Is the Buffett Indicator Warning a Stock Market Bubble?
Explore the Buffett Indicator and what its 223 reading means for investors could the stock market be in a bubble?
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Nov 06 2025
When Warren Buffett’s favorite market gauge, the Buffett Indicator, hits a record 223%, even experienced investors take notice. This ratio of the total U.S. stock market value to GDP signals the market may be priced far above the real economy. Historically, such extremes often precede corrections, but that does not mean the rally is over.
Since April, the SPX has jumped nearly 40%, fueled by Big Tech and AI-driven growth in $NVDA $MSFT and $AAPL. While the momentum looks unstoppable, the math tells a cautionary tale: the U.S. stock market is valued at about $62.5 trillion versus a $28 trillion economy, levels Buffett has called "playing with fire"
The indicator history provides context. In the 1950s and 60s, it hovered around 50–60%, reflecting steady growth. At the dot-com bubble peak, it reached 140%, and before the 2008 financial crisis, it hit 120%. During the pandemic, liquidity pushed it past 200%, yet the market only experienced a temporary dip. The takeaway is that the Buffett Indicator is a guide, not a timer. Valuation extremes can last longer than traders expect, especially when liquidity and market narratives are strong.
Buffett himself does not rely solely on this ratio. Berkshire Hathaway now holds roughly $384 billion in cash, its highest ever, which is a sign he is disciplined, not panicked. For investors, this is a subtle reminder: respect market cycles, tighten stops if riding recent gains, and avoid chasing momentum blindly.
The Buffett Indicator does not predict exact crashes, but it signals risk. While valuations alone do not end bull markets, sentiment and liquidity do. For traders watching SPY QQQ, and IWM the lesson is clear: opportunity exists, but so does risk. The real question is how long investors will pay premium prices for growth.
Follow the cash. Buffett already has
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Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.
