CAPE

flloyd

Yes but it's not usually at CAPE all time highs. [https://www.multpl.com/shiller-pe](https://www.multpl.com/shiller-pe)

I_Own_A_Fedora_AMA

CAPE is still way too high for a sustainable bull market. This bubble is temporary.

BatStandard9991

I am losing faith in the government and financial markets daily. The timing of the President's tweet is impeccable. President Trump probably just received the CPI report for tomorrow and probably has information that the FOMC is going to use to make a decision regarding interest rates. The report would have expecations, or information through the end of 2x26. Trump would be more privied to this knowledge than the investing public, for the next few hours. Trump has lost my respect in regards to manipulating financial markets. Trump is obviously attempting to hide the vaste negative effects of the tariffs, which are a tax on consumption paid ultimately by consumers, from the investing public. First it was the attack on the Federal Reserve Governors, then it was the attack on the Bureau of Labor Statics head, where by design, the claim of manipulation is not possible considering how vaste the surveys are in reality. Now it is an attempt to get the SEC to allow publicly traded companies to hide results for longer period of time from the investing public. Does Trump not realize that the 12 member board votes, not just the chairman? If you knew a recession was coming and potentially a depression, then would you boldly hold on to your portfolio? No, you would start letting go of stocks and heading towards safer investments. If Trump gets his way, then the only safe investment will be gold. The government has demanded the publics gold supply before, dont think they will not do it again, so dont think they will not force you back into a fiat currency. The stock indexes are hanging on valuation never seen before a prior with the expection of the months before the [dot.com](http://dot.com) price bubble and crash, >38 CAPE Shiller Ratio. Inflation is moving higher, unemployment rates are moving higher, many key industries are indicating economic contraction. Many big companies in the service industry missed earnings, McDonalds, Starbucks, Chipotle, etc. The normal consumer is struggling, now you hear CEOs talk about the 2 Tier economy, those who make under and above 100K. I am going to assume that households earning under 100K are already in a recessionary environment. Yet, the trade deal with China is not finalized, in fact, none of them are so long as Trump can unilaterally decide to add tariffs to anything. Trump influenced me to vote for him because I am against killing innocent babies and paying for it with tax dollars. Trump also influnced me to to vote because of illegal immigration, millions of illegals cannot just be here committing crimes and market saturating certain work markets. I am all for immigration, but it must be done legally and we must have the right to say no. I can now officially say that I am becoming sorry for voting for Trump. I am worried about America, my future, my investments and our political governance. I am becoing disgusted for Trump, his authoritarian rule, the, one party politics, non-Constitutional governance, catering to elite tech CEOs, manipulating fincial markets, attempt to obfiscate economic reality. I think many people are starting the feel the way I do also. Maybe it is time to start considering a dual citizenship plan.

Cut_Copies

CAPE approaching dotcom levels 👍

ItsAConspiracy

Plenty of portfolios will have reasonable returns without excessive downside in crashes. Split your assets between domestic and foreign stock, domestic and foreign government bonds including both long-term and short-term, and gold, and you're pretty much untouchable no matter what happens. Sounds like you're pretty far along this path already. You can play around with it on portfoliocharts, which will show you worst-case scenarios from the past fifty years in various countries. I don't know why people believe the history that tells them stocks have been great over the past century, and also don't trust the same history telling them that stocks kinda suck when CAPE ratios are this high.

BatStandard9991

https://preview.redd.it/e4rymtsr6sof1.png?width=2560&format=png&auto=webp&s=e69153728dd9ce9407597038054b0d82a76b7eec The S&p 500 is overvalued in general. Perhaps all prior technical and fundamental analysis is defunct and the market will simply continue to live on hopium and in denial of its addiction to hopium and in denial of reality. In reality, there has alway been a reversion to mean. Inflation, unemployment, national and international policies, a potential WWIII, unresolved trade wars, challenged independence of the Federal Reserve and Bureau of Labor Statistics, unsastainable budget deficits, government transferance through tariffs from the public to the government, etc., slowing tourism nationally to the US and from international visits, political upheaval, etc. The value of gold alone right now indicates international crisis. The list of real reason why anyone should be concerned about investing in stocks, which are really just unsecured publicly traded debt is growing. Please remember that it is possible for a 20% drop to occur in this market in just one trading day. Yes, the circuit breakers would kick in at 5% before open and then at 7%, 13% and finally 20% and trading would stop momentarily in hopes of abeting fear bas The likelihood of the market continuing to go higher and higher is possible but becoming impractical even from a bull-standpoint. The only time the CAPE was higher was in the months preceeding the [dot.com](http://dot.com) crash. Remember the traders in the [dot.com](http://dot.com) crash did not have a precedent, it was unprecedented at that time. Today, we have precedent, the [dot.com](http://dot.com) bubble and crash itself. To reach the CAPE level before the [dot.com](http://dot.com) crash, the index would need to about another year of time based upon the average yearly growth while in the channel. If I had only 2 choices, to bet it all on going higher or all on going lower in the next year to 2 years, I would bet it all on going lower. Many key indicators of a ensuing economic downturn and recession have happend, yet the market plows higher because of anticipation of autonomous intelligence investments and expected success at mega-tech companies. The real economic problems of the economic stemming from income inequality are not going to be solved by building trillions of dollars of data centers and nuclear power plants and water plants. Technology has always become obsolete, which is why almost every major tech company is chasing AI, because they could become obsolete as well. Why would anyone think a million dollar GPU from Nvidia cannot also become obsolete? Imagine 3 years from now when $3 Trillion dollars of GPUs and $4 Trillion dollars of bricks and mortar data warehouse and utilities become unecessary becasue of the advancements in AI. The Great Recession of 2006-2008 happened in part because of a major systematic devaluation of real-property, houses and the related mortgage backed securities of around $1-2 Trillion dollars. A home has intrinsic value as shelter for someone. What intrinsic value do uneeded GPUs and utility plants have? If (AI) autonomous intelligence advances, the first goal will be to simplify the compute and lower the operations costs. Do you think Open AI or any other major AI players is interested in operating at a loss just to purchase GPUs and pay utilities. Who is going to pay to sustain this operating loss? The most valuable IPO ever is operating at a loss, think about that for a moment. I believe in a future with AI, but as with every single other major advancement in the industrial revolution, the hype and hope is getting ahead of the reality. I drive a Tesla, it cannot do a 3 point turn in full-self driving. I am supposed to believe that after +10 years of failed promises that Tesla will magically develope advancements to make FSD do even the most simple task. Further, that the same program will empower robots to do human tasks and that those robots will be invited into every country and at every level of responibility and in every persons private life ... Um, you might not want to have your last dollar riding on that becoming a reality in the near to short term future. Be prepared for the real reversion to the mean and stocks eventually falling by 50-60%. Maybe the index trades to 7000+, but eventually it will fall back to at least 5300 to 3500 and that would simply be a reversion to the mean. It could literally happen in 2 day trading days, which is why you see volume on far out of the money index puts that are intrinsically worthless being purchased because if it really does ever happen, then someone is holding lottery tickets. Im not suggesting wasting investment funds chasing the mother of all crashes by purchasing far out of the money index puts, but as an investor you should be aware of the reality of it being possible, how and why it can happen, and how no one really knows the whens, wheres and whys of how it will. The market is literally cultivating traders to buy the dip and one day the dip is not going back to being the rip.

