Market YTD / Shiller / Buffett Ratio

Investment Analysis Clubs Macro Economic Trends and Risks
1

This is a visual map of market gains in % terms this year.

It does not include the rally from October to December 2022.

However, it gives you an idea of which parts of the market have raced ahead the most in 2023.

Those parts IMHO may be more likely to race backwards in any correction or crash.

The Shiller CAPE P/E remains very elevated though not quite at record levels.

Shiller: 31x vs historical peak 45x and recent peak 40x

SP500 Price/sales: 2.5x vs historical peak 3x

Buffett Ratio: 177% GDP (1.5x standard deviations) vs 2.6x standard deviation peak.

Consider the 50 years from 1973 to 2023.

It is interesting to see that across 5 decades, the market spends very little time above 1 standard deviation upwards.

5 Likes
2

Great stuff…

This is a visual map of market gains in % terms this year.

It does not include the rally from October to December 2022.

However, it gives you an idea of which parts of the market have raced ahead the most in 2023.

Those parts IMHO may be more likely to race backwards in any correction or crash.

Just an assumption (and there does not appear to be a way to verify from their site) but I imagine some of those that are way up this year, may still be down when you include their 2022 performance. In other words, those that have raced to the top this year may still be behind the pack when you view them from two years ago.

I took a look at 4 of the best this year, MSFT, AAPL, GOOG, and AMZN and compared them to the S&P over the last two years. I found that two did better and two did worse so not conclusive in any way.

3 Likes
3

The bigger issue on the Buffett Indicator is when there is an abundance of capital versus when capital dries up. We are about to see a light drying up. The longer 1974 into the 1980s period demanded a complete recapitalization of our economy. We are not there at all.