Although in the markets we have seen that the historical sequence may not be fulfilled, as we have clearly seen with the month of September that is settled on either side of the Atlantic clearly in positive for which, let’s remember, it is year after year, The worst month in which the bags of the entire exercise behave.
That said, the truth is that the historical maximums, above 220% marked by the one known as ‘Buffet Indicator’ It is a sign that many consider, but of alarm, of clear warning of what is happening in financial markets.
This indicator is calculated as a ratio in the division that places the value of all the companies that quote on Wall Street, The so -called Wilshire 5000 for the United States GDP. When comparing the size of the stock market with general economic production, this relationship provides information on the relative assessment of the market.
And became famous as the still responsible for Berkshire Hathaway pointed out, back 2001, which was «Probably the best individual measure of the situation of valuations at a given time», What Buffet came was a more than added value.
As highlight that CNBC, Warren Buffet indicated that «If the percentage ratio falls to 70% or 80%, it is likely that buying shares will work very well,» After the indicator approached 150% the previous year, during the Puntocom bubble. «If the relationship is approaching 200%, as happened in 1999 and part of 2000, you are playing with fire.»
And that fire is the one that springs at this time on Wall Street, for concern of some investors. Even levels, beyond the 2000 crisis, in the pandemic, in 2021, the indicator was placed in 190%.
In addition to this indicator, there are others that show similar levels. The price-sale ratio of the S&P 500 recently rose to 3.33%, a historical maximum, according to Bespoke Investment Group. As a comparison, the Puntocom peak in 2000 reached a maximum of 2.27, and the post-covid boom reached 3.21 before the valuations cool.
The current levels of the American market are due to two fundamental factors. The first is the rebound, from the recovery after the minimum of the tariffs in the month of April of the Big Tech, The 7 magnificent thrombus that leads to capitalizations until recently unexpected: 4 and a half billion Nvidia in their continuous alliances with respect to AI, artificial intelligence, Apple and Microsoft with 3.8 billion stock market value in the market and an Alphabet-a that already brushes the 3 billion.
But the outstanding students have also helped in the effort: among them the new ‘magnificent’ for many, Broadcom, as well as the resurgence of Oracle, with Larry Ellison raising their fortune or intel that is reborn from the hell of the semiconductors.
The second, while we expect the results that can mark the future in the investments of the AI, It is the expectation that the type drop cycle in the United States is consolidated. Despite Powell’s attitude to focus the cuts and perimeter them two this year and only one in 2026, the truth is that the market expects more, and one immediately, at the end of October. And with an actor to take into account: in May the Powell era ends and Trump wants to raise the Fed chair to a convinced of the low types, and surround him with ad hoc governors for this task.
At the moment, in the case of the dismissal of the governor of the Federal Reserve, Lisa Cook will have to wait, since the US Supreme Court has prevented the President from replacing it. The order of the high court postpones the decision until a subsequent sentence and sets the view of the case to listen to the oral arguments for January 26.
In this way expectations of right now within the Federal Reserve, would completely change in the medium term, Only eight months seen. The rest will be in charge of both inflation and the evolution of the labor market and, of course, the economic evolution of the country.
We will have to wait and see the evolution of Wall Street, but caution, in these market moments, along with diversification and the fact of being selective, is more than ever, a degree.