Finance

The stock market has never been this big relative to the economy, signaling it could be overvalued

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The size of the stock market relative to the size of the economy is at its highest level ever, raising concerns that the market’s recent all-time highs are detached from reality.

The likes of legendary investors Warren Buffett and Paul Tudor Jones have measured the stock market in this, or similar ways in the past to determine if it is overvalued or undervalued.

While some valuation measures are based on fickle analyst estimates, the equity market cap-to-GDP ratio is based on concrete and simple data. The same goes for Buffett’s reportedly preferred gauge, equity market cap-to-gross national product, and the cyclically adjusted price-to-earnings ratio, created by Nobel Prize winner Robert…



Source cnbc.com

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