On Oct. 1, the first trading day of the fourth quarter, Warren Buffett (Trades, Portfolio)’s favorite market indicator reached 147.8%, approximately 0.7% from its all-time high of 148.5%. Based on the Berkshire Hathaway Inc. BRK.ABRK.B CEO’s valuation level, the U.S. stock market is expected to return -2.5% per year over the next eight years.
Buffett Indicator continues trending upward on new North American agreement
CNBC columnists Fred Imbert and Alexandra Gibbs said the Dow increased over 260 points on several factors, which include the U.S. and Mexico striking a new deal with Canada and forming the “United States-Mexico-Canada” agreement, or USMCA for short.
The Wilshire 5000 index reached $30,171.5 billion, which is approximately 1.478 times greater than the last reported gross domestic product of $20,411.924 billion. The ratio of total market cap to gross domestic product has increased approximately 30% from its December 2015 reading of 116.2%.
According to the predicted and actual earnings chart, the expected market returns range from approximately -10.2% in the most pessimistic case to approximately 2.3% in the most optimistic case.
Shiller price-earnings ratio nears twice historical average
Yale Professor Robert Shiller offers an alternative market valuation ratio known as the cyclically-adjusted price-earnings ratio. As of Monday, the Shiller price-earnings ratio of the Standard & Poor’s 500 index reached 33.4, approximately 97.6% higher than the historical average of 16.9.
Based on Shiller’s market valuation, the U.S. market is expected to return -3.2% per year over the next eight years.
Other key stock news
CNBC also said former Dow component General Electric Co. GE traded 9% higher after replacing CEO John Flannery with Larry Culp, the former CEO of Danaher Corp. DHR. Additionally, Tesla Inc. TSLA skyrocketed 15.14% on news that CEO Elon Musk settled with the Securities and Exchange Commission over his recently aborted “take private” plan. Per the settlement, Musk must relinquish his chairman role for at least three years. Additionally, Musk and Tesla must pay a fine of $20 million each.
Disclosure: No positions.
Also check out:
