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Stock market valuation tied to CAPE ratio near dot-com levels
The Shiller CAPE ratio stood at 42.2, the highest since the dot-com peak of 44.2 in November 1999, using inflation-adjusted S&P 500 earnings.
Yahoo Finance highlights that the stock market is near a valuation level not seen in more than 26 years, based on the Shiller cyclically adjusted price-to-earnings ratio, or CAPE. The article says the CAPE ratio was 42.2 at the time of writing, the highest level since the dot-com bubble.
The outlet explains that CAPE measures how much investors pay for each dollar of earnings by using S&P 500 company earnings over the prior 10 years, adjusted for inflation. It also aims to reduce the impact of one-off events such as the COVID-19 lockdown, so a higher CAPE generally signals a more expensive market.
Yahoo Finance also reviews the dot-com bubble as a historical reference point. It notes the S&P 500 peaked at 1,527 in March 2000 and then declined about 50% over roughly the next 2.5 years, with many companies failing and investors taking large losses.
The piece adds that while CAPE is not a perfect metric, it is used to provide historical context for current valuations as the ratio approaches dot-com territory. It emphasizes the comparison is not an exact match, but it frames why investors are watching the elevated valuation signal closely.
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