Earlier this year, the S&P 500's cyclically adjusted price-to-earnings ratio, better known as the CAPE ratio, reached 41. 4. This might not sound scary all by itself, but consider that in more than 150 years, the CAPE ratio has exceeded 40 only one other time, and that was at the market's 1999 peak before the dot-com bubble burst. Not even in the speculative mania that led to the Great Depression, or during the 2021 IPO bubble, did it reach this level. But it's been over 40 continuously since May. Of course, just because a metric reaches a certain level doesn't mean the market is going to do anything in particular. After all, expensive markets can keep getting more expensive for years.
POLARIS INSIGHTS