Long-Term Equity Valuations
The stock market cap to GDP ratio is among Warren Buffett’s favorite macro gauges. It surpassed the previous 2000 and 2007 extremes. Both are linked to bubbles: the tech bubble in 2000 and the housing bubble in 2007. The gauge was mean-reverting historically. Its long-term average is below one relative to the Wilshire 5k index. …