Happy_Discussion_536

CAPE is retarded when interest rates were far, far higher in the past.

D74248

It is not just P/E. Price/Book value is 5.47, which is higher than before the dotcom bubble bust. Price/sales is at 3.29, also insanely high. CAPE is at 39.12. Median CAPE is 16.05. The only time it has been higher was just before the dotcom bubble burst. And that data goes back to 1870. I don't know the future. But there are a lot of people around here who would do well to cut back on the YouTube financial channels and read some books instead.

flloyd

>Every analysis shows that this has a lower expected return than a lump sum investment If one had a thousand lives to live then lump sum would always make sense. But as lump sum loses \~30% of the time, it sucks when it happens to you. Also, every analysis shows that when the CAPE is as high as it is now, the 10 year return is terrible if not negative.

Aggravating_Can_8749

:) my worry goes like this. I am not an expert but based on my limited knowledge here it goes We can see prices for everything that seems to be going up. I can see it when I shop at Walmart. PPI goes up, followed by CPI. We see that trickle up already. The labor market seems to be in a freeze. Layoffs slowly trickling up. New grass hiring almost in deep freezer. Now if the Fed cuts rate to help with unemployment in the context of rising inflation, won't we get into further inflation (increasing money supply?). With inflation, demand drops. The offsetting good news is weaker dollars which makes foreign earnings looks good in the US. Given this backdrop, I wonder if one set of bad news cause a 5-10-15% correction. The CAPE feels pretty nuts anyways PPI - Producer Price Index News Release summary - 2025 M07 Results https://share.google/Hxj5kWdKPKasw36bC CPI - CPI Home : U.S. Bureau of Labor Statistics https://share.google/CsDWxkCEbDyfrReID Labor - https://www.newsweek.com/something-not-right-american-jobs-market-2124667

TenshiS

Actually a lot of them. I can't post an image here but the average percentile of valuations (P/E ratios, CAPE, P/B, P/S, EV/EBITDA, Q ratio, market cap to GDP) points to historically extreme valuation.

skilliard7

For the SP500 to trade at historical CAPE averages, it would need to drop 50%.

TheInkDon1

Well said, sir, and I bow to your experience and knowledge. I really mean that, not being snarky. I'm 62 myself, and have only come late to options (4 years now), but invested with MFs since the late 90's, and then ETFs when they came along. The snipe you quoted was needless, and I apologize for it. But now I need to ask the question everyone hates to hear: what kinds of returns? I'll lead by saying that I don't have anything consistent from "trading" to speak of. But you're beating the market, surely. By how many percentage points on average, do you have a feel for that? I only ask because we may be talking apples and oranges a bit. And pretty definitely I think talking different philosophies, but maybe I'm wrong about that. I'll expose my ignorance by admitting that I don't even know what the CAPE index is. But if you do, and it informs your trading, and the Greeks help you make successful trades, then I truly admire that. I really do. I like numbers, as anyone could tell from all my posts, but I don't think I like 'numbers' like that. I'm a brute-force kind of guy, and an unabashed momentum chaser. And to capture momentum you have to be long. Maybe not *unhedged* long, but net long. So I look around and say, "*That's* been going up for a while, let me buy some of it." And that used to be single stocks or basket-of-stocks ETFs. Nowadays it's long Calls mostly on ETFs as stock substitutes. I monitor daily because I like playing in the markets (to be clear, that's mostly evenings when the market is closed). I'm not day-trading, but if something I've bought is down a month later, it gets sold and a new, better thing takes its place. That's all: just performance-chasing, but it works. Now, doing that with LEAPS Calls during the COVID drop would've probably roasted me. I'd have been fine if I held through, but I'm not sure I would've had the stomach for it. So I'm intrigued: you said it was a hiccup. Is that because your portfolio balance didn't take much of a hit at all, or that you held through and came out okay on the other side? Thanks.

