CAPE

Educational_Rip6605

The underlying fundamentals remain, persistent inflows don’t create earnings. Increased access is already embedded in today’s CAPE, so it’s measuring valuations after that access expanded.

unurbane

But the point is, how does the CAPE take ‘access to markets’ into account. Seems like it can’t.

Educational_Rip6605

CAPE operates on average inflation-adjusted earnings over the last 10 years, though. Last time it was above 30 was in 1999.

Educational_Rip6605

Current Shiller CAPE is ~39–40. The highest it’s ever been. Timing a shortfall is pure speculation and a fools errand, but stocks are definitely overvalued.

Cruian

>Nearly all U.S. industry sectors have outpaced EAFE in earnings growth and valuation expansion since the GFC The valuation expansion is what's worrying (and the article itself seems to point to Chase saying they expect that the US's multiple will contract going forward). >Several factors are driving that difference, including U.S. technological innovation, more efficient operations and shareholder-friendly government policies, such as corporate tax cuts. Some of these may be sustainable, but others may have been one time boosts we may not see repeated. Was this article the source for your claim on: >VEA and VWO are at the highest CAPE since the DotCom bubble like the US If so, I missed it. I do find it nice how this article does go on to point to some weaknesses with the US and supports an international position of 25-30% (though they seem to only be looking at developed, no emerging).

Cruian

>The answer is that the US has showned that it is the only developed market with consistent earnings growth for the last 2 decades Can you please provide a citation? >Both ETFs just now getting to their 2007 level prices. Price returns don't tell the whole picture, as total returns takes dividends into account, and those tend to be higher outside the US than inside. >Valuations are terrible around the world, VEA and VWO are at the highest CAPE since the DotCom bubble like the US Can I please get the citation for this as well? I'm seeing VXUS with a current P/E of 17.1x (https://investor.vanguard.com/investment-products/etfs/profile/vxus#price) while the CAPE seems to have been above 20 (on page 6 of that AQR link) during the dotcom bust and it had gone over 25 just before the financial crisis (which was after dotcom).

GAV17

> The last decade+ of US out performance was mostly just the US getting more expensive, not US companies being much better than foreign companies: https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Lying-to-You (click through to the full version) This is disingenuous. The answer is that the US has showned that it is the only developed market with consistent earnings growth for the last 2 decades. The valuations premium comes from Europe, Japan, etc. being adverse to growth for a ton of factors. Valuations are terrible around the world, VEA and VWO are at the highest CAPE since the DotCom bubble like the US. Both ETFs just now getting to their 2007 level prices.

Adventurous_Initial6

There’s always 2 sides to this argument. On the one hand, stocks have always gone up historically, and generally speaking, will continue to go up. On the other hand, there have been multiple instances in the last century where full recovery took over a decade. We’re at the point where the last one (2000) is already past the memory of most investors today. So people will put their money in the market and forget about it (also a big factor in the market also going up). But if this type of big crash is outside your risk tolerance level, then it should still play a factor into how you diversify. CAPE ratio is close to its ATH which was in 1999, so personally, I think there is a bit of froth building up in the market.

Wide_Neighborhood_49

Google sending me push notifications about CAPE ratio is bullish right?

garden_speech

> Stocks cycle via CAPE historically. First of all this is only *very* loosely true. As in, 10 year CAPE predicts next 10 year returns *with a very low r-squared value*. It's not zero, there is some correlation, but it's really a weak predictor. Secondly, you should look at a long term chart of PE ratios, like, going back 100 years. There have been paradigm shifts. It used to be common 100 years ago to buy top companies for a P/E of 5. Now, 15 is low. Expecting stocks to be predictable because of CAPE is not going to turn out well for people.

