Buffett Indicator and Recession

KYHBKO
2022-05-22

Buffett Indicator as of 20 May 2022.

The Buffett Indicator is the ratio of total United States stock market valuation to GDP. As of May 20, 2022 we calculate the Buffett Indicator as:

Aggregate US Market Value: $41.7T

Annualized GDP: $24.7T

Buffett Indicator: $41.7T ÷ $24.7T = 169%

Buffett Indicator from current market valuation website as of 13May22

By our calculation that is currently 29% (or about 0.9 standard deviations) above the historical average, suggesting that the market is Fairly Valued. We are coming off historical highs for this indicator.

While we wait for Q2/2022 GDP results due in Q3, another decline will confirm that the market is in a technical recession. From the recent earnings and situations, we are already in a recession.

While there are several ones who called out that the downtrend has reached a bottom. It would be prudent to be observing more. It is not over till the fat lady sings and we have yet to see the single "collapse" event or subsequent rippling effects.

I do not wish that my "forecast" to be true but I think that we need to be prudent to watch the market accordingly. It is good to be an observer for now.

@TigerStars 

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Comments

  • KittyBruno
    2022-05-22
    KittyBruno
    Thanks for sharing. The situation is unclear, and it is not clear whether the recession will last or hit bottom. Can you explain it in detail?
    • chaickaReplyKYHBKO: 
      Delayed Reflection where impacts should show up in Q2 earnings. [Smile]
    • chaickaReplyKYHBKO: 
      Indeed.
    • KYHBKOReplychaicka: 
      to differ is good.  it means that we have a healthy and respectful exchange - needful for learning & growth.  all the best for the coming week.
    • KYHBKOReplychaicka: 
      Personally, I am concerned that the US government will be too busy with the "mid term".  Ukraine, food, energy, weather and supply chain issues are not going away soon.
    • KYHBKOReplychaicka: 
      supply chain pain's recent relief came from the China lockdown.  they have couple more weeks to get ready for the "influx".
  • chaicka
    2022-05-22
    chaicka
    Sharp in observations and analysis. Indeed having same perspective on yet to bottom out. Many still in slight ‘bubble’ zone yet to shed all off. 2022 war chests still building & waiting….. [Grin]
    • KYHBKO: 
      let us continue to observe.  No hurry to buy anything, tempted to short few.
  • MyrnaNorth
    2022-05-22
    MyrnaNorth
    Although I also think the market has hit bottom, I think the downturn may last longer and is unlikely to be reversed in the short term.
    • KYHBKO: 
      we may see some rally in the market but the general trend remains downwards.  take short term trades.
    • KYHBKO: 
      Market looks to decline and may hit a bottom soon.  Let us observe closely.  I will publish a market outlook soon.
  • BaronLyly
    2022-05-22
    BaronLyly
    I am more optimistic about the future of the market, and think that this is the critical moment for bottoming out and rebound.
    • KYHBKO: 
      in the long run, market always go up.  Now, we have too many considerations that could spoil the soup.
  • AdrianTan
    2022-05-23
    AdrianTan
    A temporary cool off is needed to temper the glut of demand from economies reopening
    • KYHBKO: 
      from my latest technical, we can expect some rally in the market but we have yet to see a confirmation for reversal
  • LawrenceLBC
    2022-05-22
    LawrenceLBC
    thanks for sharing [smile]
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