Krammsy

"If you’re young and/or still chasing “Reverse Jade Iron Lizards to capture the risk variance of vol contraction,” remember this post for a few years from now." I'm well over 50, trading 17 years and would never buy an unhedged single directional option, LEAP or otherwise, especially not with the CAPE index where it is. The quoted sentence looks a lot like an excuse to avoid learning Greeks, specifically how to capitalize & manipulate Theta, Vega & Gamma to your advantage. I mean no insult, at least no more than you did with the quoted sentence, but I traded through '08, I remember the tech bubble and the 2002-03 double dip, the selling went on relentlessly for months,, years - newer traders have never seen markets like that, 2020 was a light belch. There are ways to mitigate losses and even trade profitably through periods like those, but it involves incorporating Greeks with fancy-sounding names and juvenile strategies that only kids like me use.

redditissocoolyoyo

Here are several of those claims that are provably false or overstated based on the latest official data: “Inflation is steadily rising.” Headline CPI was 2.7% YoY in July 2025, unchanged from June (core 3.1%). That’s not a steady rise. “Total employment numbers are falling / job creation dead in the water.” Total nonfarm payrolls rose to 159.5M in July and were +73,000 on the month (sluggish, but positive). “GDP growth is slowing to a crawl and may be heading negative.” After a –0.5% dip in Q1, real GDP rebounded to +3.3% (annual rate) in Q2 2025. That’s not near-zero or negative. “Food costs are rising much faster than inflation.” Food prices were +2.9% YoY in July vs +2.7% overall; groceries (“food at home”) were +2.2%—only slightly above or even below headline, not “much faster.” “Total market P/E … has never in the past been this high without causing a recession.” The S&P 500 forward P/E is ~22.4, elevated but not unprecedented; Shiller CAPE is ~39, below the 2000 peak (~44)—so “never” isn’t accurate. Nuance on others you mentioned: Unemployment rate “slowly rising.” It was 4.2% in July; hiring has cooled, but unemployment remains historically low. Credit-card delinquencies “at a 10-year high.” Serious delinquencies have been climbing and are around post-2011 highs per Fed monitoring, but the exact superlative depends on the series used. (Direction: up.)

VeryStableGenius

Buffet indicator is is at ATH, CAPE at 2nd highest after 1999. In 2000, the market collapsed because most dotcoms were losing money. The internet ended up being yuge, but not as Yuge and fast as the 1999 dotcom bubble made them out to be. Today, most AI companies not making money. AI is cool, but not a profit maker. I read that datacenter depreciation ($40B) is far bigger than AI revenues ($20B). We *could* be heading into a another 2000 situation. It took a long time to recover from 2000 in real dollars, because the 2008 crash kicked the legs out from under the market as it was coming back. Maybe TSLA will be the new Yahoo, which went to $500 in Jan 2000, to $8 by Sep 2021. Then again, maybe not. Or maybe in 5 years.

Bubbly_Marketing7062

I'm holding off until a correction of at least 10%. CAPE, Buffett ratio, ... they all suggest it's coming

MetricT

My personal valuation model combines Shiller CAPE, the modified Buffett indicator, Tobin's Q, Aggregate Investor Allocation to Equities, and detrended log (Real S&P 500). https://i.imgur.com/1vlwBqz.png All five show valuations 2+ standard deviations above the mean, which is the definition of bubble. That doesn't convey timing of course. You have to look elsewhere for that (yield curves, Sahm rule, etc.) The yield curve normalizing is an interesting one. It happened in late 2019. There were no signs of a recession, but I invested in gold anyway. Then COVID happened and I made 40%. Time will tell whether that was luck or not. I suspect yield curve inversions mean that the economy is out-of-equilibrium in some sense, and much more susceptible to shocks that it could otherwise shrug off at other times. Unfortunately there are a lot of potential shocks in the near future.

tragicdiffidence12

Problem is that you would have been expecting weakness since 2014 if that was your metric - the CAPE ratio was well above its historical average since then. Admittedly, the difference is that now it’s in spitting distance of the 2000 bubble but then how low does it get after that? Could it end up being a small blip?

KopOut

I will just keep posting about the CAPE ratio. If you don’t know what it is, google it. Here is the CAPE chart for the S&P 500: https://www.multpl.com/shiller-pe I continue to believe that this time will not, in fact, be different.

flobbley

The low, middle, high IQ meme with the low and high IQ people saying the market goes up over time and the middle IQ guy yelling about PE ratios and CAPE, valuations, market concentration, etc

maha420

percent apparently. But it's also P/S, P/B, Training and Forward P/E, Market Cap/GDP, CAPE, Q ratio.... (I don't know what these are anymore)

Soundadvicefroma

Every time CAPE has been at these levels since 1928, the subsequent 10-yr real return from stocks has been negative. Look it up and educate yourself.

KopOut

If you would like to see a chart of all the other times it was different, here is a handy summary: https://www.multpl.com/shiller-pe The only question is when that huge CAPE ratio spike comes back to normal. And it will. And everyone in these comments will suddenly care a lot about valuation.

BatStandard9991

You can flip your primary house once every 2 years and pocket up to $500k without paying taxes, which I would try and do again if possible. The tax free benefit is unbeatable. To equal that same benefit you would have to achieve a significant % gain pre-tax. To achieve that % gain is going to require risk taking and risking your investment. Yes the market can continue powering higher, rest assured a reckoning day of historic concern is right around the corner. So if you invest now, you would be forced to be a market timer either way at this point. Of course you could just hold at a loss for 10 years until the Nasdaq inches its way out of lost decade and not time the market to sale early in the crash. If you purchase index funds on this coming Monday, then on Wednesday afternoon Nvidia reports and fails to carry the torch, then swoosh, back down we go. Nvidia is currently 7% of the S@P500 market cap, every 7% drop in Nvida moves the whole index 1%. My guess is that macro economic data is what is going to bring about the eventually correction in stock values and maybe eventually bear market. Why not wait until some of the storm clouds pass: CPI data fully reflecting inflation (September-whenever the President finally does a China "Deal", Employment Data, President challenging Federal Reserve independence. The President has probably become aware that his policies are going to cause a more serious ecnomic contraction than was originally thought, which is why he is attempting to upend the BLS and FR, to potentially prevent the data indicating economic problems from being known to the general public. I understand if you dont listen to me, but sure as hell listen to Sam Altman tell you that AI investing is becoming a bubble. If anyone does not listen to him, then who would you listen too. Sam gained my immense respect for admitting the truth, even when Open AI has to go public and value. Sam is already increbibly wealthy and I would wager he is not necessarily in it for money, because he already has a fortune. In my humble opinion the market is incredibly overvalued. The only time the CAPE regisetered higher was from October 98 through January 01, before, durign and after the [dot.com](http://dot.com) bubble burst. The general invesment consensus is that super profitable tech companies can weather the ecnonomic conditions and continue a mutl-trillion dollar build out of vaste data centers replete with hundreds of thousands of Nvidia products costing a million plus each. Hence the ever advancing worlds 1st $4 Trillion dollar company. To run software programs that are eventually supposed to be able to achieve autonomy and think on their own. If that ever happens, then the vaste data centers will probably not be needed because the software will figure out a better way to do the compute. The trillions of dollars of wasting worthless equipment, funded with debt from everysource, sounds like the biggest potential financial crisis ever Congress will try ride to the rescue and make taxpayers bailout big tech, just like they did the banking system in the Great Recession. Meanwhile every job in this world will be threatened with robotics and AI. Purchasers of American treasuries are not going to bail us out for 1.5% per annum, if that happens. Personally, I would hold my profits dear and just wait. You know who else is waiting, Warren Buffet's Berkshire Hathaway. He isnt pounding a desk talking about how he missed the 4th industrial revolution. Many do not know that Berkshire Hathaways market beating success is almost entirely because of what people call market timing. It is true that market timing works against most investors who try to use it, but using it wisely is the only way to actually beat market returns, buy low sell high. At least wait for the pullback. Maybe consider buying some deep out of the money puts on the index you would like to invest in for 6 months to 2 years from now. If the price drops to that level, you would have cheap insurance, perhaps like 3-5%, that allows you to hold risk free, you have the right to sale at that price. Even better, if you get in below the put price, then you are guaranteed a gain.

