Buffett’s Favorite Market Gauge Says Stocks Are Cheap Again

​Warren Buffett’s favorite valuation tool is flashing green—and that could mean it’s finally time to buy stocks again.

The so-called Buffett Indicator, which compares the total value of the U.S. stock market (via the Wilshire 5000 Index) to the nation’s gross domestic product, has fallen to 180%—its lowest level since September, even after a powerful rebound off April’s lows​.

Buffett once called this the “single best measure” of stock market valuations. And while 180% is still elevated historically, it’s well below last year’s peak and far from the nosebleed levels seen before the dot-com crash and 2021 bubble.

Analysts say the drop reflects a mix of tariff-driven volatility, interest rate anxiety, and earnings downgrades. But with the S&P 500 still 9% off its February high, some investors are seeing a window of opportunity—especially if Trump steps back from aggressive trade threats.

“This is a crucial signal,” said Adam Sarhan of 50 Park Investments. “If Trump eases up on tariffs, and valuations are this reasonable, people are going to buy, buy, buy.”

Other valuation metrics agree. The S&P 500 now trades at 20.6x forward earnings, down from earlier this year and only modestly above its 10-year average. Still, some critics caution that Buffett’s metric doesn’t factor in high interest rates, which continue to weigh on corporate profits.

But for Buffett fans, all eyes are on this weekend’s Berkshire Hathaway meeting, where investors hope to learn if the Oracle of Omaha has dipped into his record $321 billion cash pile to scoop up bargains.

Bottom line:
​Buffett’s market gauge says stocks are getting cheaper—and if history holds, that’s when the long-term money starts moving in. Don’t be surprised if Buffett’s doing just that.