What it is
Taiwan Buffett indicator: what is measured, and why it matters
What it measures
The total market value of shares listed in Taiwan ÷ the last four quarters of GDP (quarterly); compared with its own 10-year average, because the ratio has trended up over the decades.
Why it matters
Taiwan’s stock market size relative to its whole economy: well above normal means share prices have risen much faster than the economy.
Compared with its own 10-year average: the ratio has trended up over the decades.
Where it stands now
Position over time
coldcoolneutralwarmhotHatched = earlier periods that were also hot
Short sample: positions start only in 2006 (less than 30 years), so conclusions should be more cautious.
When it was here before
Earlier hot periods (4), plus the current one
US stocks after it began, cumulative1 yr2 yr3 yr
- Q4 2006–Q1 20086-quarter period, hot throughout1 yr+12.9%2 yr−28.9%3 yr−21.7%
- Q4 20101-quarter period, hot throughout1 yr+3.0%2 yr+22.7%3 yr+46.8%
- Q4 2020–Q1 20226-quarter period, hot throughout1 yr+30.5%2 yr+9.0%3 yr+24.9%
- Q1 2024–Q2 202610-quarter period, hot in 8 of those quarters1 yr+24.2%2 yr+43.9%3 yrnot yet
For each period, the changes 1, 2 and 3 years after it began are cumulative and measured from its first month; “What happened next” is measured from every hot month, so the two give different numbers. The events named beside each period are major events of that time, not necessarily related to the readings here.
What happened next
How US stocks moved after earlier months with Taiwan Buffett indicator hot
Bars: median cumulative changeEarlier quarters with Taiwan Buffett indicator hot, excluding the current period (21)All quarters (79)
Median of the deepest drop below the starting month within the next 5 years: −44.5% for months with Taiwan Buffett indicator hot; −3.4% for all months.
The hot months come from a small number of market episodes (4), and neighboring months are not independent events; rises and falls are all listed. This is the historical record, not a forecast. “US stocks” means the S&P 500 price index compiled by Professor Shiller (monthly average, excluding dividends).
Where Taiwan Buffett indicator went next
| Median position | Back to neutral (40–60) | Still hot or more extreme | |
|---|---|---|---|
| 1 yr later | 63warm | 12% | 35% |
| 3 yr later | 74warm | 8% | 38% |
| 5 yr later | 30cool | 0% | 30% |
Has hot or cold lined up with later returns?
Some link in the past (not a guide to the future)
2006–2021: average yearly change in US stocks over the next 5 years
In this period, the hotter the month, the lower the average over the next 5 years. The months overlap, so there are really only a few market episodes. This is a tendency, not a rule, and not a forecast.
What it is linked to
Links involving Taiwan Buffett indicator
No tested links currently involve this indicator.
Values
Values over time
Data and sources
Where the data come from and how they are calculated
- Source
- Central Bank of the Republic of China (Taiwan) (listed market value) and DGBAS (nominal GDP, last four quarters)
- Frequency
- Quarterly
- Positions start
- Q4 2006 (short sample)
- Method
- Ratio: this month ÷ the 10-year average; position = the percentile of this ratio within its own history
- Unit
- % (listed market value / GDP)
- License
- Open license, with attribution; Full attribution and license: see Data sources and licenses