The S&P 500’s Shiller P/E ratio reaches near-record highs, surpassing 1929 levels and nearing 1999 peak valuations.
The S&P 500’s cyclically adjusted price-to-earnings (CAPE) ratio has climbed to its second-highest level in history, trailing only the dot-com bubble peak. The metric, which adjusts for inflation over a 10-year period, now exceeds valuations seen during the 1929 crash and sits just below the November 1999 high of 44.19.
Historically, the CAPE ratio plunged to 21 by January 2003 after the dot-com bust. The current reading underscores stretched valuations, though markets can remain elevated for extended periods. Separately, the S&P 500’s dividend yield has fallen to a record low of 1.04%, further signaling rich valuations.
While some analysts warn of potential downside risks, others argue that staying invested may yield further gains despite overvaluation concerns.