Veteran investor Jeremy Grantham warned that the U.S. stock market is at its most expensive valuation in history, saying the Buffett Indicator stands at 235% of GDP, a level that rivals or exceeds the dot-com bubble peak.
Market Cap Eclipses Economy
“Based on the value of the stock market compared to GDP, with modifications, this is the most expensive market in American history,” the Boston-based GMO co-founder told CNBC’s “Squawk Box.”
The market-cap-to-GDP ratio, tracked by Longtermtrends.com, shows the total value of the U.S. stock market now exceeds twice the size of the U.S. economy.
Warren Buffett previously warned that when the ratio approaches 200%, as it did in 1999 and part of 2000, “you are playing with fire.”
Although the timing remains uncertain, this is not the first time Grantham has issued a warning. In March 2024, he said the long-term outlook for U.S. stocks looked “as poor as almost any other time in history,” yet markets continued to advance.
A Classic Peak Signal
Grantham flagged Space Exploration Technologies Corp.‘s (NASDAQ:SPCX) roughly $2 trillion valuation at its public-market debut as a sign of extreme market enthusiasm, comparing it to Amazon (NASDAQ:AMZN), which fell 92% after the dot-com bubble before eventually dominating global e-commerce.
“Is it going to have a crash like Amazon? Yes, very likely,” Grantham said, calling the IPO “one of the defining peaks of all time”.
Earlier, Grantham said roughly 90% of SpaceX’s value rests on AI assumptions, calling it an “AI bubble within a bubble.”
Before SpaceX went public, CNBC’s Jim Cramer raised a similar concern, warning that if underwriters released too few shares, demand could push SpaceX’s valuation toward $5 trillion, saying it “would create a bubble unto its own.”
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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