I was looking at the numbers this morning, and honestly, they're a little terrifying. If you follow the "Oracle of Omaha," you know he’s got this one specific yardstick he swears by. He once called it "probably the best single measure of where valuations stand at any given moment." Well, the warren buffett indicator today is currently sitting at roughly 223%.
That is not a typo.
For context, during the height of the Dot-com bubble—you know, when people thought Pets.com was a solid retirement plan—this indicator only hit about 159%. We are now miles past that. Basically, the total value of the U.S. stock market is now more than double the entire country's economic output (GDP).
What exactly are we looking at?
The math is dead simple. You take the total market cap of all publicly traded U.S. stocks (usually via the FT Wilshire 5000 Index) and divide it by the latest quarterly GDP figure. It's a ratio. A "vibe check" for the entire economy.
Buffett’s logic is that if the stock market is growing way faster than the actual economy that supports it, something has to give. You can't have a $50 trillion market sitting on a $25 trillion economy forever without the wheels coming off eventually.
💡 You might also like: Iowa Unemployment Explained: What to Do When the Paycheck Stops
As of January 17, 2026, the Wilshire 5000 is hovering around $69.5 trillion, while the U.S. GDP is trailing significantly behind. This puts us in "Strongly Overvalued" territory. Like, "don't look down" levels of high.
Why this time feels... weird
Usually, when the indicator hits these levels, people start screaming "crash" from the rooftops. But 2026 is a weird beast. We’ve got the "One Big Beautiful Bill Act" stimulus kicking in, tax cuts on the horizon, and an AI spending spree that makes the 90s internet boom look like a lemonade stand.
J.P. Morgan is still calling for double-digit gains this year. Goldman Sachs thinks GDP will actually outperform the "doomers" and hit 2.5% growth.
So, who’s right?
The danger is in the "Trendline." If you look at the historical average, the market usually settles around 120% of GDP. Being at 223% means we are nearly two standard deviations above the norm. In plain English: the rubber band is stretched so thin you can see through it.
The "New Era" argument
I hear this a lot: "The indicator is broken because companies today make money globally, not just in the U.S."
It’s a fair point. Apple and Nvidia sell to the whole world, but their value is measured against only U.S. GDP. That definitely skews the numbers higher than they were in the 1970s. However, even if you adjust for that, we are still at record-breaking extremes.
💡 You might also like: Sales Tax in WA: What Most People Get Wrong
The warren buffett indicator today is basically telling us that investors are pricing in a perfect future. They’re betting that inflation stays dead, the Fed keeps cutting rates (we're expecting two more this year), and AI actually starts making companies profitable, not just expensive to run.
Is a crash actually coming?
Here’s the thing about this indicator: it’s a terrible timing tool. It’s like a "Check Engine" light. It tells you something is wrong, but it doesn't tell you if the car is going to explode in five minutes or five months. It stayed "overvalued" for years leading up to the 2022 correction, and it’s been screaming since late 2024.
Currently, the S&P 500 is flirting with the 6,900 mark. Greed is high.
If you're looking at your portfolio today, the smart move isn't necessarily to sell everything and hide in a bunker. Buffett himself isn't doing that—though it's worth noting he’s been sitting on a massive mountain of cash lately. He’s been a net seller of stocks like Apple and Bank of America recently, which should tell you exactly what he thinks of these prices.
What you should actually do
Don't panic, but don't be oblivious.
- Check your weightings. If your Nvidia or tech stocks have grown so much they now make up 50% of your account, maybe take some off the table.
- Look at the "laggards." The Buffett indicator is high mostly because of a few mega-cap tech stocks. There are still pockets of the market—like mid-caps or specific energy plays—that aren't at "nosebleed" valuations.
- Keep some "dry powder." If the indicator is right and a 20% or 30% "reversion to the mean" happens, you want to have cash ready to buy the dip, not be the one getting dipped.
The market can stay irrational longer than you can stay solvent. That’s the old saying. But ignoring the warren buffett indicator today is like driving 100 mph toward a brick wall because you haven't hit it yet.
🔗 Read more: 27 Out of 30 Percent: Why This Specific Math Hits Your Wallet Harder Than You Think
Stay cautious. The air is very thin up here.
Your next steps:
Check your current portfolio allocation to see if your "winners" have made your portfolio too top-heavy. If you’re sitting on 90% equities, consider moving a portion into short-term Treasuries or a high-yield cash account while the market works through this valuation peak.