Wide_Neighborhood_49

Either I been doom googling too much or they just trying to get me to panic but in the last two hours they pushed a Burry article and a piece about CAPE ratio

shiithead_007

What's your rationale? Stocks cycle via CAPE historically. Obviously things at ATH's drop... but my argument is this is different for Gold right now.

harrison_wintergreen

> returns for the past 8 years are only 12%. that's not terrible. where did you get the idea 12% a year is bad? I'd leave it alone in the TDF, or a similar allocation. the S&P 500 is dominated by a handful of mega-large US companies, but there are periods of time international stocks or smaller company US stocks will perform better than the S&P 500. even bonds beat the S&P 500 something like 15% of 10-year periods. > too late to take a more aggressive approach and just switch to S&P500 at current stock market valuations, I'd hesitate to invest 100% into the S&P 500. in fact, with the CAPE ratio over 40 for the S&P 500 it wouldn't be a shock for bonds to beat the S&P 500 until 2035 or 2040.

harrison_wintergreen

reddit will often give questionable advice on this topic, advice that usually clashes with what a licensed advisor or professional advisor would say. there's case to hold 10-20% as bonds for all people, at all ages. here's the problem: reddit will say: -(a) you don't need bonds until you're 40 seconds from retirement; and - (b) the purpose of bonds is to stabilize your portfolio and generate income. because reddit leans young, they do not understand how there are long, long periods of time bonds can perform better than stocks. for example, in the 1970s shorter-term bonds tended to preserve capital slightly better than stocks. and bonds performed as well as stocks, if not better, from about 2000 to 2020. at current stock valuations (CAPE ratio over 40) it would not be a shock if bonds beat stocks in the next 10-15 years, even longer.

jemicarus

Schiller CAPE 10 was much, much lower 10 years ago, and the US was not 60-70% of the global market. We hadn't just experienced one of the longest bull runs ever. So it would have been a lot less plausible to say the same thing 10 years ago. Depending on one's age and time horizon it may not matter much in either case. But for older guys hoping to retire, it's worth considering the difference between then and now and what's likely to transpire. Sure, one can never know, that goes without saying. Nevertheless...

jemicarus

Everyone should have a lot of international diversification at these historically expensive US CAPE valuations regardless of political affiliation or related anxieties

D74248

The problem is that the United States market has been carrying a premium *because after World War II it was not normal*. It was stable. It had the rule of law. Political debates were about policy. It lead the free world in every meaningful way. And S&P 500 CAPE of 40 is not sustainable if the United States stock market is now "back to normal".

Krammsy

I was afraid of that a year ago. Now I'm just prepared, taking short term profits, hedged on everything. We're bouncing at all time highs with the CAPE where it was in 1999, and a president that doesn't know what Smoot-Hawley did the last time we imposed tariffs. .

D74248

We are also at record valuations. P/E is at 31, median is 15. CAPE is at 40, median is 16. Price to book is at 5.63, median 2.91. And so on and so on.

First-Finger4664

CAPE (or Shiller PE) has also been shown to substantially improve on the predictive power of simple P/E, with high correlation with long term returns (albeit little correlation with short term results)

throwaway3113151

Not sure if it’s healthy or not but CAPE sure seems concerning to me

zeppo_shemp

>I feel there are more companies getting listed now there is now actually a very low number of stocks listed on the major exchanges. this chart is from the Federal Reserve, showing stock listings on NYSE back to the early 1970s. https://www.federalreserve.gov/econres/notes/feds-notes/fig1-3125.png >Are stocks still “the best” because they’re inherently superior, or because the system is now designed to keep them afloat? there is no 'best', because it's subjective and depends on your goals and timeline. if you need money within 2 years, for example, it's possible you might lose a lot with stocks over the next 24 months. a CD at the bank might be 'best' in that scenario. and there are no guarantees with investing, which is why all the professionals recommend wide diversification. stocks *usually* beat bonds over longer periods, but there are several 10-15 year periods bonds were the better investment. >Do future returns look anything like the past? the most accurate methods we have for forecasting stock returns are things like the CAPE ratio. not 100% accurate but better than 50/50 over 10-15 year periods. CAPE ratio is over 40, which is very high and indicates returns for the US stock market as a whole are probably going to be very disappointing. >Or are we just anchoring to a history that will not repeat so similarly? people anchor on recent events and expect them to continue into the future. with finance and investing this is called "recency bias", and it's an important thing to be aware and adjust for. >Where does Crypto sit in this equation? it doesn't, because crypto is purely speculative. there's no way to estimate fair value for crypto. stocks are ownership of businesses, and you can analyze companies to estimate if $100/share is a reasonable price or not. real estate produces rent, so you can determine if a price you pay for a rental house or farmland is reasonable given the expected income. similar for bonds, you can analyze the income paid to bondholders and how likely the bond issuer is to pay their obligations. there's nothing comparable for crypto. it's worth what some other goober will pay for it.

