The latest reading on Warren Buffett’s favorite valuation metric shows a bit of a decline, but still elevated levels. The latest reading of 105% is still consistent with a market that is overvalued and unattractive from a pure value standpoint. In the past, Buffett has said that he prefers to see this metric at 70%-80% before buying equities:
“For me, the message of that chart is this: If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you. If the ratio approaches 200%–as it did in 1999 and a part of 2000– you are playing with fire.”
Clearly, we’re far from a level where equities are highly attractive according to this indicator.
See here for more on this metric.