The S&P 500 Shiller CAPE ratio has climbed above 40 for only the second time ever, reaching roughly 41.4, a level last seen during the late 1990s dot-com era when it peaked at about 44. The CAPE ratio, which compares the index's current price to its average inflation-adjusted earnings over the past decade, has historically averaged between 16 and 17 over the last 150 years. The current reading means investors are paying about $40 for every $1 of the S&P 500's average inflation-adjusted earnings over the last decade, representing a premium of about 135% compared to the historical average. The article notes that while a CAPE above 40 does not guarantee an imminent crash, it signals that investors are placing unusually high value on future growth, and a painful reset in stock valuations could occur if that growth falls short of expectations.
