Buffett Indicator
Selected range · Q1 1952 — Q1 2026
About this chart
The Buffett Indicator compares the estimated value of the U.S. stock market with the size of the U.S. economy.
The idea behind the indicator is straightforward. Public companies operate within the broader economy, so comparing their combined market value with gross domestic product can provide long-term context for how highly the stock market is valued relative to economic output.
The indicator is calculated by dividing estimated U.S. stock market capitalization by nominal U.S. gross domestic product.
A ratio of 1 means that the estimated stock market value is equal to one year of U.S. economic output. A ratio above 1 means that the market value is larger than annual GDP, while a ratio below 1 means that it is smaller.
A higher ratio generally means that investors are assigning a larger market value to companies relative to the current size of the economy. A lower ratio means that market value is lower relative to economic output.
There is no single fixed ratio at which the market automatically becomes expensive or inexpensive. The relationship between stock market value and GDP can change over time because of interest rates, corporate profitability, globalization, taxation, technology, changes in the composition of listed companies, and the amount of revenue U.S. companies earn outside the United States.
For this reason, the model does not assess the current ratio only against one fixed threshold. It also compares the ratio with an estimated long-term trend.
The deviation line shows how far the current Buffett Indicator is positioned above or below that trend.
A deviation of 0% means that the ratio is equal to its estimated long-term trend.
A positive deviation means that the ratio is above the trend.
A negative deviation means that the ratio is below the trend.
The standard-deviation zones show how unusual the current deviation is compared with previous observations in the model’s history. Values farther above the trend may be described as historically elevated, while values farther below the trend may be described as historically depressed.
The chart should be used as a broad, long-term valuation measure. It does not predict when markets will rise or fall and should not be treated as a short-term market-timing signal.
Limitations
- The numerator is a broad proxy for U.S. corporate market value rather than the market capitalization of all publicly traded U.S. companies.
- The denominator measures total U.S. economic output, while the numerator reflects the value of corporate assets and expected future profits, so the two series are conceptually different.
- Many large U.S. companies earn a substantial share of their revenue abroad, whereas GDP measures production within the United States.
- The indicator can be affected by interest rates, inflation, profit margins, taxation, accounting standards, and the sector composition of the corporate market, not only by equity valuations.
- GDP and financial-account data are revised after publication, so historical values and the latest reading may change as new estimates become available.
- The historical benchmark and standard-deviation zones depend on the selected sample period and may be influenced by structural changes in the economy and financial markets.
- An unusually high or low reading can persist for a long time and should not be interpreted as a precise fair-value estimate or a market-timing signal.
Methodology
The Buffett Indicator is calculated quarterly by dividing estimated U.S. stock market capitalization by nominal U.S. gross domestic product. The natural logarithm of the ratio is then fitted to a linear quarterly time trend, and converting the result back into normal values creates an exponential long-term trend.
The standard deviation of the full deviation series is used to create the ±1σ, ±2σ and ±3σ historical zones. The model uses quarterly observations beginning in Q1 1952.
Data sources
U.S. nonfinancial corporate business equities, end-of-period market value
Range: Q1 1952 to the latest available observation
Source: Board of Governors of the Federal Reserve System (US), Nonfinancial Corporate Business; Corporate Equities; Liability, Level [NCBEILQ027S], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/NCBEILQ027S
U.S. nominal gross domestic product, seasonally adjusted annual rate
Range: Q1 1952 to the latest available observation
Source: U.S. Bureau of Economic Analysis, Gross Domestic Product [GDP], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/GDP