Stock prices are reaching new highs, with the S&P 500 up by nearly 21% in the last year and 41% since April 2025. While this is cause for celebration, some investors are concerned that a market downturn may be on the horizon. One popular metric, the Buffett indicator, is at a record high of 222%.

The Buffett indicator, named after Warren Buffett, measures the ratio between U.S. GDP and stock market capitalization. In the past, it accurately predicted bear markets, like the dot-com bubble burst. Buffett himself warned that high ratios, like the current 222%, could mean trouble for investors. Critics argue that the metric may not be as reliable as it once was.

Investors are urged to review their portfolios and consider selling stocks from unhealthy companies. While no indicator can predict the market’s future, preparing for a potential downturn is essential. Strong companies with long-term growth potential are recommended. It’s crucial to exercise caution and be prepared for market turbulence.

Read more at Yahoo Finance: The S&P 500 Is Surging in 2026, but This Stock Market Indicator Could Be Sending a Warning Signal to Investors