KopOut

Do you want the real answer? Because a huge portion of the market is extremely overvalued. The CAPE ratio of the S&P500 is at 39. The median in its history is 16, the mean is 17. The only other time it’s been above this was the run up to the dot com bubble bursting in 2000. It’s not gonna drop like a lead balloon, but people are kidding themselves if they think these valuations are sustainable long term.

RustySpoonyBard

The CAPE ratio still has 10% or so to go before we breach all time highs.  Because of a chat bot that gets the bulk of its information off reddit users.

synexo

* Shiller P/E (CAPE) is at the highest level in 20 years, surpassed only by dot-com. * Buffet Indicator (Total Market/GDP) is at highest level recorded. * SPX Price-to-book ratio is at the highest level recorded. * Yield curve inverted \~ 1 year ago. From a historical perspective, stocks are extremely expensive right now and the market is primed for a significant correction. Anything can happen though. US equities might double over the next 5 years before even a 10% drop, or we could see a 30%+ crash before the end of the year.

skilliard7

Buffett indicator is flawed because it does not account for the increasing profitability of US companies. More of US economic activity is going to profits, rather than costs like labor/materials. CAPE ratios are a better metric, but those also show extreme overvaluation.

PresenceOk1371

Just to add to this, the Schiller CAPE ratio was also developed prior to widespread globalization and international companies. Nowadays companies have far more reach and international revenue than was ever anticipated.

on-adderall

CAPE ratio isn't very useful IMO. Better to look at forward P/E: [https://product.datastream.com/dscharting/gateway.aspx?guid=f7edb71b-b15d-469d-90fb-413284ed10c8&action=REFRESH](https://product.datastream.com/dscharting/gateway.aspx?guid=f7edb71b-b15d-469d-90fb-413284ed10c8&action=REFRESH) Yeah we're at historically high levels.

Qluot

When the Schiller CAPE Ratio was developed, the amount of passive investing was nowhere near the amount today. Valuation multiples that were once considered unsustainable are now much more tolerable due to the net addition of capital flowing in. Another thing to consider is fact that share buybacks were illegal back then, and is now commonly used by many corporations. Yes, a high CAPE ratio definitely shouldn’t be ignored, but it’s horrible at timing corrections, just like trying to use economic recessions. All it can do is suggest lower expected returns relative to the immediate past.

skilliard7

Historically, if you increased allocation to bonds when the 10 year treasury yields more than the CAPE yield of the market, and increase allocation to equities when CAPE yields are above the 10 yr yield, you massively outperform the market.

m0nsieurp

I read a ton of finance related news and comments on LinkedIn from financial professionals. A lot of them refuse to see the crazy valuations for what they truly are (a bubble). https://imgur.com/a/rhznfY2 Schiller P/E? CAPE? Outdated. Throw away the fkin barometer. Everything's fine. This time is different. Hint: it never is and there's always a reversion to the mean. This market is irrational and I can't wait to short it.

D74248

To be clear, I do not in any way think that these emotionally driven moves by retail investors to be all in or all out of the market are sound. But at the same time, to ignore the incredibly high valuations in the United States market and quote dogma from the *Church of VOO and Chill is equally stupid*. S&P 500 CAPE is close to 39, Price to Sales it at an historic high, as is Price to Book. The real investing questions should be about asset allocation.

ButtStuffingt0n

Redditor: [snarky ass dismissal] Walmart: trading at 38x forward PE; 0-2% profit growth per year. Costco: trading at 48x forward PE; 1-3% profit growth per year. Schiller CAPE: 38x, 42.5% over is 40 year historical average. Buffett indicator: 200-212% of GDP US equity risk premium: near zero or negative, a level that preceded the crashes of 1987, 2001, and 2022. Averaged 8.4% between 1926-2002.

EnginrA

Schiller price earnings ratio (also known as CAPE) is the third highest it’s been since 1871, the other highs were December 1999 (the dotcom bubble) and January 2022 (before that year’s bear market) Do with this what you will

skilliard7

Buffett indicator is flawed because it doesn't take into account profitability. Companies have better margins than the past. A better indictor is comparing the CAPE yield * 1.25 to 10 year treasury yield. This benchmarks if bonds are returning more in interest than companies generate in earnings, but smooths out cyclical factors.

KopOut

The rate cuts that have been expected for many months now? I'm sorry, but our business press is literally just making things up to attempt to justify these moves when what it actually feels like is euphoria and a bubble. Margin balances now top $1 trillion. The CAPE ratio of the S&P 500 stands at about 40. Core inflation just ticked higher through July with new higher tariffs just taking effect a few days ago. Jobs numbers over last three months look terrible. Credit card debt at all time high. Auto debt at all time high. Deficits at all time high. National debt at all time high. It is completely understandable why so many people don't understand why the market is up. Anyone telling you they know why is just grasping for justifications. A september rate cut has been predicted and expected since the beginning of the year...

dicksy_cup

I addressed that with my comment on CAPE ratio.

