On August 31, the Buffett Indicator (CSI 300 market capitalization/GDP) rose slightly to 93.88%, with increased volatility since May. The equity risk premium (ERP) of the CSI 300 Index, a stock-bond ratio indicator, further rose to 5.57%, a new high since August 19, 2025, continuing its upward trend after breaking through the upper limit of its volatility over the past year. From a longer-term perspective, this indicator remains at the lower end of its five-year fluctuation range, suggesting that the current advantage of the stock market relative to government bond yields has increased, returning to a neutral level.
-------- Note: 1. The Buffett Indicator compares the total market capitalization of the stock market to GDP to determine whether the stock market is currently overvalued. Generally, 70-100% is considered a normal valuation; below this range is considered undervalued, and above is considered overvalued.
2. The risk premium (ERP) of the CSI 300 Index is mainly compared with the returns of the CSI 300 and the yield of government bonds. Statistics from the past 10 years show that this indicator has a clear inverse relationship with the stock index. Every time the stock market is in the bottom area, the risk premium exceeds 6%. That is, when ERP ≥ 6%, the stock market has investment value, while when ERP ≤ 4%, the stock market is often close to or at a stage high, the investment value is low, and there is even a risk of correction.
