It's almost impossible for investors to be critical of the stock market these days. In 2026, the S&P 500 index (SNPINDEX: ^GSPC) has so far generated a total return of 14% (as of Aug. 12). This follows a fantastic 18% total return in 2025, with double-digit gains posted in the two years before that as well.
Stock investors are making money. However, investors continue to monitor valuations. To be more specific, the Buffett indicator, a metric from the Oracle of Omaha, might be signaling what's to come.
This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia.
Continue » It's not a good idea to panic, though. History says investors should make this one move. The Buffett indicator, first mentioned by Warren Buffett in 2001, measures the total capitalization of the U.S. stock market relative to the country's gross domestic product.
This number is like the popular price-to-earnings ratio, except it applies to the entire market and economy. Right now, the Buffett indicator is at 238%, an all-time high. This means the stock market's value is 2.4 times the size of the entire U.S. economy.
Assuming that a reading of 100% shows that valuations are fair, the current level suggests a stock market bubble ready to pop. There are limitations to the Buffett indicator that investors shouldn't overlook. This figure doesn't account for the fact that large U.S. companies generate significant revenue from other countries.
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