2001 Fortune article on Warren’s view.
Most investors [individuals and professional] pay too much attention to the rear view mirror.
Folks should have been loading up on stocks during the stagflation era.
Stocks were demonstrably cheaper in 1978 when pension managers wouldn’t buy them than they were in 1972, when they bought them at record rates.
It is emotionally tough to buy at the 1978 levels until you are Warren
though.
In regard to the total market value of the stock market as a % of GNP.
The ratio has limitations in telling you what you need to know. Still, it is probably the best single measure of where valuations stand at any given moment.
If the percentage relationship falls to 70% to 80% area, buying stocks is likely to work very well for you. If the ratio approaches 200%–as it did in 1999 and part of 2000–you are playing with fire.
We are currently at 195% according to the Yahoo article.
Since the index hit its latest low in October 2022, seven stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — have collectively risen nearly 117 percent, far outpacing the performance of the other 493 companies in the S&P 500. Together, these stocks have become known as the “Magnificent Seven.”
But it’s not just the stellar price performance of these stocks that helped lift the S&P 500 to a closing record on Friday. The stock index is weighted by market capitalization, meaning the moves of the largest companies contribute more to the performance of the index. In other words, the influence of these seven stocks comes down to their size. Their market value has risen more than 60 percent since October 2022.
Are we looking in the rear view mirror again?
The 7 stocks have huge market capitalization that affects the S&P 500 valuation. But what can inflat can also deflat methinks.