The Market Cap to Gross National Income GNI ratio is the “best single measure of where valuations stand at any given moment” according to Warren Buffett. It compares the total value of the country’s stock market to its annual GDP after adding investment income earned abroad and subtracting investment income paid to foreign investors (that forms Gross National Income or GNI). Like the CAPE Ratio, it can be a predictor of future long-term returns based on a fundamental valuation. When valuations are high, the stock market’s long-term return is likely to be lower.
