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James Li
James Li
Articles (405)  | Author's Website |

Warren Buffett’s Market Indicator Falls Slightly From February

US market stays significantly overvalued despite fears of global trade wars

March 05, 2018 | About:

On March 5, Warren Buffett (Trades, Portfolio)’s market indicator declined from its Feb. 5 value of 143.8% to 140.7%. Despite fears of global trade wars, the U.S. still has a significantly overvalued stock market.

Dow opened lower on continued global trade war fears

The Dow Jones international average opened about 100 points lower as investors “mulled over potential U.S. steel and aluminum tariffs,” according to CNBC.

While CNBC reporters Fred Imbert and Alexandra Gibbs said the Dow rebounded from the losses, the market , according to Chief Investment Strategist Ed Yardeni, can still decline if “President Trump turns into an outright protectionist.”

U.S. market remains significantly overvalued

The Wilshire 5000 currently stands at $27.76 trillion, approximately 140.7% higher than the latest gross domestic product of $19.7 trillion. Based on this valuation level, the average expected return of the U.S. stock market is about -1.80% for the next eight years assuming the Buffett indicator reverts to a mean of 80%.



The predicted actual returns chart also estimates the expected returns for an optimistic case (TMC/GDP = 1.2) and a pessimistic case (TMC/GDP = 0.4). Based on current valuation levels, the expected return of the U.S. stock market can range between -9.50% and 3.0%.


See also

GuruFocus provides two strategies that have outperformed the benchmark in at least six of the past seven years: the most broadly held strategy and the Buffett-Munger strategy. The latter implements Berkshire Hathaway Inc.’s (NYSE:BRK.A)(NYSE:BRK.B) four-criterion approach to investing.

We also introduced the FilingWiz, a feature that allows you to interact with company filings from the Securities and Exchange Commission. All registered GuruFocus members can use the FilingWiz at no extra charge for the month of March.

Disclosure: No positions.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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