Global Stocks in 'Bubble Territory'

According to the Buffett Indicator, the global stock market has entered a "Bubble territory," says Welt market analyst Holger Zschaepitz on Aug. 9.

In the past month, the Dow Jones Industrial Average rose from 25,706 points to 27,433, by 6.7%.Why stocks are showing hints of a bubble, and how it could affect Bitcoin.

The Buffett Indicator measures the stock market's valuation by dividing its market cap by the United States' GDP. It attempts to find a fair valuation of stocks relative to the U.S. economy.

When the indicator is above 100, it signals that the stock market is heading into bubble territory.

Since April, after the pandemic began, U.S. stocks surged due to favorable market conditions and multi-trillion dollar stimulus.

Specifically, tech stocks substantially outperformed the rest of the stock market, pushing the market upward.

Global markets entered bubble territory for the first time in 2018.

"Global stock mkts have hit another milestone. All stocks now worth more than 100% of global GDP for the 1st time since 2018, pointing to stretched valuations. For Warren Buffett, a Market Cap to GDP Ratio >100% means stocks in bubble territory."

There is no conclusive link between stocks and Bitcoin other than BTC has followed the trend of stocks in the past four months.

If stocks begin to drop as investors seek safety in bonds and treasuries fearing an overvalued market, it could negatively affect Bitcoin.