Can the Buffett Indicator really predict a stock market crash? Research has analyzed 50 years of data, and the results are a bit heartbreaking.

This indicator is the total market value of the US stock market divided by GDP. Old Ba said this is the most reliable single indicator for measuring valuation. Over 100% is a signal of a bubble.

But what about the actual effect? Out of the 14 major declines (decline ≥10%) since 1971, this indicator only successfully warned 7 times, resulting in a success rate of 50%. It sounds okay, but there is a big problem – it has been above 120% since Q3 of 2016, continuously shouting "overvalued" for a full 6 years, while the market keeps rising.

Looking at it from another angle, if the threshold is set at 132.7% (based on the average level since 2000), it warned of 4 out of the 7 major declines in the 21st century, approximately 10 months in advance. However, the cost is missing several waves of declines in 2007-09, 2015-16, and early 2018.

Conclusion: This indicator is not万能的; it's okay as a reference, but don't expect it to be the bible.