Bank of America isn't sure one of Warren Buffett's favorite stock market indicators should really make you nervous

1. Market Cap/GDP is like Price/Sales, "with all of its shortcomings and more." BAML adds that neither measure takes structural changes in profit margins into account, which is problematic. In 2014 corporate margins grew to new highs due to lower taxes, lower interest expense, and higher operating margins in tech.
2. Global GDP should be used because it is more closely tied to the S&P 500 than US GDP. This is because S&P companies are generating more and more sales and profits from overseas, not just in the United States.
3. There are too many mix differences between the US equity market and the entire US economy. For example, sectors like technology and energy hold a much stronger weight in the stock market than they do for US GDP. Also, US GDP is more services-oriented, while profits from S&P companies are more goods-oriented.

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