Let’s rewind to last summer. If you’ve been hanging with us at Stocks.News since then (hi, you beautiful degenerate), you might remember we were screaming from the rooftops that Warren Buffett’s favorite indicator was flashing red. Not like a “slow down” kind of red… more like “the hurricane sirens are blaring, your neighbor’s inflatable pool just flew past the window, and the weatherman is setting up a live shot on your front lawn” kind of red.

And you probably rolled your eyes. Because you’ve heard the phrase “the market is overvalued” so many times it barely registers anymore. If you listened to every one of those warnings, you’d be living in a tent, robbing Dollar General for food, while your buddy Chad (who dumped his student loan forgiveness check into NVDA call options) owns a condo in Miami and plays golf every day. I get it. The market’s been “overvalued” longer than most people on TikTok have been alive. But this wasn’t your average Chicken Little alarm. This was Buffett’s red flag… the man who treats cash like a grandmaster holding back his queen… calm, calculating, and saving his power move for when it breaks the board wide open.

The metric in question, known affectionately as the Buffett Indicator, takes the total market cap of U.S. stocks (via the Wilshire 5000) and divides it by U.S. GDP. It’s like a macro-level sanity check: are stocks getting way ahead of economic reality? When that ratio blew past 200% at the end of January, it was a full-blown “you’re playing with fire” situation. And if that phrase sounds familiar, it’s because Buffett literally said it during the dot-com bubble (he was right then too).

Not long after, the market tanked. The S&P 500 dropped nearly 15% from its highs (before it’s recent rally), institutions sold of Magnificent 7 stocks, and Buffett was entirely unbothered, watching his $321 billion cash pile grow while the rest of us panic-refreshed our brokerage apps.

But now, the script just flipped. That same Buffett Indicator has dropped to around 180%, the lowest it’s been since September. That might still be high historically, but in the current chaos (tariffs, GDP woes, and earnings season bringing us back to reality, aside from AI stocks) it’s starting to look downright reasonable.

Now, let’s not kid ourselves. 180% isn’t “cheap” in Buffett’s book. The man once said stocks start looking juicy around 80%. But 180% is a far cry from the Snoop Dogg high 200%+ we saw a few months ago. I like to compare it to the housing market, if you wait for a 2008 level housing crash, you’ll never own a home. So you have to buy stocks eventually (unless you’re all in crypto).

Even the P/E ratios are starting to come back to earth. The S&P 500’s forward P/E is down to 20.6x… still above the 10-year average of 18.6x, but a solid 8% drop from earlier this year. Add in a bounce-back in Big Tech and a momentary pause in Trump’s tariff tirades, and you've got enough runway for this rally to keep going… or at least not spontaneously combust. And in my opinion, this is a great time to deploy some capital (maybe not all of it, but like I said, you do have to buy sometime if you want to retire from your 9-5).

Of course, you’ll hear the usual buzzkills grumble about how the Buffett Indicator doesn’t factor in interest rates or that valuations aren’t great timing tools. And fair enough… even Buffett himself admits he has no clue what the market’s doing over the next year. But this isn’t about calling bottoms like a guru just to brag later on. It’s about probabilities. Patterns. And when one of the GOATs says this metric is the “single best measure” of market valuation (and it goes from screaming sell to whispering buy) you don’t ignore it.

So what now? Now you stay sharp. You look for high-conviction plays. You clean out the portfolio garbage you never really believed in. Maybe you go bargain hunting, maybe you stay defensive… but either way, you stop waiting for perfect clarity that’ll never come. Because guess what? Buffett’s favorite indicator just gave you a green light. He might not be on the roof shouting “BUY STOCKS” at the top of his lungs… but if you know how to read a chart, the message is loud and clear.

Stock.News does not have positions in companies mentioned.