---
title: "Buffett Indicator (July-2025)"
author: "DeepValues Research"
publisher: "DeepValues Research (DeepValues / LuLu Ventures LLC)"
type: "Research article"
date: "2025-07-01"
language: "en"
section: "Market Vibes"
answer: "DeepValues Research, “Buffett Indicator (July-2025)” (Jul 1, 2025): ^1 Daily FRED data: 10-yr yield 4.26 % vs."
canonical_url: "https://research.deepvalues.ai/market/buffett-indicator-july-2025/"
markdown_url: "https://research.deepvalues.ai/market/buffett-indicator-july-2025/index.md"
license: "CC BY 4.0"
license_url: "https://creativecommons.org/licenses/by/4.0/"
cite_as: "DeepValues Research, Buffett Indicator (July-2025), https://research.deepvalues.ai/market/buffett-indicator-july-2025/"
publisher_url: "https://deepvalues.ai"
app: "https://deepvalues.ai"
api: "https://app.deepvalues.ai/developers"
data_note: "Reports are dated snapshots. Current data via the DeepValues API: https://app.deepvalues.ai/developers"
disclaimer: "Educational research, not investment advice."
---
**Snapshot as of Friday 27 June 2025**
| **Metric** | **Latest reading** | **Percentile vs. history** | **What it usually signals** |
|--------------------------------------------------------|-----------------------------------|------------------------------------------------------|------------------------------------------------------------------|
| **Buffett Indicator (Total US Mkt Cap ÷ Nominal GDP)** | **≈ 206 %** (≈ $61.6 T / $30.0 T) | \~94-th percentile (1.9 σ above 1970-2024 trend) | Extreme over-valuation; 10-yr real returns historically < 2 % |
| **Shiller CAPE (10-yr real PE)** | **37.6** | 94-th percentile (only 1929 & 1998-2001 were higher) | Implied 10-yr real return \~2 %-3 % |
*Sources: Wilshire 5000 close 61 629 (27 Jun 2025) ([gurufocus.com](https://www.gurufocus.com/economic_indicators/53/wilshire-5000-full-cap-price-index?utm_source=chatgpt.com), [fred.stlouisfed.org](https://fred.stlouisfed.org/series/GDP?utm_source=chatgpt.com)); CAPE 37.65 (27 Jun 2025) ([multpl.com](https://www.multpl.com/shiller-pe/table/by-month?utm_source=chatgpt.com)).*
### **How the two big gauges line up**
| | **Buffett Indicator** | **Shiller CAPE** |
|-----------------------|--------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|
| **What it measures** | Market value vs. size of the *economy* | Price vs. 10-year *earnings power* (inflation-adjusted) |
| **Current takeaway** | Stocks priced at **\~2×** the size of the economy-near dot-com extremes | Earnings multiple back at **late-1990s highs** despite slowing EPS growth |
| **Overlap** | Both capture broad-market exuberance; both say "expensive" | - |
| **Where they differ** | Buffett uses *nominal* GDP, so fast inflation can keep ratio in check; CAPE strips inflation out | CAPE less sensitive to nominal GDP swings but can stay elevated if yields are very low |
### **Other valuation & macro lenses**
| **Indicator (27 Jun 2025 unless noted)** | **Reading** | **Historical context** | **Aligns with Buffett/CAPE?** |
|------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------|--------------------------------------------------|
| **Plain (trailing) PE** | 29.4 ([multpl.com](https://www.multpl.com/s-p-500-pe-ratio/table/by-month?utm_source=chatgpt.com)) | 90-th percentile vs. 1960-2024 | **Yes** - expensive |
| **Forward PE (Street EPS)** | 21.3 (Yardeni, week of 24 Jun) ([archive.yardeni.com](https://archive.yardeni.com/morning-briefing-2025/?utm_source=chatgpt.com)) | Highest since Jan 2022 | **Yes** |
| **Price-to-Sales (P/S)** | 3.14 ([multpl.com](https://www.multpl.com/s-p-500-price-to-sales/table/by-year?utm_source=chatgpt.com)) | New record; long-run median ≈ 1.5 | **Yes** |