KopOut

Not sure if you know about it, but I like this link for CAPE and other valuation histories of the S&P500. It’s pretty eye opening: https://www.multpl.com/shiller-pe

throwaway3113151

CAPE is what I've been looking at as well. I've got a long enough horizon that I'm not 50/50 (far more equities) but when the boomers in my life start talking about NVIDIA stock I know something is going to go wrong soon. That said, I could see this go on for another year or two.

KopOut

The valuations of most stocks right now are not sustainable long term. There is no way future growth will justify the CAPE ratio of the S&P500 right now. “AI” is part of that. That is the overall view in my opinion. However, AI should help with productivity for some white collar workers and make search better etc. but it will also cost a lot of white collar workers their jobs. That technically is good for the bottom line, however it is not necessarily good for the top line (because underemployed populations buy less). So, I wonder if those two forces will blunt the effect some people are expecting. I am 50/50 fixed income and equities right now and expect a big correction in the next 12-24 months, but if I’m wrong I’m willing to lose out on some gains for the reduced risk.

dicksy_cup

The market isn’t totally irrational right now. CAPE is high, but not historically crazy and 82% of companies in the S&P500 just beat earnings projections in Q2. The market seems to be remaining strong despite obvious additional friction (tariffs/uncertainty).

TwoShedsJackson1

> what with CAPE at 38 and all Thankyou. I couldn't remember the signal which was written about here recently. I am retired and careful because I need to support my wife and also help our adult children to buy homes in the near future.

D74248

Sheraton hotel breakfast buffet, Delhi India. All Americans on a trip for work. Fellow worker bee was excited about the market, and did we know about this thing called "margin"? And angry that "people" had not told him that he could make so much money. He lost his marriage, his house and the last that I saw him in 2020 he clearly had no idea how he was going to retire. I am no doubt a bit negative around here, what with CAPE at 38 and all; but I did retire early and on my terms. Be careful out there.

Portmantrellis

Since 2000, the world economy has grown from US$33.5 trillion to about US$80 trillion, but to achieve that growth, the total debt has grown to over US$247 trillion as of the third quarter of 2018. What happens to bond markets with the exponential increase of that debt? All politically feasible roads appear to lead to long term currency debasement and structurally higher inflation, perhaps worse. And this is while the S&P 500 is near its all time high CAPE, eclipsed only by the dotcom bubble and a president causing uncertainty every week of his term. I cannot bring myself to remove gold from my portfolio.

D74248

CAPE is over 38. That is *not* the default state.

SaltJaded8769

The issue is that all macro indicators, such as CAPE, are at levels typically seen before a large market correction. The earnings, although above expectations, are still nowhere near justification for the current prices. We last saw this single market subset (mega-tech) drive up like this in 1999/2000 based on the same arguments (expectation of high future earnings based on new technology). We then come to know that the US economy isn't strong, is going to have strong inflationary pressures and reduced demand. Add in politically uncertainty (i.e. might trade deals change or trade wars break out), and it's a market almost perfectly structured for a correction. The ETFs are at record highs, which will multiply out losses faster than any time in history, and markets are highly leveraged meaning margin calls will drive behaviour even if purple want to re-invest or hold. The question seems to be not "if" there will be a correction, but how big it will be. Will it be 20% as the big name economists say? 10% as the positive analysis suggest, or will it be historic - a crash of up to 80%, the level of drop last seen with the near exact macro indicators and market structure? Or maybe we live in a magic land of plenty, with lollypops and rainbows where earnings will rise to meet prices even though there is a global US led trade war, even though tourism to USA is declining, even though new taxes are impacting the US economy by hundreds of billions of dollars, and even though jobs are being lost on mass, new jobs are down, and a segment of productive workers in America are being removed from the country.  It's not impossible but no realistic analyst thinks it's true.

skilliard7

On a CAPE ratio basis, we are closer to 1999.

VotedOut

4. Major Overvaluation. CAPE Ratio, Buffett Indicator, and Mean Reversion of the S&P 500 are all two standard deviations above the historical trend.

InjuryEmbarrassed532

I would recommend you look up the non existing predictive value of CAPE Shiller, the change in accounting/tax rules since the invention of CAPE Shiller and the overall shifts in the structure of indexes. Hopefully no one here actually tries to time the marked based on this indicator.

Aggressive-Donkey-10

but bounced back fully in like 30 minutes when Jay Powel said he would bail out everyone and everything on 3/23/20 7/2007 till 3/9/2009 was a shit show 3/4/200 till 10/2002 was even worse, with QQQ down 83% 2020 was a blip and 2022 market down only 18% on the year, 4/2025 bounced back in the same day it was crashing due to TACO boy CAPE Shiller PE at insane levels so we will crash or we will slide down over 10 years slowly, but we need a 50% drop to get to reasonable valuations.

D74248

> is that $1 million that you need to have invested, invested at all times... It is important to understand that "investing" covers a lot of ground. Money can be invested in stocks, bonds, real-estate.... and cash. Another important point is that "cash" in investing terms does not mean piles of dollar bills on the kitchen table; in means short term, liquid investments such as treasury bills. >I’d be extremely nervous right now. You should not be nervous, but you should be prepared. CAPE is at 38.96 [Here]( https://www.multpl.com/shiller-pe). The risk that you need to be prepared for is ["Sequence of Returns Risk"](https://www.schwab.com/learn/story/timing-matters-understanding-sequence-returns-risk). There are ways to mitigate this risk, such as using a [bond tent](https://smartasset.com/investing/bond-tent). William Sharpe, who is a lot more qualified than anyone posting here, called living off a portfolio "....the nastiest, hardest problem in finance.". Books and PhD theses have been written on this subject. With regard to the actual 4% rule, I suggest looking at the Trinity Study. If you are close to retirement Wade Pfau, another person more qualified than anyone posting here, has written a number of books on the subject. And also Michael H. McClung's [Opus](https://livingoffyourmoney.com/) Be wary of simplistic, dogmatic answers to your questions. Probably best to ignore them.

