Wednesday, December 17, 2014

Stock Market Capitalization To GDP – Through Q3 2014

“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 December 11, 2014 post titled “Market Cap to GDP:  The Buffett Valuation Indicator Declines a Bit” 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)
Dshort 12-11-14 - Buffett-Indicator
Here is the second chart, with the stock market capitalization as defined by the Wilshire 5000:
stock market capitalization to GDP
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 1987.04 as this post is written

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