Market Correction Ahead: Warren Buffett's Historical Warning for Investors

The Buffett indicator, which measures U.S. market capitalization relative to GDP, has reached an all-time high of 229.7% as of May 2026—far exceeding the 200% threshold that Buffett himself described as 'playing with fire.' Historically, when this ratio exceeded 200% during the tech bubble (162.6%), the S&P 500 subsequently fell 50%. With the indicator now 30 points above Buffett's danger zone, investors should exercise caution despite continued AI-driven market optimism, as a significant market correction poses elevated risk.