The S&P 500’s Shiller P/E Ratio reached 42.84 in early June, leaving it just short of the 44.19 peak recorded in December 1999 before the dot-com bubble burst. Only six readings above 30 exist during a continuous bull market since the early 1870s, and the previous five all ended in disaster for equities. Longer-run data, however, still favours patient investors.
The S&P 500’s Shiller P/E Ratio reached 42.84 as of early June, roughly 146% above its 155-year average. That puts the benchmark’s most-tested valuation gauge within reach of the 44.19 peak it hit in December 1999, in the months leading up to the bursting of the dot-com bubble.
Driving investor euphoria on Wall Street is the AI infrastructure build-out, which has also pushed stock valuations to nearly never-before-seen levels. A wider confluence of catalysts has lifted the indices themselves: better-than-expected corporate earnings, record share repurchase activity by S&P 500 companies in 2025, IPO excitement and buzz around high-profile stock splits. Since early June, the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite have all romped to record highs.
What the CAPE Ratio measures
Valuations resist any one-size-fits-all blueprint, so what one investor finds pricey another may view as a bargain. The Shiller P/E — also known as the Cyclically Adjusted P/E Ratio, or CAPE Ratio — pushes past that subjectivity by using average inflation-adjusted earnings per share over the trailing decade, so short-lived recessions cannot offset its usefulness.
Economists first introduced the measure in the late 1980s, but it has been backtested to January 1871 — roughly 4.5 years after President Andrew Johnson signed a proclamation declaring the U.S. Civil War over in August 1866. Across that span the ratio has averaged approximately 17.4.
The previous five readings above 30 ended badly
There have been only six instances of the CAPE Ratio topping 30 during a continuous bull market stretching back to the early 1870s. Excluding the present case, the previous five all resulted in eventual disaster for equities.
After a brief stint above 30 from August to September 1929, the Great Depression took shape and eventually wiped away 89% of the Dow Jones Industrial Average’s value. During the dot-com bubble, the S&P 500 and Nasdaq Composite shed 49% and 78% of their respective values.
Bull runs have outlasted downturns by 3.6 times
But red arrows and green ones are not mirror images of each other. According to data published on X by Bespoke Investment Group, the average of 27 S&P 500 bear markets since September 1929 lasted only 286 calendar days, or the equivalent of 9.5 months.
The typical bull market has persisted for 1,023 calendar days, roughly 3.6 times longer than the average 20% or greater downturn in the benchmark index. Crestmont Research stretched the analysis further, calculating rolling 20-year total returns with dividends for the S&P 500 from 1900 onward, and all 107 rolling timelines generated a positive annualized total return. Hypothetically — S&P 500-tracking exchange-traded funds did not exist on U.S. exchanges until 1993 — an investor buying an S&P 500 index fund at any point between 1900 and 2006 and holding for 20 years would have generated a positive return 100% of the time.
Source: The Motley Fool
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