Analysis of Market Cap to GDP Warren Buffett, the world’s greatest investor once remarked that Country’s Total Market Capitalization to GDP ratio is a good indicator to measure the ‘temperature’ of the market. My wild guess is - he draws his inspiration from P/E ratio where price correspondes to the Total Market Cap and GDP to Earnings.
Key points By historical standards, the Market Cap to GDP ratios are currently way above the average, 5-year and 10-year averages This may spell some bad news in the near term.