(Bloomberg) — A key valuation metric touted by legendary investor Warren Buffett is signaling that equities are relatively cheap, bolstering the case that the sizzling rebound in US stocks has room to run.

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The “Buffett Indicator” measures the ratio of the total value of the US stock market via the Wilshire 5000 Index divided by the dollar value of US gross domestic product. It stands at its lowest level since early September — even after a bounce that has sent stocks screaming higher in recent weeks.

The 94-year-old chief executive of Berkshire Hathaway, which will hold its annual meeting in Omaha, Nebraska, this weekend, has said the “single best measure of where valuations stand” was the ratio of the value of US publicly traded companies to the country’s GDP. The indicator blared a warning late last year when it shot to a historic high, echoing similar signals sent during market peaks in 2021 and before the bursting of the dot-com bubble in 2000.

The measure is now at 180%, around where it stood after an unwind of the Japanese yen carry trade sparked a brief but intense selloff last year. That stock-market rout cleared the path for a powerful S&P 500 Index (^GSPC) rally in the closing months of 2024.

“This is a crucial indicator because it helps traders know when to deploy capital and buy stocks,” said Adam Sarhan, founder of 50 Park Investments, who has been piling into Big Tech stocks. “There are reasons to still be concerned about the global trade war, but if Trump isn’t playing hardball with tariffs, people are going to buy, buy, buy with valuations much more reasonably priced now.”

Valuation metrics of all types have taken on added significance this year, as investors try to determine if a tariff-fueled selloff has left stocks cheaper relative to their fundamentals. Those calculations are complicated by the S&P 500’s 12% bounce from its April lows, which has traders wondering whether to bet on momentum carrying the index further — or beef up hedges and place bearish bets on a trip back down. The index is still down nearly 9% from its February record.

In addition to the unpredictable twists of President Donald Trump’s trade war, investors are bracing for several more weeks of earnings season and next week’s Federal Reserve meeting as potential catalysts that could determine the trajectory of stocks.