Stock Market Capitalization vs GDP Shows More Pain Ahead

By John Del Vecchio and Brad Lamensdorf

While 2022 has been a brutal year for the markets, Warren Buffet’s favorite indicator is still only back to levels seen in 2000.

Now, we have had a massive rally off of deeply oversold levels. While we warned that shorts could get punched in the nose from an oversold rally, it’s unlikely that it would represent the start of a new bull market.

Now that the market is exceptionally overbought, we continue to believe this is the case. Few stocks are making new highs. Breadth has been poor on some of the strong rally days.

Meanwhile, indicators such as The Buffet Indicator illustrate that we likely have a way to go before reaching a major bottom.

Continued caution is warranted over the long term.

Stock Market Capitalization vs GDP Shows More Pain Ahead

To learn more about how these indicators can help manage risk in your portfolio, book a call with Brad. You may book a call here.


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