On Friday, Berkshire Hathaway Inc. BRK.ABRK.B CEO Warren Buffett (Trades, Portfolio)’s favorite market indicator reached 134.3%, approximately 10.7% higher than its two-year low of 123.6% set on Jan. 2. Based on the current market valuation, the expected return of the stock market in the next eight years is -1.2% per year.
Dow breaks 25,000 on strong jobs report and earnings from key companies
The Dow Jones industrial average closed at 25,063.89, up 64.22 points from Thursday’s close of 24,999.67 despite reaching an intraday high of 25,186.44 in morning trading. Strong jobs growth data contributed to the early gains: according to Bureau of Labor Statistics data, the U.S. economy added 304,000 jobs in January, close to double the consensus estimate of 170,000. Additionally, strong earnings from Dow components Boeing Inc. BA and Buffett’s top holding Apple Inc. AAPL fueled the index's growth for the week. Other companies like Chevron Corp. CVX, Exxon Mobil Corp. XOM and Merck & Co. Inc. MRK led gains on Friday.
Stock market remains significantly overvalued
The U.S. stock market remains significantly overvalued ahead of the Super Bowl and Chinese New Year: the Wilshire 5000 full-cap index is approximately 1.34 times greater than the last-reported gross domestic product. A total market cap to gross domestic product ratio of at least 1.15 indicates “significant overvaluation.”
According to the “predefined and actual returns” chart, the expected market return ranges from -9% in the most pessimistic case to 3.70% in the most optimistic case.
See also
Table 1 reports the value screener records as of Feb. 1.
| Screener | USA | Canada | UK | Europe | Asia | Oceania | Latin America | Africa | India |
| Graham Net-Net | 281 | 66 | 54 | 283 | 625 | 11 | 7 | 12 | 161 |
| Undervalued Predictable | 65 | 3 | 34 | 78 | 66 | 5 | 33 | 7 | 7 |
| Buffett-Munger | 28 | 3 | 15 | 48 | 77 | 0 | 17 | 4 | 31 |
| Peter Lynch PE | 42 | 2 | 15 | 43 | 70 | 0 | 5 | 2 | 3 |
| Peter Lynch PS | 143 | 8 | 59 | 124 | 117 | 11 | 38 | 19 | 21 |
| Peter Lynch PB | 191 | 23 | 77 | 151 | 129 | 10 | 36 | 17 | 36 |
| Lynch p2ebitda | 203 | 9 | 57 | 188 | 143 | 10 | 11 | 15 | 23 |
| Hist Low PS | 46 | 3 | 17 | 38 | 135 | 2 | 13 | 4 | 15 |
| Hist Low PB | 60 | 2 | 20 | 47 | 138 | 2 | 24 | 8 | 14 |
| High Div Yield | 67 | 4 | 12 | 94 | 25 | 11 | 13 | 10 | 4 |
| Magic Formula | 4257 | 549 | 1818 | 5364 | 12633 | 549 | 794 | 330 | 2470 |
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Disclosure: No positions.
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