Here is a comprehensive summary of the Wikipedia article on the Buffett Indicator:

The Buffett Indicator—also known as the Market Capitalization-to-GDP ratio—is a valuation multiple proposed by investor Warren Buffett in a December 2001 Fortune essay with Carol Loomis, who called it "probably the best single measure of where valuations stand at any given moment." It compares the total value of U.S. equities (via the Wilshire 5000 index) to the country's GDP, and Buffett advised that ratios of 70-80% signal favorable buying opportunities, while approaching 200% means investors are "playing with fire." The indicator set an all-time high by crossing that 200% threshold in February 2021 during the "everything bubble." Its credibility is bolstered by a 2022 academic study showing it explains an average of 83% of ten-year return variation across fourteen developed markets, and it was named one of the "Eight Best Predictors of the Long-Term Market" by the Wall Street Journal in 2018. Theoretically, it works because of the strong long-term correlation between GDP and corporate profit growth, and advocates prefer it over earnings-based ratios since it is immune to share buybacks and "aggressive accounting" distortions. Despite its simplicity and limitations, the indicator remains widely followed by financial media and is also calculated for many international markets.