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S&P 500 CAPE tops 40 for a third straight month for first time
The cyclically adjusted price-to-earnings ratio reaching above 40 has occurred only once before in over a century, during the dot-com bubble.
Yahoo Finance and The Motley Fool cite the cyclically adjusted price-to-earnings, or CAPE, ratio for the S&P 500, saying it has closed above 40 for three months in a row.
The outlet notes that across more than a century of market history, this exact stretch has happened only once before, during the dot-com bubble, when the S&P 500 later fell nearly 50% from March 2000 to October 2002.
The CAPE ratio is described as a smoothed version of the standard P/E measure, dividing the S&P 500 level by the average of its inflation-adjusted earnings from the prior 10 years.
The story argues that while a high CAPE can signal elevated valuations, the decade-long earnings window is designed to reduce the impact of unusually strong or weak single years, and it draws a comparison to 1999 when investors were more optimistic about technology profitability than it ultimately proved to be.
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