S&P 500 valuation indicator nears dot-com era level at 41

The S&P 500 Shiller CAPE ratio has hit around 41, more than double its long-term average of 17, Hindustan Times reports. The cyclically adjusted price-to-earnings ratio, which compares the index's price with 10 years of inflation-adjusted earnings, has crossed 40 only twice in history, once before the dot-com crash around 2000 and now. The reading signals that US stocks are in historically expensive territory, though the ratio cannot predict the timing of a downturn.

The current bull market has all three major US indexes up by double digits in 2026 and on track for a fourth consecutive year of gains, a streak not seen since before the dot-com bubble burst. Gains have been concentrated in a small group of megacap companies. Analysts cited by Hindustan Times advise investors to focus on quality stocks with durable earnings rather than chasing momentum, as a high CAPE suggests caution but not an imminent crash.

The S&P 500 CAPE has stayed above 24 for much of the past decade, but the current level of 41 places the market in unprecedented territory aside from the dot-com era. The report notes that while valuations alone cannot trigger a correction, they make the market vulnerable if investor confidence wanes. No specific next event or date is mentioned.