The “Buffett Indicator”, created by Warren Buffett in 2001, measures the size of the US stock market against the size of the economy by comparing the total value of publicly traded companies to the GDP. A ratio above 100% indicates that stocks are overvalued, while a ratio near 200% indicates investors are “playing with fire.” Currently, the indicator is near a two-year high at nearly 190%, signaling a potential market retreat. Some analysts are warning that the market may be in bubble territory, given the surge in stock prices and the anticipation of interest rate cuts by the Federal Reserve.
Market enthusiasm over artificial intelligence stocks, like chipmakers, has contributed to the market surge this year. While some investors are celebrating the market’s rise, others are expressing concerns about a potential speculative bubble. Legendary investor John Hussman and former Treasury Secretary Larry Summers have both voiced worries about the market’s current state. Despite the concerns, the S&P 500 has risen more than 10% since January, surpassing year-end targets set by some analysts. While the Buffett Indicator has its limitations and the market may be frothy, it is not currently in a full-fledged bubble situation, according to some experts.
Visa and Mastercard, along with the banks that issue their cards, have agreed to a $30 billion settlement to lower merchant swipe fees paid by US merchants over the next five years. This settlement is the result of a decades-long antitrust case brought by merchants in 2005. Swipe fees, which can reach as high as 4% for premium rewards cards, will be reduced by at least 0.04 percentage points for a minimum of three years. Approval from the US District Court for the Eastern District of New York is required before the settlement is finalized, and the case may be subject to appeals.
Trump Media & Technology Group, the owner of Truth Social, saw its shares go public for the first time in almost 30 years. Trading began with a surge of 56% at the opening bell, but the frenzy eased by the end of the day, with shares closing at a more modest 16% increase. Despite the high share price, the company is facing financial losses and diminishing user numbers for its social media platform. Some experts believe that the stock price is detached from the company’s fundamentals and may not reflect its true value. The situation with Trump Media is similar to the meme stock phenomenon seen during the Covid-19 pandemic.