First-Finger4664

There are a bunch of signs that point toward an imminent correction (combination of a recently reverted yield curve + low VIX, historically high CAPE ratio and Buffet index). But markets can stay irrational for a long time and timing the market is tough- so is “imminent” a matter of weeks-months or still years out? My answer to the valuation anxieties has been to move most of the portfolio to cooler parts of the market- high dividend, international, etc- and to trade broad S&P exposure for reduced exposure to a “hedge” of handful of individual equities that are poised to do well if/as the AI bull run continues. And to be honest, that positioning is ultimately more about self-managing my own FOMO to ensure that I don’t go all-in at the top of the market, panic sell as the expected correction materializes, or sit in cash and miss out on another year of gains because I’m a perma-bear.

VotedOut

For the overall market valuation: Buffett Indicator - 233% (2.43 standard deviations above historical trend) S&P 500 CAPE Ratio - 40x (2.3 standard deviations above historical trend). S&P 500 Mean Reversion - 2.38 standard deviations above historical trend. And that's just the overall S&P 500 view without going into the nonsensically extreme valuations of many individual stocks underneath the surface. Sources you can check to verify: [https://www.currentmarketvaluation.com/](https://www.currentmarketvaluation.com/) [https://www.multpl.com/](https://www.multpl.com/)

lowfrequencyinvst

Schiller CAPE is useful for a sense of the market relative its long term average valuation, but it’s not a good timing tool. Another way to think about it that helped me was to think of it as a useful way to tell the ‘season’ of the investing landscape (winter = bear market, spring = early bull, etc) but not the ‘weekly weather’ of that market (won’t tell me what’s going on for the shorter term).

Rabitai_Trades

Valuation can be a useful input, but it’s a blunt timing tool. 1) Metrics like CAPE/Buffett Indicator have decent long-horizon signalling (expected returns), but weak short-horizon timing. Markets can stay “expensive” for years if earnings growth, margins, or rates cooperate.   2) “Taking profits” can be sensible as risk management: rebalance back to target weights, trim concentrated winners, and diversify factors/regions rather than making an all-in call.   3) The main uncertainty is regime: inflation/rates and profit margins drive what “fair value” even means. A second risk is taxes/transaction costs if you churn. If you’re reallocating, what’s your time horizon (5, 10, 20+ years) and what drawdown would make you change course?

Bd1ddy82

History shows that 10 year returns following a CAPE ration at this level ALWAYS fall within a range of -2% to 2%. Always.

CuriousCat511

CAPE has never been this high without being followed by a significant crash. 100% accuracy in predicting past downturns.

sloanemonroe

Shiller CAPE ratio at 40.83. All time high was 44 in December 1999 right before the dotcom bubble burst.

Krammsy

Either it's a deep conspiracy where global elites are luring unsuspecting retail minions in for the kill. Or, the market, as usual, lures retailers into buying the top of an ATH while the CAPE index rivals 2000 levels. At WSB they call that "Time to bet the farm on OTM calls!".

