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Two conflicting signals
Investors are fearful right now. At least, that’s what the CNN Fear & Greed Index says. This index measures seven indicators, including market momentum, market volatility, and safe haven demand. It’s currently at 38, which is firmly in the “Fear” range.
Two of the index’s component indicators even reflect “extreme fear.” First, the Stock Price Strength indicator shows the number of stocks trading at 52-week highs versus those at 52-week lows on the New York Stock Exchange (NYSE). There are many more stocks at lows than at highs right now, reflecting extreme fear. Second, the Stock Price Breadth indicator shows a greater of volume falling than rising, another extreme fear warning sign.
However, there are also ample signs of greed in the market. Perhaps the best example is a metric named after Buffett himself — the Buffett indicator. This indicator is the ratio of total stock market capitalization to GDP. Buffett wrote in 2001 that when this ratio approaches 200%, investors are “playing with fire.” It’s now at an all-time high of 237%.
Similarly, the S&P 500 (^GSPC +0.59%) Shiller CAPE (cyclically-adjusted price-to-earnings) ratio is near its second-highest level ever. The last time it was this high was in early 2000, right before the stock market crash that ed the dot-com bubble’s burst.
Another strong sign of greed is margin debt, the amount investors borrow from their brokerages to buy or short-sell stocks. Total margin debt has topped $1.4 trillion for the last four months, according to FINRA, the private self-regulatory organization overseeing U.S. broker-dealers.
What Buffett’s rule says to do
Should investors be fearful or greedy right now? The answer is “both,” according to Buffett’s 13-word rule.
Being fearful means that you shouldn’t chase momentum or buy growth stocks with valuations that can’t be justified. It won’t be hard to find examples of the kinds of stocks that are best avoided.
However, you can be greedy in areas of the market where others are fearful. Check out the stocks that have lower price-to-earnings multiples in a broader market that’s priced at a premium.
Pipeline stocks are one place to start. Enterprise Products Partners LP (EPD -1.82%), for example, has a forward earnings multiple of only 11.9. The company benefits from the increasing demand for U.S. natural gas. It’s also practically a blue chip in the midstream energy industry.
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NYSE: EPD
Enterprise Products Partners
Premium Feature
Moneyball Superscore
73/100
Today’s Change
(-1.82%) $-0.67
Current Price
$36.08
Key Data Points
Market Cap
$78BMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.
Day’s Range
$36.05 – $36.95
52wk Range
$30.01 – $40.16
Volume
3.4M
Avg Vol
3.1M
Gross Margin
12.98%
Dividend Yield
6.11%
Healthcare stocks have also lagged well behind the overall market this year. Bargains can be found in the sector, too, including Bristol Myers Squibb (BMY -0.77%), which trades at only 9.4 times forward earnings.
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NYSE: BMY
Bristol Myers Squibb
Premium Feature
Moneyball Superscore
68/100
Today’s Change
(-0.77%) $-0.46
Current Price
$59.12
Key Data Points
Market Cap
$121BMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.
Day’s Range
$58.74 – $59.79
52wk Range
$42.52 – $68.64
Volume
9.3M
Avg Vol
11.3M
Gross Margin
66.64%
Dividend Yield
4.26%
Simple but complicated
Buffett referred to his investing rule as “simple” when he wrote about it in 2008. And, to some extent, it is. However, it’s also complicated in some ways.
You shouldn’t rush to buy every stock just because the CNN Fear & Greed Index reflects that other investors are fearful. You shouldn’t sell every stock because the Buffett indicator and S&P 500 Shiller CAPE ratio reflect pervasive greed in the market.
In October 2026, as throughout much of the stock market’s history, there’s a mixture of both fear and greed. The trick is to understand how to balance the two extremes. Investors who are cautious yet opportunistic have the best chance of long-term success.
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About the Author
Keith Speights is a contributing Motley Fool healthcare analyst covering publicly traded companies across pharmaceuticals, biotechnology, medical devices, technology, and marijuana. Prior to The Motley Fool, Keith was CEO of Constant Care Technology, a healthcare technology company; vice president of American HealthTech, a healthcare software company; and a director of operations for Blue Cross Blue Shield of Mississippi, a health insurer. He holds a B.S. in Industrial Engineering from Mississippi State University.
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