skilliard7

> What I’m asking is why you think that 2.3% applies to you personally. It doesn’t, the inflation you experience is unique to you. I don’t need to hedge against some macroeconomic metric just because a product is offered for that purpose. The inflation I experience will likely be correlated to general inflation, though. Whereas a 30 year fixed US treasury can be inflated away by money printing, 30 year TIPS cannot. >Investors fall into the same trap when looking at hedging against inflation. They understand the threat and want to address it, it’s an emotional decision not a logical one. For me, it's not just about insurance. It's about maximizing returns over the long term. When you consider high CAPE ratios on US stocks, austerity measures, high bond yields, and the trade war, I strongly believe that 30 year TIPS will outperform most asset classes over the long term.

D74248

This is not really a surprise. People on this sub love to talk about average market returns, while ignoring that the history for 10- and 15-year market returns starting with CAPE over 30 is bleak. CAPE is currently over 38.

plainsdriffter

Many fewer companies to invest in now vs 10-20 yrs ago and too much money chasing them. Throw out all historical valuation metrics of PE, CAPE ratios, etc (at your own peril). This too shall pass...

Happy_Discussion_536

They think they're fucking Magellan the explorer finding the first path to south America or some shit. CAPE PE!!!

InnerCircleTI

I actually don't disagree that this is a GREAT time to be pulling on the reins. I never recommend all-in or all-out approaches in response to bull and bear markets, even when extended ... but I've been making sure I'm very happy with my diversification and weights. I've trimmed the top holdings in my primary portfolio consisting of overweight positions of $AMZN $NVDA $AVGO and $TSM. I also took off the long term position of $XYZ. I'm over 12% cash now with other positions I can liquidate. The Shiller (CAPE) P/E is dangerously close to being the second highest recorded on record, only after the dotcom bubble and burst. Add in an incredible rally off the April lows, price P/E valuations and the looming Trump 8/1 deadline, yet again ... and there are negative catalysts lining up. Of course, we also have lower rates coming, earnings have been great, etc. I'm not all out here, but I'm mindfully trimming.

D74248

> There’s plenty of data that supports it. There is also plenty of data that shows 10 year returns when CAPE is over 30 have been below 5%.

broooooskii

CAPE looks even worse right? "**Current CAPE Ratio:** As of July 2025, the S&P 500 Shiller CAPE ratio is approximately 37.7–38.1, among the highest levels in history. * **Historical Context:** The only period with a notably higher CAPE was during the dot-com bubble (late 1990s), when it peaked around 44.2. In 2008, during the financial crisis, the CAPE was much lower than current levels. * **Long-Term Average:** The historical mean is around 17, and the long-term average is closer to 16–17, so today’s level is more than double the average"

beerion

Yep, this is why I prefer CAPE. You get rid of the noise of when Earnings drop through the floor.

skilliard7

The question isn't if it goes back up, it's if it grows at a faster rate than you can get with other assets. The yield on US treasuries are as high as 5.2%. Based on historical returns at our current CAPE ratios, the US stock market has a 90% chance of returning less than 2% over the next decade. Pivoting a portfolio from 100% equities to 60/40 is likely a really smart move. If you're worried about inflation, you can make TIPS a big component of the bond allocation.

Rude_Judgment7928

Post crash. PE isn't a good short term recession/crash indicator. 2008 was a debt, not equity crisis. PE skied because E went to the floor. Variations of CAPE are better predictors of a pullback (the use 10-year inflation adjusted earnings, so a pull-back in E for other reason \[e.g. a debt crisis or supply shock\] don't screw with the numbers as bad). Even still CAPEs are better for 10-year projections.

VotedOut

CAPE, Ratio, Buffett Indicator, Price-to-Sales Ratio, and Mean Reversion for S&P 500 are all 2 standard deviations above historical trend-line. The last 3 times those conditions were all present were 2000, 2021, and recently early 2025. It has been 3 for 3 so far in market sell-offs following. It is not the typical meme "bears have called 420 of the last 69 recessions" shit. And fear and greed index is at extreme greed (its usually a contrarian indicator when it hits extreme greed or extreme fear levels).

Apart-Consequence881

S&P 500 Shiller CAPE PE Ratio has been über frothy since the pandemic.

skilliard7

SP500 CAPE ratio in 1982 was 6.6x. Right now its 38x

Krammsy

It can't, Google "CAPE index".

FilthyWishDragon

The S&P CAPE was at the same level as it is now on Oct 2021 (a local peak). What has CAGR been since that date? No cheating! :D The future has no obligation to the past. Despite endless academics trying to force it to be so.

D74248

Lets try a stupid test! What is CAPE? No cheating! A smart investor can give the definition in their sleep. And what is it today? No Cheating! A smart investor knows this to within a couple of points. What have 10 year market returns been when CAPE is starting over 30? No cheating!

Echo-Possible

That's a more reasonable argument than your initial argument. Yes, expected 10 year "real" returns based on today's CAPE multiple are around 0% (actually slightly negative). But returns sitting on cash would be even more negative since you'll be losing out to inflation. And the market doesn't have to tank for the CAPE multiple to get to a more reasonable. Earnings could grow at a faster clip than the market share price bringing CAPE down. So the market could trade flat or grow slowly while valuations come down the next few years if we have good earnings growth. Right now investors are expecting very health earnings growth the next 10 years from AI productivity gains so they are willing to pay a premium. As a final example, CAPE multiples looked very frothy in late 2020 as well. Hit 33x in November 2020 when SP500 was 3,500. Even with the massive inflation spike we saw and the bear market in 2022 we bottomed out around 3,500 2 years later. Because we had excellent earnings growth the draw down didn't guarantee a better entry point even at the very bottom of the bear market.

