On October 13th, the Buffett Index (CSI 300 market capitalization/GDP) slightly rebounded to 88.11%; the equity risk premium (ERP) of the CSI 300 Index, a stock-bond cost-effectiveness indicator, rose to 5.94%, almost unchanged from the previous day. The current ERP is close to the historical high cost-effectiveness reference line of 6%, still at a relatively high level over the past year, indicating that the valuation advantage of equity assets relative to government bonds has strengthened, but it has not yet entered a range with historically significant allocation value.
-------- Note: 1. The Buffett Index compares the total market capitalization of the stock market with 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 this range 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.
