We believe in fundamental analysis as the basis of any investment, and made CMV as a resource to track long-term indicators of market valuation. The purpose of this site is not to be a comprehensive trading strategy, or to predict exactly when the next crash will happen, or to guess bull markets through opaque charting techniques. Our goal is to be a quick resource to see major macro-economic indicators, and use them as a guide to understand if we're currently in a 'risk on' or 'risk off' environment.
We strive to be as transparent as possible in data and methodology. Our view is that nothing here is either complex or proprietary. Most data are publicly available from free sources, and always cited. Wherever we make assumptions or deviations about data, we try to call that out in the model, and explain the reasoning for doing so.
We hope you find CMV useful. If you have any comments or feedback, let us know on Twitter, @us_market_value.
CMV tracks several long term macroeconomic indicators, comparing current values to their historical norms. The methodology is explained in each model's individual page, but generally we're looking for the over/undervaluation of the indicator in terms of how many standard deviations the current value is from the historical norm.
Specific statistical claims (e.g., "the Buffett Indicator is 1.4 standard deviations higher than trend") are true insofar as they are calculated as such in our models. These are presented here as long term relative valuation indicators, but are not intended to be scientifically robust. The point here isn't to create statistical models to drive trading algorithms, but rather to demonstrate the approximate current relative value of these fundamental indicators. The ratings are:
Strongly Overvalued This rating corresponds to values greater than 2 standard deviations from the mean, and should statistically occur about 2% of the time.
Overvalued This rating corresponds to values between 1 and 2 standard deviations from the mean, and should statistically occur about 14% of the time.
Fairly Valued This is by far the largest rank, corresponding to values between -1 and 1 standard deviation from the mean. Our models should be ranked as Fairly Valued about 70% of the time. Depending if the value is greater than / less than zero, we may present this a 'slightly over/undervalued'.
Undervalued This rating corresponds to values between -1 and -2 standard deviations from the mean, and should statistically occur about 14% of the time.
Strongly Undervalued This rating corresponds to values less than -2 standard deviations from the mean, and should statistically occur about 2% of the time.
Selected press clippings featuring CMV are below.
- Bloomberg: Warren Buffett’s Favorite Valuation Metric Is Ringing an Alarm
- Yahoo Finance: Warren Buffett's favorite stock market indicator reaches internet bubble extreme
- Forbes: This Isn’t Your Father’s Overvalued Market
Current Market Valuation is meant to be used as an educational resource to help readers understand today's market in a historical perspective. This might be useful context to have when making investment decisions, but this is absolutely not presented as, or intended to be used as a singular investment strategy.
The valuation models that are explored on this site are very long term focused. The trends analyzed and illustrated here play out over years, or even decades. When we say that the market is "overvalued", that is in reference to historical norms only, not a prediction of future results. Even if the market does revert to norms, it may not be for many years. As ever, past performance is not necessarily indicative of future results. For just a few examples, geopolitical changes (war, trade), technological changes (AI, automation), or geographic changes (climate change) could permanently deviate the market from the norms we've seen in the modern era. Even without any such obvious causes, there is no intrinsic guarantee that markets will necessarily correct and return to historical norms. As per the famous maxim: the market can stay irrational longer than you can stay liquid.
Said Another Way...
The information provided on www.currentmarketvaluation.com ("CMV") is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs.
CMV does not make any guarantee or other promise as to any results that may be obtained from using our content. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. To the maximum extent permitted by law, CMV disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.
Content contained on or made available through the website is not intended to and does not constitute legal advice or investment advice and no attorney-client relationship is formed. Your use of the information on the website or materials linked from the Web is at your own risk.