LiberalAspergers

We arent far off. The Schiller CAPE of the S&P 500 is 37 now, reached a recors high of 44 right before the crash in 2000. The historical average is about 17. Valuations a getting very neat dot com era levels.

MetricT

I have my own dashboard with 5 metrics (CAPE, Tobin's Q, AIAE, modified Buffett ratio, and detrended log[price]) of over/undervaluation, going back to 1870. All 5 metrics are 2-sigma from the mean. Big badda bubble. https://i.imgur.com/oyOfOF2.png

alfapredator

things bers r good at: 1) echoing baseless macro viewpoints 2) yapping about CAPE ratio, amongst other pointless metrics with no predictive power 3) boasting about holding worthless cash things bers r bad at: 1) making money

SPQR0027

[SPX vs Money Supply](https://en.macromicro.me/charts/101057/Major-Central-Bank-M2-Money-Supply-YoY-vs-S-amp-P-500-amp-NASDAQ-100-YoY) <-- or -->[SPX CAPE](https://en.macromicro.me/series/1632/us-shiller-cape) Who will win?

BigShort1357

The fact you have to say “derisking” says it all- 26X earnings- 3.1X sales- 37 CAPE- 206% Stocks/ GDP-hang on I guess but show those figures to anyone since 1870 and they would sell 60-80% immediately to the little people (pensions, mutual funds etc) has no one on here seen actual Withdrawals from accounts ?- Wow, this is gonna be a doozy- The Gov/ Fed will go 10-15 Trillion more I guess- The US Economy

Trimethlamine

Just prices, and CPI. But CAPE is not looking particularly good either

Krammsy

"... this kind of regarded bull." Another word for that is "bubble", see SPX 1987, 1999, 2007, or take a look at the CAPE index.

Grouchy-Stretch-6517

Bro, he's saying if you're trying to make predictions on a rigged market without actually being within those circles of trump and Co, you're basically gambling. There are things that have proved undeniable over the years as an indicator for a stocks direction long term such as ROCE, CAPE, ROI, ROE etc which can help assess its profitability and valuation against the broader industry. If you're betting on the fact trump might manipulate a stock in the short term, might as well put it all on black on a roulette wheel.

Diamond1africa

What data does this chart base itself on? CAPE, P/E?

LiberalAspergers

Average PE doesnt grow over time. The historical pattern is that average PE grows until there is a crash. The long term cyclicaly adjusted P/E (CAPE P/E or Schiller P/E) is about 17. It is about 37 now.

Agreeable_Joke_6075

50%. CAPE is high, interest is high…. Up 58% this year. To most of my gains in the last few weeks as oil and stocks peaked. Probably leaving some money on the table, but I’ll wait for the next crisis.

Krammsy

Looks a lot like the CAPE index. A thing about bubbles, the biggest & fastest gains come at the end.

LiberalAspergers

Worth pointing out that the CAPE of SPY broke 40 in early 1999. The return over the following 10 years was negative. I dont expect that, but I do expect a decade or two of stagnation. 5% annual returns is frankly an optimistic prediction given a CAPE this high. I bring up VXUS because I expect the dollar to decline relative to a basket of world currencies over the coming decades, which should enhance realtive dollar returns from non-US equities over that time.

Krammsy

Not according to Warren Buffet or the CAPE index. I have puts on almost everything, buy dips, sell rips.

user-namepending

You've been doing this for 3 decades now but that didn't stop SPY in the 90's when CAPE was in the forties? And if youre going to talk about 2 decade returns than why even bring VXUS up? Even in high CAPE conditions SPY has still outperformed VXUS when we expand the horizon to 2 decades.

LiberalAspergers

If your long term strategy was SPY, then you were already a bonehead. A CAPE of 35 is insanely high, there just isnt any long term value to be had there. Expecting a return over 5% over the coming decade or 2 from SPY seems unlikely. The time to start selling US equities was December, frankly. There are still a few individual equities on the US market I hold, but my 401(k) is now 90% VXUS.

Trimethlamine

CAPE looks at earnings. This is just looking at prices. But yes the CAPE models are also nearly [2 standard deviations above historic levels](https://valuetheories.com/cape)

Sanpaku

What the hell is a 'price mean reversion model?' Looks like a trend line adjusted [CAPE](https://www.multpl.com/shiller-pe).

D74248

Lump sum wins 2/3rds of the time, not every time. And right now stock market valuations are high. If I were the OP I would just buy it and be done. But there are other situations where DCA would be a reasonable toll for risk management. People on his sub often cite broad, simple historical studies about issues like this. What does not get discussed enough is that many of these fall apart when CAPE is over 30. Right now CAPE is over 36 (S&P 500).

cadoi

These tech valuations are ruining my CAPE ratio neighborhood. /s

21plankton

The stock market has gone up for many years, except for a few hiccup years due to interest rates or exterior factors. This has produced a CAPE ratio that has also been high for many years. Either we have a permanent paradigm shift in economics, or at some point we will have some reversion to the mean. It is important in long term planning to be ready for either alternatives, as our stock market reflects New Economic Theory of management of government spending. It will be either right or wrong. Be prepared for either contingency through diversification of assets and flexible spending with low fixed expenses. Having lived through 4 major recessions (one stagflation) my sense is at some point we will see reversion to the mean, possibly through loss of the hegemony of the dollar. There is no real time line for this process, however. So in my planning it is beyond my 5 year mark in the future as there are no imminent signs.

