Recently, I came across an interesting piece of data: the Buffett Indicator for the U.S. stock market has hit a new high. According to statistics, this indicator (total market capitalization divided by GDP) has now surged to 223%-224%, with some data sources even approaching 230%. This is the highest on record, surpassing the 150% during the dot-com bubble in 2000, and exceeding the peak after the COVID-19 pandemic in 2021.

The Buffett Indicator is important because it reflects the valuation level of the entire stock market relative to the actual economic output. Historically, the long-term average of this indicator has been around 80%-100%, with 100%-120% considered a reasonable valuation range. Now exceeding 200%, it indicates that U.S. stock valuations are indeed deviating from fundamental economic conditions.

Warren Buffett himself considers this indicator the best single measure of market valuation. He has said that it is the most indicative of whether the market is overheated. With the Buffett Indicator at such a high level now, it somewhat serves as a warning.