The “Warren Buffett Indicator” is a simple yardstick that compares the total U.S. stock market’s value to the size of the U.S. economy. It’s recently surged above 200%, a level Buffett once warned is like “playing with fire,” signaling stretched valuations versus economic output. What the Indicator isIt’s the ratio of total U.S. stock market capitalization (often proxied by the Wilshire 5000) divided by U.S. GDP, giving a quick read on whether stocks look expensive relative to the economy’s size. How to read it, in plain termsThink of it as a price tag for the whole stock market compared to America’s economic “paycheck;” when the price tag is double the paycheck, expectations are sky-high and disappointments can sting more. Still, crossing 200% is unusual and underscores future returns may be lower if multiples compress or growth cools, echoing Buffett’s long-standing preference for value and margin of safety.