The Buffett indicator is flashing red, and investors are ‘playing with fire’ worse than 1999. Is it time to sell?

The Buffett Indicator measures the total U.S. stock market capitalization against the country’s GDP — essentially gauging if there’s a potential bubble, akin to the 1999 dot-com bubble (2). Buffett once called the indicator “probably the best single measure of where valuations stand at any given moment (3).”

In a 2001 reflection on the dot-com bust, he offered a simple guide: “If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you. If the ratio approaches 200% — as it did in 1999 and a part of 2000 — you are playing with fire (4).”

Today, the Buffett Indicator stands at a whopping 230%, topping dot-com bubble levels (5).

It may help explain why Buffett’s appetite for U.S. equities has cooled. Berkshire Hathaway has been a net seller of equities since 2024 and, as of September, held a massive $381.7 billion in cash (6). Meanwhile, real GDP increased 4.3% in the third quarter of 2024, according to the Bureau of Economic Analysis — the first such report since the government shutdown in October and November (7).

The blunt reality is that stock market gains have outpaced America’s economic growth by a wide margin. And while Buffett admits the ratio has “certain limitations,” many agree that U.S. stocks look stretched.

If you’re concerned about where markets might head, here are three potential ports in the storm.

A ‘very effective diversifier’ for bad times

The record performance of gold in 2025 is one sign that the wealthy are bracing for a rocky stock market.

Gold and silver have long served as classic hedges against inflation. Unlike fiat currency, precious metals can’t be created at will by central banks. And because their value isn’t tied to any single country, currency, or economy, investors often turn to them during periods of market turbulence and geopolitical uncertainty.

Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, told CNBC earlier this year that people “don’t have, typically, an adequate amount of gold in their portfolio,” adding “When bad times come, gold is a very effective diversifier (8).”

Investing in gold for your retirement fund

A gold IRA is one option for building up your retirement fund with an inflation-hedging asset.

Opening a gold IRA with the help of Goldco allows you to invest in gold and other precious metals in physical forms while also providing the significant tax advantages of an IRA.

With a minimum purchase of $10,000, Goldco offers free shipping and access to a library of retirement resources. Plus, the company will match up to 10% of qualified purchases in free silver.

If you’re curious whether this is the right investment to diversify your portfolio, you can download your free gold and silver information guide today.

Passive income, even in a down market

Like stocks, real estate has its cycles, but it doesn’t rely on a booming market to generate returns.

Even in a downturn, high-quality, essential real estate can continue to produce passive income through rent. In other words, you don’t have to wait for prices to rise to see a payoff — the asset itself can work for you.

In fact, Buffett has often pointed to real estate as a prime example of a productive, income-generating asset. In 2022, he stated that if you offered him “1% of all the apartment houses in the country” for $25 billion, he would “write you a check (9).”

Diversifying with real estate

You can tap into this market by investing in shares of vacation homes or rental properties through Arrived.

Backed by world-class investors, including Jeff Bezos, Arrived allows you to invest in shares of vacation and rental properties, earning a passive income stream without the extra work that comes with being a landlord of your own rental property.

To begin, simply browse through their selection of pre-vetted properties, hand-picked for their potential appreciation and income generation. Once you choose a property, you can start investing with as little as $100, potentially earning quarterly dividends.

Another option is First National Realty Partners (FNRP), which allows accredited investors to diversify their portfolio through grocery-anchored commercial properties without taking on the responsibilities of being a landlord.

With a minimum investment of $50,000, investors can own a share of properties leased by national brands like Whole Foods, Kroger and Walmart, which provide essential goods to their communities.

Thanks to triple net leases, accredited investors can invest in these properties without worrying as much about tenant costs cutting into potential returns. How it works is simple: Tenants pay for a trifecta of property taxes, building insurance, and common area maintenance — plus base rent.

Simply answer a few questions — including how much you would like to invest — to start browsing their full list of available properties.

A finer alternative

It’s easy to see why great works of art tend to appreciate over time. Supply is limited, and many famous pieces have already been snatched up by museums and collectors. Art also has a low correlation with stocks and bonds, which helps with diversification.