Us Stock Market Will Crash

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Us Stock Market Will Crash

Is The Us Stock Market Going To Crash?

The US stock market keeps on rising like there's no tomorrow. But deep down, we all know that we are now also inching closer to a crash.

But, when will the US stock market crash? Well, we can determine that by looking at an indicator that's used by Warren Buffett!

Shiller P/E Ratio Is 39.9

Back in 2001, Warren Buffett talked about the market cap to GDP ratio and how it could be used to check valuations. This measure basically compares the value of all companies in the stock market to the GDP.

Back in the 1970s, the long-term average of this ratio was around 85%. But today, it's nearly 218% and shows that the value of the US stock market is more than double the USA's entire GDP.

Similarly, another way to look at it is the Shiller P/E ratio. So if we look at that, it's around 39.9, which is also the highest value in the last 150 years.

So, whether we look at the Shiller P/E ratio or the indicator from Warren Buffett, everything tells us that valuations are sky high!

But, this doesn't automatically mean that the markets will crash tomorrow. It just tells us that stocks are valued very high right now, and caution is needed.

So, those who have bought the stocks at good rates will do just fine. But those who bought the stocks near record high levels will need to reevaluate their strategy.

Also, everyone knows that markets can remain unrealistic for long periods of time. So, if we spend a few years under the stock market's bull run, then it shouldn't surprise anyone.

But, it's also a reality that the majority of the US stocks have high valuations. So for those who are looking for an entry into the market, perhaps it is best to wait for a pullback or a healthy correction.

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