The U.S. stock market has delivered decent returns in 2026 despite persistent economic uncertainty created by tariffs and, more recently, elevated oil prices tied to the Iran war.
This year, the S&P 500 (SNPINDEX: ^GSPC) has added 8% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) has added 7%
However, the S&P 500 recently flashed a warning last seen during the dot-com era, and it hints at big losses in the stock market over the next three years. Read on to learn more. The S&P 500 flashes a warning seen only once before In 1988, economist Robert Shiller introduced the cyclically adjusted price-to-earnings (CAPE) ratio as means of evaluating entire stock market indexes.
Whereas the traditional price-to-earnings ratio can be distorted by cyclical fluctuations in earnings, the CAPE ratio eliminates that noise by averaging inflation-adjusted earnings from the past decade. The S&P 500 recorded an average CAPE ratio of 40.9 in June, the second straight monthly reading above 40. Not only is that well above the 20-year average of 27.6, but the last two months mark the first time since the dot-com bubble (in the late 1990s and early 2000s) that the S&P 500 recorded a CAPE ratio above 40.