Kindly-Artichoke6569

The CAPE ratio measures a market that no longer exists. Because the S&P 500 shifted from asset-heavy industrials to capital-light software, the historical mean is obsolete. It's a structural evolution. So, while 40 looks terrifying against 1929 benchmarks, it reflects a permanent expansion in margin durability. Which means we aren't repeating the 2000 collapse; we're pricing a new reality.

mbreaddit

Lets reverse the thinking and assume that due to the flourish economy (at some places at least=, the wealth of a lot of high paid employees, easy access to stock markets, the internet and other factors, relativly speaking more money flows in and raises the market to a new base line? I mean, take Robinhood as one reference for trading activity. What would happen if we say the assumptions made 20, 50 or 80 years ago are just not applicable anymore, at least not to the same number like the P/E ratio? I´m not saying it is, just considering **if there are logical reasons** and that it might not be so overvalued as everybody says. That does never mean there aren´t overvalued stocks for sure. Funny tho that the US is highest in Shiller P/E, maybe also because its the most well connected with the mag7 and a lot of other companies: [CAPE Ratios by Country 2025 (Shiller PE) | Siblis Research](https://siblisresearch.com/data/cape-ratios-by-country/)

VotedOut

I lot of you clowns still seem unaware that the market is objectively at or exceeded 1929 bubble, 2000 dotcom bubble, and 2021 clown bubble by CAPE ratio, Buffett Indicator, Mean Reversion, Debt-to-GDP ratio, unhealthy sector concentration, multiple ponzi schemes, and more cracks in the foundation than a crack addict. (https://www.currentmarketvaluation.com/members/dashboard.php) 2026-2027 is gonna wreck everyone's shit.

Aggressive-Donkey-10

If you find yourself in a hole, step one is stop digging. You don't have to keep digging/putting your paycheck into the sp500 at CAPE Shiller of 40.5, you could 1) put it into VXUS with a PE of about 15 and easily own 6000 foreign companies 2) into 100% safe cash - SGOV at 3.85% with no risk of any capital loss (Buffett has been doing this for 4 years now, with 382 Billion in T Bills just waiting for a crash - he is an ok investor) 3) a collection of BDCs/mREITs/CEFs earning around 10-11% 4) gold/silver ETFs which often outperform in recession or stagflation 5) real estate syndications - get 15-25% checkout passive pockets youtube channel, and biggerpockets website 6) Oil/Gas MLPs, like ET/EPD/MLPX 8-10% dividend yields alone about 100 other things that are easy to invest in and not the sp500 :)

D74248

>My concern is that the S&P 500 is already near all-time highs Being at a high does not matter. But valuations do matter. CAPE, P/E, price to book, price to sales -- all these things are at interesting levels.

D74248

It is not the all-time highs that have people concerned, it is the valuations under pinning that. For the S&P 500 CAPE is now at 39.9. Price to book is at 5.5. Price to sales 3.39. The last two are all time highs, the only time that the first has been higher was just before the dotcom bubble burst. I don't know the future. But smart people are looking at this market with very jaundiced eyes.

LuxanHD

This is the way Stocks are at 2nd highest CAPE ratio in the history of the stocks market. At these levels, expected returns for the next ten years is 0 to 2% only. Getting 4.8% from long treasuries now is your only option until the CAPE ratio drops to sane levels again.

