The Buffett Indicator compares total stock market capitalization to GDP, assessing market valuation. A high ratio suggests overvaluation, while a low ratio indicates undervaluation, helping people investing in the stock market gauge market conditions for long-term investing decisions.
Most seasoned investment professionals know that stock prices and fundamentals are two totally different elements. Sometimes, they herd together. At times, they diverge significantly. The month-to-month correlation between these two variables is never constant. That's why using valuation metrics to predict stock prices is quite frustrating.
However, Warren Buffe...
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