S&P 500 CAPE ratio hits 41, its highest level since the dot-com bubble

The Shiller CAPE ratio for the S&P 500 has climbed to approximately 41.1, a level not seen since the peak of the dot-com bubble. To put that in perspective, the long-term average for this metric since the 1880s sits around 17. The market is currently trading at more than twice that historical norm.

For those unfamiliar, the CAPE ratio works like a price-to-earnings ratio with a memory. Rather than dividing a stock index’s price by a single year of earnings, it uses the average of ten years of inflation-adjusted earnings. The idea is to smooth out the boom-and-bust swings in corporate profits and reveal what you’re actually paying for a dollar of normalized earnings.

How extreme is a CAPE of 41?

The current reading places the S&P 500 in the top 1% of all historical valuations going back to 1881. That is not hyperbole. Out of roughly 1,700 monthly data points in Robert Shiller’s Yale dataset, only a tiny handful have recorded ratios at or above current levels.

The all-time record was 44.2, set in December 1999, right before the dot-com crash erased trillions in market value over the following two years. The present reading of 41.1 sits uncomfortably close to that watermark.

The CAPE first crossed 40 in January 1999 during the late-1990s tech frenzy. It has now remained above 40 continuously since May 2026, a sustained stretch that has no real precedent outside of that brief dot-com window.

Adding another layer of concern, the Buffett indicator, which compares total US stock market capitalization to GDP, exceeded 237% in September 2026. Readings above 200% are generally considered to reflect significant overvaluation. Warren Buffett himself described a version of this ratio as probably the best single measure of where valuations stand at any given moment.

What history says about buying at these levels

What the CAPE is actually useful for is forecasting long-term returns. And on that front, the historical record is fairly consistent: starting valuations above 30 to 40 have correlated closely with weak equity returns over the following decade.

It’s also worth noting that CAPE skeptics have raised legitimate objections over the years. Changes in accounting standards, the growing share of buybacks versus dividends, and a shift in index composition toward higher-margin technology companies have all been cited as reasons the modern CAPE might naturally run higher than its 19th and 20th century predecessors. Those arguments have merit. They just don’t fully explain away a reading of 41 against a historical average of 17.

What investors are watching now

The sustained elevation above 40 for multiple consecutive months is the part that stands out to market watchers. A brief spike and retreat is one thing. A prolonged plateau at these levels is a different kind of signal, suggesting the market isn’t simply overreacting to a single earnings cycle but is pricing in a structurally optimistic long-term view of corporate profitability.

The CAPE is one data point among many, but a ratio sitting in the 99th percentile of 145 years of data, accompanied by a Buffett indicator above 237%, is the kind of confluence that tends to show up prominently in the rear-view mirror of future market histories.

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