“Stock market capitalization to GDP” is a notable and important metric regarding stock market valuation. In February of 2009 I wrote of it in “Does Warren Buffett’s Market Metric Still Apply?”
Doug Short has recently published posts depicting this “stock market capitalization to GDP’ metric.
As seen in his February 5, 2014 post titled “Market Cap to GDP: The Buffett Valuation Indicator” he shows two different versions, varying by the definition of stock market capitalization. (note: additional explanation is provided in his post.)
For reference purposes, here is the first chart, with the stock market capitalization as defined by the Federal Reserve:
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Here is the second chart, with the stock market capitalization as defined by the Wilshire 5000:
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As one can see in both measures depicted above, “stock market capitalization to GDP” is at notably high levels, from a long-term historical perspective.
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 1751.64 as this post is written