“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 a post depicting this “stock market capitalization to GDP” metric.
As seen in his August 7, 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:
(click on charts to enlarge images)
Here is the second chart, with the stock market capitalization as defined by the Wilshire 5000:
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.
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1931.59 as this post is written