The Shiller CAPE ratio for the S&P 500 reaches levels last seen before the 2000 market crash, signaling elevated valuations.
The S&P 500’s Shiller CAPE ratio, a measure of long-term valuation, has climbed to its highest level since the dot-com bubble of the early 2000s. The ratio, which adjusts for inflation over a 10-year earnings period, currently exceeds its 155-year average of 17 by a significant margin.
Historically, such elevated CAPE ratios have preceded major market downturns, including the 2000 crash. The index has surged nearly 23% over the past year, driven by artificial intelligence enthusiasm, pushing valuations to extremes not seen in decades.
Investors are paying more per dollar of earnings than at almost any point in history, raising concerns about sustainability. The last time valuations reached similar levels, the market experienced a prolonged decline.