What Happens When the Shiller PE Goes Above 40?
Once before in 155 years of data since 1871: January 1999 to October 2000, roughly 24 months in total. The Shiller PE is above 40 again today at 40. That episode ended with the ratio back below 40, and with the dot-com crash.
The evidence
| Episode | Months above 40 | Peak |
|---|---|---|
| January 1999 – October 2000 | 21 | 44.19 (December 1999) |
| May 2026 – ongoing | 3 | 40.50 (June 2026) |
The episode around the 44.19 peak of December 1999 preceded one of the deepest bear markets on record; the 2021 episode preceded a sharp correction and a recovery to new highs within about two years. Same threshold, very different damage. Today's reading sits at the 98.8th percentile of 1865 months since 1871. The full series is on the Shiller PE page.
The caveat
Why this answer is not a forecast, and never will be.
1 completed episode across 155 years is an anecdote set, not a distribution. Treating it as a base rate would be false precision, and this page deliberately does not average the outcomes into a single number.
Above 40 has always been a “where” signal, never a “when” signal. The ratio crossed 40 well before the December 1999 peak, and the market kept rising for much of that crossing — selling on the threshold alone meant missing most of the final advance.
The strongest argument against treating any of this as a forecast is on the market analogs page: the historical months that most closely match today’s conditions were followed by both strong and poor S&P 500 returns. Nearly identical setups have preceded opposite outcomes, and any page that tells you otherwise is selling certainty it does not have.
Related reading
More questions, answered live
The current reading against the highest value in the full history of the series.
The date the spread crossed back above zero, and the record of past un-inversions.
Both long-run valuation yardsticks ranked against their entire recorded history.
The last month real rates stood at or above today’s reading, from the full series.
Computed from public data for educational purposes only. Not investment advice. Past patterns do not guarantee future results.