Investment guru Warren Buffett's Buffett Indicator has recently fallen back to last September's low point. Will Berkshire Hathaway will hold its annual shareholders meeting in Omaha this weekend, and many predict this could be the 94-year-old Buffett's last full participation in the meeting. Investors will closely watch whether Buffett has already used the company's record cash reserves to buy cheap stocks in the market.
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ToggleBuffett Indicator's Recent Decline: Will It Replay Last Year's Yen Carry Trade Liquidation Rebound?
In a Forbes interview in December 2001, Warren Buffett mentioned that the ratio of total stock market value to GDP can be used to determine whether the overall stock market is too high or too low, hence known as the Buffett Indicator. This indicator can measure whether the current financial market reasonably reflects fundamentals. Buffett's theoretical index suggests a reasonable range of 75% to 90%, with over 120% indicating an overvalued market. According to Financial M Square's chart, the Buffett Indicator has been at a high level since 2016, hovering above 200 from late last year to early this year. However, it fell to 165 in early April and is currently at 189, approximately the same level as after the brief but intense sell-off following the yen carry trade liquidation, which lowered the Buffett Indicator and was followed by a significant market rebound.
This year, various valuation indicators have taken on greater significance as investors try to determine whether tariff-induced sell-offs have made stock prices cheaper relative to their fundamentals. With the S&P 500 index rebounding 12% from its April low point, these calculations have become more complex, and traders are considering whether to bet on further index increases or strengthen hedges and bet on index decline. The index remains nearly 9% below its February historical high.
Berkshire Shareholders Meeting: Will Buffett Make a Move?
Berkshire Hathaway, founded by investment guru Warren Buffett, will hold its annual shareholders meeting in Omaha this weekend. Many predict this could be the 94-year-old Buffett's last full participation in the meeting. In the company's annual letter earlier this year, he told shareholders that "a successor will soon take over the CEO position, most likely Greg Abel".
Investors are eagerly awaiting Berkshire's Saturday shareholders meeting, partly to understand whether Buffett has used the company's cash reserves (the latest report shows the company's cash reserves have reached a record $321 billion) to buy cheap stocks in the market.
Scott Colyer, CEO of Advisors Asset Management, stated that Buffett "has always been a long-term investor".
More importantly, they want to hear his views on the economy and whether lower valuations will prompt him to use the cash from previously sold stocks to buy again.
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