Warren Buffett's market indicator broke 140%



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Friday, the preferred market indicator of Berkshire Hathaway Inc. (NYSE: BRK.A) (NYSE: BRK.B), Warren Buffett (Trades, Portfolio), reached 140.3%, or about 6% more that his reading from February 134 to February 1. and 16.7% higher than its January 2nd reading of 123.6%.

Dow has risen sharply in the last two months

Although the Dow Jones industrial average briefly exceeded 26,100 in morning trading, it closed at 26,028.76, down 103.59 points from the intraday peak of 26,132.35 but 112.76 points. on a closing of 25,916. Despite this, the index has risen by approximately 3,346.54 points since January 3, its lowest level of 22,682.22. Similarly, Buffett's major holdings, Apple Inc. (NASDAQ: AAPL), closed at $ 174.97, up cumulative total of $ 142.19 since the beginning of the year.

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<p>CNBC columnist Fred Imbert has listed a number of reasons for the sharp increase in the market over the past two months, including a decrease in trade tensions between China and the United States, and a decrease in fears of a more accommodating monetary policy. restrictive of the Federal Reserve. Despite this, the Dow reduced its initial gains by relying on less favorable consumer confidence data than expected.</p>
<p><strong>The stock market is becoming more and more overvalued</strong></p>
<p>As the Dow rises, the US market becomes more and more overvalued: the ratio of total market capitalization to gross domestic project stands at 140.3%, about 25% more than the "significant overvaluation" threshold of 115%. Based on this level of market valuation, the expected return on the US market is approximately -1.8% per annum for the next eight years. Figure 1 illustrates the historical trend of the Wilshire 5000 full-capitalization index and US GDP.</p>
<p><img alt=

Figure 1

According to the chart of predefined and real returns, the expected return on the US market ranges from -9.50% in the most pessimistic case to 3.10% in the most optimistic case. The green, blue and red lines in Figure 2 show projected returns if the Buffett indicator averages 40%, 80% and 120% over the next eight years.

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<p><strong>Figure 2</strong></p>
<p><strong>Value controllers continue to identify investment opportunities</strong></p>
<p>GuruFocus has released new versions of each of the most popular screens, including the Ben Graham Net-Net screen, the Undervalued Predictable screen and the Buffett-Munger screen. Table 1 lists the value filtering record as of March 1st.</p>
<p><strong>Table 1</strong></p>
<p><strong>See also</strong></p>
<p>Buffett referred to a "forest of trees" in his 2019 shareholder letter to emphasize the importance of owning a diverse business basket. The Oracle of Omaha also said that it considers its assets as "an assembly of companies [Berkshire] Buffett also mentioned that his stocks brought at least 20% of their stock and generated profits "without having to use an excessive level of debt," essential criteria of Berkshire's four-criteria investment strategy. . At the end of 2018, the Berkshire equity portfolio was heavily exposed to the financial services, technology and consumer staples sectors. The six largest holdings of the conglomerate are Apple, Bank of America Corp. (NYSE: BAC), Wells Fargo & Co. (NYSE: WFC), The Coca-Cola Co. (NYSE: KO), American Express Co. (NYSE: AXP) and The Kraft Heinz Co. (NASDAQ: KHC).</p>
<p>Disclosure: No position.</p>
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<h3>About the author:</h3>
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James Li

I am a writing assistant and researcher at GuruFocus. I have a master's degree in finance from SMU and I like to write reports on financial trends and investor portfolios. Follow me on Twitter @JamesLiGuru!

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