Buffett Indicator

## What this measures

The Buffett Indicator measures the market value of US nonfinancial corporate equities as a percentage of nominal GDP. It reflects the aggregate equity valuation of American corporations relative to the size of the economy.

## Background

The market value of US nonfinancial corporate equities from the Federal Reserve's Financial Accounts (Z.1, FRED NCBEILQ027S) divided by nominal GDP (FRED GDP), × 100. Quarterly back to 1945. Z.1 publishes about ten weeks after each quarter, so the months after the latest quarter are estimated by moving that quarter's value with the S&P 500 (FRED SP500) and are marked as estimates until the Z.1 figure replaces them. Computed monthly by /api/cron/buffett-compose. Until September 2026 this series used the Wilshire 5000, which Wilshire withdrew from FRED; the signal had frozen at 2025-09-30.

## Why it matters

It serves as a valuation benchmark for organizations making capital allocation decisions or assessing market risk. When equity markets trade at a high multiple of GDP, future return expectations tend to be lower; when the ratio is low, long-term prospective returns have historically been higher.

## How to read it

A rising ratio indicates that equity valuations are increasing relative to economic output; a falling ratio suggests the opposite. Compare the current level to its historical range to gauge whether equity markets are trading at elevated, moderate, or depressed valuations.

## What it does not say

The indicator does not forecast near-term market direction or signal when to enter or exit positions. It is a valuation measure, not a timing tool, and does not account for interest rates, earnings growth, or other factors that influence equity prices.

## Source

Palanor pulls the source series from the FRED API nightly. The ratio uses Federal Reserve Financial Accounts data for equity market value and Bureau of Economic Analysis data for GDP, both published by FRED.