D74248

Ignore simplistic slogans and those who spout them. Luck is the only way to beat the market, IMO. What you *can* do is manage risk by carefully planning your investment strategy. Once you have an asset allocation planned there is nothing wrong with buying into it slowly over a period of time. People who like to cite studies about “time in the market” and “lump sum beats DCA” bristle when studies showing poor long term returns when CAPE is over 30 are pointed out [it is currently 36]. Learn from people who are qualified, not from social media. Subscribe to the WSJ, but feel free to skip the Opinion section. Best of luck.

harrison_wintergreen

>FXANX only about half of FXANX is government bonds, the rest are corporate bonds, mortgage-backed bonds, etc. https://fundresearch.fidelity.com/mutual-funds/composition/316146356 ... IMO there's a case for bonds at any age. 10-20% is a good starting point. Jack Bogle of Vanguard recommend 20% bond allocation, minimum, for all investors at all ages. >I don't want to be too heavily dependent on fixed income until maybe 15 years in the future, but is it a good idea to start phasing some of this in now? you don't necessarily hold bonds only for income. you also keep bonds in your portfolio because bonds can out-perform stocks for much longer periods of time than you might be aware ... like 10-15+ years. Bonds in general performed as good as the S&P 500, if not better, from 2000 to 2020. https://www.nytimes.com/2020/05/01/business/bonds-beat-stocks-over-20-years.html Long-term US bonds beat the overall stock market from 2001 to 2017. https://www.financialsamurai.com/wp-content/uploads/2016/11/long-term-bonds-versus-stock-market.jpg these types of numbers depend on bond yields and stock valuations ... right now the CAPE ratio for the US market is over 30, which means average annual returns are very likely to be far below average over the next ~10 years. 5% or under per year is a realistic expectation. so if bonds are yielding 4-5% like right now, it's not crazy to expect bonds will perform as well as stocks if not better until about 2035. chart here illustrates the point: https://web.archive.org/web/20231104154423/https://realinvestmentadvice.com/wp-content/uploads/2023/10/cape-and-returns.png it's a few years old but the numbers are basically similar today. the red star indicates CAPE ratio and expected average returns. the horizontal blue and green lines are average yields from high quality corporate and government bonds, respectively. notice the red line is below the green/blue lines ... stocks are projected to under-perform bonds.

sonJokes

A couple of key indicators: Shipper CAPE is 33-34X, which is higher than avg but not at bubble levels but similar to COVID. 44x was peak with dotcom bubble. -0.8% Equity Bond Spread. Negative narrow spread means equities aren’t looking great right now.

Swimming_Cover_9686

Rewriting this for you degenerates: slow-motion AI bubble incoming 🫡 SPX P/E 22. CAPE 31. Top 5 stocks = 28% of index. It’s 2000 with [GPUs.AI](http://GPUs.AI) profits? Nowhere. Nvidia is carrying the market like it’s Jesus with a 10-Q.Musk’s beef with Trump is reality TV. Institutions are hedging. You’re buying zero-day Tesla calls like it’s free money.This ain’t a bull. It’s a parade float over a minefield. I’m short. Stay delusional. 🐻

Swimming_Cover_9686

So, here my bearish post. Disclosure: I am heavily short long term puts. **1. Valuations Are Detached from Reality** * **S&P 500 forward P/E**: \~21–22× (vs. historical average \~16×) * **Shiller P/E (CAPE)**: \~31× — second-highest *ever* (only 2000 was worse) * **Nasdaq-100 P/E**: \~28–30× — still massively stretched, especially with rates where they are * **Market cap-to-GDP ("Buffett Indicator")**: **185%+** — full-blown red zone * **Top 5 companies = over 28% of the S&P** — more concentrated than the Dotcom era This isn’t “priced for inflation.” This is priced for **perfection, fantasy, and AI religion**. **2. Breadth Is Dead** The rally is being driven by a handful of megacaps. If you strip out Nvidia, Microsoft, Apple, and a few others, the market is *flat to negative* YTD. This is unhealthy. It mirrors late 1999, when everyone piled into Cisco, Intel, and Pets.com. **3. The Narrative Is Everything — And It’s Thin** * "AI will 10x productivity!" → So far, it’s 10x hype and 2x CapEx burn. * "Soft landing is priced in!" → Then what happens if it's not soft? Or not landing? * “Inflation is under control!” → CPI reaccelerated in Q2. Shelter, services, oil — all sticky. **4. Musk, Trump, and the Clown Show** When Tesla’s CEO is busy picking fights with the U.S. president over Epstein memes, and Nvidia’s CEO is treated like a tech messiah, you know you’re in a sentiment bubble. This is 2021 vibes with a 2000 setup. **5. Smart Money Is Hedging — Are You?** * Institutions are quietly buying puts, increasing cash positions, rotating to defensive sectors. * Retail? Still all-in on tech. Again. **TL;DR:** This is **not a healthy bull market**. It’s a **concentrated, sentiment-fueled valuation bubble**. When earnings eventually disappoint — and they *will* — this thing doesn’t correct, it cracks. Don’t be the bagholder.

iffey

Take a look at the CAPE ratio over time and when bubbles burst. See any coincidences?

martythestoic

The thing is, the market is smarter than all of us. Anything that you are considering has already been considered by many many many market participants. Sure, the administration is unpredictable, and that WILL lead to continued volatility, but the market can remain irrational longer than you can remain solvent. Re: the elevated P/E & CAPE Ratio, I’ve been hearing this argument for the last 12 years. I get it, but I don’t think it’s actually useful for predicting corrections/crashes. These things aren’t predictable, they’re brought on by poor company earnings reports, reducing the E (earnings) and forcing the P (price) to adjust as well Future earnings are FORECASTED, not KNOWN. Once they’re known, the market digests them and prices adjust accordingly.

615wonky

> If an elevated PE ratio has been in place for decades The problem is, understanding *why* the elevated PE ratio has been in place, so you understand what might cause it to end. My suspicion is that increases in stock valuation are due in part to increases in federal debt-to-GDP. It's a slower burn version of the much quicker asset inflation we've seen since COVID. Government borrows money, spends money, and the people with the money look for assets to invest it in. Here's a graph I made of Aggregate Investor Allocation to Equities, a measure of stock market under/overvaluation similar to CAPE (in red), with a simple fit I made assuming that increases in overvaluation were due to increases in Federal debt (in blue). https://i.imgur.com/lkek8dY.png While correlation isn't causation, increases/decreases in Federal debt-to-GDP do seem to lead in increases in stock market over/undervaluation, with a lag of ~2 years. If that is true, it means that when Congress/Trump passes some form of debt reduction, it is likely to hammer the living hell out of the stock market in a way not seen since the 1970's.