Nobel laureate Robert Shiller's valuation metric strips out short-term noise with 10 years of smoothed earnings. When CAPE exceeds 30, history shows the market is skating on thin ice.
Cyclically Adjusted PE Ratio (CAPE). Measures stock market valuation relative to 10-year average earnings. High values indicate overvaluation.
Thresholds: Negative >35 • Warning ≥25 • Positive <25
Today's reading sits at the 98.8th percentile of 1865 months since 1871.
2.9 years • Current: 40.46 • 3-month change: +0.18 (+0.45%) • Source: multpl.com Shiller PE by month
The CAPE ratio divides the S&P 500 price by the average of 10 years of inflation-adjusted earnings. By smoothing earnings across a full business cycle, it avoids the distortions that plague the standard PE ratio during booms and recessions.
Research shows a strong inverse relationship between CAPE levels and subsequent 10-year returns. When CAPE is high, future returns tend to be low — and vice versa. This makes it one of the best tools for setting long-term return expectations.
Historical 10-year average annual return: ~10-12%. Markets at these levels have been springboards for strong bull runs.
Historical 10-year average annual return: ~4-6%. Decent but below the long-term average of 7-10%.
Historical 10-year average annual return: ~0-3%. Often accompanied by significant drawdowns along the way.
The CAPE hit 44.2 in December 1999 — the highest in history — right before the dot-com crash wiped out 78% of the NASDAQ. It reached 27.5 before the 2008 crisis. Extreme CAPE readings don't tell you when the crash will happen, but they tell you the market is priced for perfection with no room for error.
The Shiller PE changes slowly, which is exactly why checking it daily is a waste of your time. One email a week, only when the composite score moved, with the current CAPE reading and the other five indicators alongside it.
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Market cap to GDP — another powerful valuation metric
10Y-2Y Treasury spread — #1 recession predictor since 1950
DXY tracking the strength of the US dollar
M2 money supply growth — liquidity driving asset prices
Inflation-adjusted rates driving borrowing costs
Market sentiment from volatility, credit spreads, momentum and safe-haven demand
Every formula, source series and threshold behind these numbers
Shiller PE data provided for educational purposes only. Not investment advice. Past performance does not guarantee future results.