| **Price-to-Book (P/B)** | 5.24 ([multpl.com](https://www.multpl.com/s-p-500-price-to-book/table/by-year?utm_source=chatgpt.com)) | All-time high | **Yes** |
| **Equity-Risk Premium (ERP)** | \~0 % (CAPE-based; Reuters) ([reuters.com](https://www.reuters.com/markets/europe/us-stocks-bonds-warnings-flash-amber-again-2025-06-11/?utm_source=chatgpt.com)) | Lowest since 2000 tech bubble | **Yes** - stocks no longer compensate vs. bonds |
| **Excess CAPE Yield** | 1.25 % (1 Jun) ([gurufocus.com](https://www.gurufocus.com/economic_indicators/4530/shiller-excess-cape-yield-for-the-sp-500?utm_source=chatgpt.com)) | Well below 20-yr average 3.3 % | **Yes** |
| **Yield-Curve (3m-10y)** | Still **inverted** (> -90 bp)^1 | Longest inversion since 1970s | **Macro caution**, supports lower future returns |
| **Margin-Debt YoY** | Flat (neutral) ([currentmarketvaluation.com](https://www.currentmarketvaluation.com/?utm_source=chatgpt.com)) | Not flashing extreme greed | **Mixed** - sentiment less frothy than 2021 |
| **VIX, Junk-spread models (CMV)** | Neutral ([currentmarketvaluation.com](https://www.currentmarketvaluation.com/?utm_source=chatgpt.com)) | Risk indicators complacent, not euphoric | **Mixed** - valuation rich, fear low |
> ^1 Daily FRED data: 10-yr yield 4.26 % vs. 3-m bill 4.39 % (26 Jun 2025) keeps spread negative. ([fred.stlouisfed.org](https://fred.stlouisfed.org/series/DGS10?utm_source=chatgpt.com), [fred.stlouisfed.org](https://fred.stlouisfed.org/series/DGS3MO?utm_source=chatgpt.com))
### **Reading the ensemble**
- **Consensus message - stretched:** Every price-based valuation yard-stick (Buffett, CAPE, P/S, P/B, forward & trailing PE) sits in the top decile of its own history, pointing to compressed long-run returns.
- **Risk-premium drought:** The equity-risk premium near **zero** means stock earnings yields barely cover Treasury yields - a setup that preceded the 1966-73 and 2000-02 bear markets.
- **Macro divergence:** While valuations scream "expensive," cyclical stress gauges (VIX, junk spreads, margin debt) are only neutral. That mixture often appears late-cycle: investors feel calm even as value is scarce.
- **Yield-curve still warns:** The 3 m-10 y inversion - a recession hit-rate > 80 % within 6-18 months - is the piece most consistent with high valuations eventually normalising via slower growth, not via an earnings boom.
### **Take-aways for investors**
1. **Lower forward return set:** Both Buffett Indicator and CAPE currently map to **1 %-3 % real annual S&P 500 returns** over the next decade, versus the post-1980 average ≈ 6½ %.
2. **Risk skewed "right-tail down, left-tail fatter."** With the ERP at 0 % and yield curve inverted, any earnings stumble or policy shock could trigger a faster-than-normal repricing.
3. **Alternatives look comparatively fair:**
- T-bills & TIPS (real 2.7 % on 30-yr TIPS) offer yields competitive with equity yields ([barrons.com](https://www.barrons.com/articles/time-buy-tips-yields-off-charts-8783456d?utm_source=chatgpt.com)).
- Quality bonds may regain their hedge role if ERP mean-reverts via lower equity prices.
4. **What could invalidate the warning?**
- **Productivity renaissance** (e.g., AI) lifting real earnings far above the CAPE denominator.
- **Sustained disinflation and rate cuts** that expand the "fair" multiple - but ERP would still need to rise.
**Bottom line:
**The *Buffett Indicator* and *Shiller CAPE* are singing in harmony - both at levels that historically precede anaemic 10-year returns and higher draw-down risk. Price-to-sales, price-to-book, and a vanishing equity-risk premium back them up. The main counter-point is a still-calm credit & volatility backdrop, but that calm typically breaks *after* valuations peak, not before.