Warren Buffett's Market Indicator Eclipses 130% Ahead of MLK Day

Warren Buffett (Trades, Portfolio)’s favorite market indicator reached 131% on Friday, the final trading day before Martin Luther King Jr. Day.

The ratio of total market cap to gross domestic product, probably the “best single measure” of market valuations according to the Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO, increased approximately 7.4% from Jan. 2’s reading of 123.6%. Based on the current market valuation level, the expected market return over the next eight years is approximately -0.8%. Despite this, the current market level is still approximately 17.5% below the all-time high of 148.5%.

Dow finishes the week with near-500-point surge on improving U.S.-China trade talks

The Dow Jones industrial average closed at 24,706.35, up approximately 499 points from Thursday’s close of 24,207.16 and approximately 710.40 points from last Friday’s close of 23,995.95. Stocks leading gains included UnitedHealth Group Inc. (UNH, Financial), The Home Depot Inc. (HD, Financial), Boeing Co. (BA, Financial), Caterpillar Inc. (CAT, Financial) and Deere & Co. (DE, Financial). Potential progress in U.S.-China trade negotiations helped bolster the Dow, which had its first four-week winning streak since August 2018 according to CNBC columnists Fred Imbert and Silva Amaro.

Imbert and Amaro said sources told CNBC that China had offered a “six-year increase in U.S. imports” during recent trade talks, a deal which aims to trim the U.S.-China trade imbalance by 2024 according to Bloomberg News.

Number of Graham net-nets drop slightly

Figure 1 illustrates the historical trend of Benjamin Graham net-nets for the U.S. and Asia regions.

Figure 1

As Figure 1 illustrates, the number of net-nets for both regions declined over the past month, suggesting slightly higher overvaluation. While the number of U.S. net-nets exceeded approximately 300 during the sharp decline around Christmas Eve, the number of net-nets for both the U.S. and Asian regions declined throughout the month of January as the markets soared.

See also

Premium members have access to various value screens based on strategies from legendary investors like Graham, Buffett and Peter Lynch. Table 1 lists the value screener record as of Jan. 18.

Table 1

Disclosure: No positions.Â

Read more here:

• Buffett’s Goldman Sachs Boosts Dow’s Gain on Wednesday
• Value Screeners Identify Good Opportunities for 2019
• Warren Buffett’s Apple Tumbles on Lowered Revenue Guidance Warning