Stocks vs. GNP
February 4, 2009 at 6:59 pm 1 comment
Below is the graph of total stock market capitalization vs. Gross National Product. According to Warren Buffet, stocks become attractive investments when total market cap is in within 70-80% of GNP. Right now, we are in the middle of that range, at 75%.
Note, however, that based on this metric, the ratio still is higher than it was during World War II, or during the recession in 1980, when it stood around 50%. To get to that level, the market will need to drop by another third.
For more discussion, take a look at this article from Fortune.
Entry filed under: Market Conditions.
1. More on Market Valuation « Sensible Investing | April 15, 2009 at 3:27 am
[…] 15, 2009 I wrote earlier about comparing total stock market capitalization with Gross National Product. This article from […]