US stocks have reached a new all-time high, surpassing Warren Buffett’s key warning level of 212% of GDP. However, despite this milestone, the market is experiencing mild selloffs globally, with Goldman Sachs reporting high levels of speculative trading activity.
The US stock market has broken through Buffett’s “Buffett Indicator,” which measures the valuation of the Wilshire 5000 index relative to GDP. This achievement is attributed to the recent surge in the index’s value, reaching a record high on July 23.
Meanwhile, Goldman Sachs has launched a new “Speculative Trading Indicator” that gauges froth in the market by analyzing trade volumes in unprofitable stocks and those with elevated earnings multiples. The indicator currently sits at its highest level since 1998-2001 and 2020-2021, suggesting that the market may be nearing its top.
Despite this, S&P futures were flat premarket, indicating uncertainty about the market’s future direction. Investors are focused on September, October, and December, when they expect the Fed to make a decision on interest rate cuts.
The US Federal Reserve is unlikely to cut interest rates next Friday, according to most speculators in the Fed funds futures market. However, investors are concerned that inflation may rise due to Trump’s tariffs, which could delay a potential rate cut.
Some analysts believe that a provision within the President’s One Big Beautiful Bill could boost GDP growth and deter the Fed from cutting rates further. This provision halves the effective rate of corporate tax and incentivizes capital expenditure by companies.
The market is experiencing volatility due to various factors, including Trump’s trade tensions and economic uncertainty. Investors are taking profits today rather than staying in the market, which may suggest that they anticipate a delay in interest rate cuts.
Source: https://fortune.com/2025/07/25/stock-market-warren-buffett-indicator