDP: Recent 20 Year Maximum - 169.83%; Recent 20 Year Minimum - 59.7%; current -
166.28%Expected future annual return:
0.5%ETF Used for dividend yield:
EWD (Yield=
1.28%)
Market Index used:
OMX Stockholm_PICurrent Annual GDP:
$623 billion US dollars or
5,159 in billions of national currency (GDP in Local Current Prices Annual Growth=
3.72%)
Data since year
1990
Sweden Historical GDP Growth
Historical GDP of
Sweden in billions of national currency. The GDP in local current prices has grown at the annual rate of
3.72% over the past 8 years. Please note this growth rate includes the effect of price inflation and it is NOT the real GDP growth rate. Current Annual GDP:
$623 billion US dollars or
5,159 in billions of national currency.
Sweden GDP (Billion, National Currency)
Historical Stock Market Cap
Historical total market of
Sweden in billions of national currency. This value is normalized using the data published by WorldBank.
OMX Stockholm_PI is used for the normalization. It is a stock market index of all shares that trade on the Stockholm Stock Exchange.
Sweden Total Market Cap (Billion, National Currency)
Historical Ratio of Total Market Cap over GDP (%)
The current ratio of total market cap over GDP for
Sweden is
166.28%. The recent 20 year high was
169.83%; the recent 20 low was
59.7%. If we assume that the ratio will reverse to the recent 20 years mean of
115.41% over the next 8 years, the contribution to expected annual return is
-4.46%. This is the detailed historical chart of the ratio.
Sweden Ratio of Total Market Cap over GDP (%)
Based on these historical valuations, we have divided market valuation into five zones:
Ratio = Total Market Cap / GDP |
Valuation |
Ratio ≤ 81% |
Significantly Undervalued |
81% < Ratio ≤ 104% |
Modestly Undervalued |
104% < Ratio ≤ 127% |
Fair Valued |
127% < Ratio ≤ 150% |
Modestly Overvalued |
Ratio > 150% |
Significantly Overvalued |
Where are we today (2021-01-25)? | Ratio = 166.28%, Significantly Overvalued |
Predicted and Actual Returns
From the equation presented on the U.S. market valuation page,
Investment Return (%) = Dividend Yield (%) + Business Growth (%) + (Re/Rb)(1/T)-1
We can compute the predicted and actual returns of the Sweden stock market over a given time period, T. In the calculation, we set T to equal eight years, the approximate length of a full economic cycle. The calculated results are presented in the chart below. The green line indicates the expected, or predicted return if the market ratio trends near the recent 20 years average ratio of 115.41% over the next eight years.
The blue line indicates the actual, annualized return of the Sweden stock market over eight years. We use “OMX Stockholm_PI” to do the actual return calculation. We can see the calculations largely predicted the trend in the stock market as the blue line is closely parallel to the green line.
Predicted and Actual Returns of Sweden
Conclusion
The stock market of
Sweden is expected to return
0.5% a year for the coming years. This is from the contribution of economic growth in local current prices:
3.72%, Dividend Yield:
1.28% and valuation reverse to the mean
-4.46%.
This is the projected return of the stock market in Sweden relative to other countries. Click on each bar in the chart to go to other countries:
You can go
here to see what international stocks Gurus are buying.
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