ASX futures down 1pc. Wall Street retreats on slowdown worries. $A falls again. Tesla tumbles. CrowdStrike offers $US10 Uber Eats card to say sorry. Follow here.
Warren Buffett’s favourite metric to indicate a stockmarket bubble is flashing red again to signal stocks could be in for a downturn after the Nasdaq index tumbled 3.6 per cent to its worst day since 2022 overnight. The metric shows the total market cap of US stocks versus the nation’s gross domestic product . It currently sits at 192.4 per cent just shy of its record high from 2021 after last night’s sell-off.
Buffett says fair value or cheap would be when stocks trade at 100 per cent of GDP to suggest earnings can grow in line or ahead of GDP. If stocks trade at say 150 per cent of GDP it suggests the market expects strong earnings growth from many companies and strong GDP growth. If they trade at double GDP or 200 per cent they’re thought to be in a bubble as there’s no way real GDP growth can produce the physical profits to match investors expectations.
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