Huevos-revueltos36

I asked ChatGPT to summarize in one sentence for each category: • Gold price: Gold prices remain elevated in the U.S., signaling heightened investor fear and a continued flight to safety. • Oil price: Persistent weakness and volatility in oil prices point to softening demand and slowing economic activity. • Loss of real disposable income: Real disposable income is under pressure, reducing consumer purchasing power and increasing recession risk. • Rising credit card delinquencies: Credit card delinquencies are climbing rapidly, indicating growing financial stress among households. • Student loan debt: Record-high student loan balances are constraining cash flow and weighing on consumer spending. • Car repossessions at pre–Great Recession levels: Auto repossessions have returned to levels seen before the Great Recession, highlighting acute consumer distress. • Increasing foreclosures: Foreclosures are rising, revealing mounting pressure on households and cracks in the housing market. • Unemployment rate: The unemployment rate is trending higher, a classic late-cycle signal that economic conditions are deteriorating. • Consumer sentiment: Consumer confidence remains depressed, reflecting widespread concern about job security, inflation, and future income. • Non-farm payrolls: Non-farm job creation has been negative over an extended period, signaling sustained weakness in the labor market. • International markets outperforming U.S. markets: Continued outperformance of international equities suggests capital is rotating away from an increasingly fragile U.S. economy. Market crash risk indicators in the U.S. right now • Buffett Indicator: The market-cap-to-GDP ratio remains extremely elevated, indicating U.S. equities are priced far above the underlying economy. • Shiller CAPE Ratio: The Shiller CAPE is near historic extremes, a valuation condition that has repeatedly preceded major market drawdowns. • Margin debt levels: Margin debt remains high, reflecting excessive leverage that can rapidly unwind during market stress. • Insider buying: Corporate insider buying is near zero, suggesting executives see little value in current stock prices and are avoiding risk.

InsideCharacter2584

The practical first step is not timing, it is deciding a long-term asset allocation your father can stick with through a large drawdown (stocks, high-quality bonds, cash, etc.), then funding that mix. If the target includes a meaningful equity weight, lump-summing gets you to the policy faster, while a rules-based DCA (over a fixed window you pre-commit to) mainly reduces regret risk, not the risk of a crash. Holding extra cash "for a crash" is implicitly a market-timing bet, and Shiller CAPE is better at setting long-run return expectations than calling when a selloff happens. On the "AI bubble" concern, some areas can re-rate sharply, but the broader AI buildout still looks constrained by real-world bottlenecks (power, construction timelines, compliance, and capital discipline), so a simple "burst" narrative is often too binary.

_highfidelity

I’m always buying, every week. High CAPE with real rates coming down, QT ending, deleveraging seen in November, and rotation away from Mag 7 would suggest a continuation. I do think we are seeing some cracks where valuations are needing to be justified with both earnings and forward guidance. In Q1-Q2 2025, any company that mentioned AI got a post-earnings pop. Now we’re seeing the largest market cap companies with impressive earnings beats getting punished for average forward guidance.

Shoddy_Ad7511

I didn’t say the market will or will not crash. I’m saying CAPE is too simple to be any type of predictive metric for the US market

_highfidelity

My understanding is the CAPE ratio is a current metric but because the measurement utilizes 10 year inflation-adjusted earnings, it isn’t a nimble metric. It is useful when thinking of future returns for the next 10-15 years, but not necessarily next year. It also doesn’t account for either interest rates or an internal structure where a concentrated number of firms may have outsized impacts on the markets overall earnings. Ultimately it is still a useful metric, but should be interpreted in a wider perspective that includes real rates, liquidity regime (QT vs QE), leverage present in the market, and market concentration.

Shoddy_Ad7511

CAPE is an obsolete metric

NeoPrimitiveOasis

The record high CAPE ratio doesn't seem to figure into these predictions.

BenGrahamButler

I don’t invest in the S&P for this reason actually. Look at the CAPE ratio, sky high.

ttkk1248

Shiller CAPE is at the alarming (pre-crash) zone as well.

malignantz

[Building a Better CAPE Ratio - Early Retirement Now](https://earlyretirementnow.com/2022/10/05/building-a-better-cape-ratio/) Real CAPE might only be 35. Checkmate OP!

Krammsy

No, I'm referencing the CAPE index as well as Buffet's Market cap to GDP, invoking Buffet's expertise to make my point. Buffet uses GDP/Mcap as a valuation metric, I prefer the CAPE, both are at extremes only seen during major downturns.

Krammsy

To an art connoisseur, a $20K painting by a new upcoming artist is worth the price. To a new investor, the price of a 50% over-valued market while inflation's hovering @ 3%, it isn't. It's a convoluted argument, the only debate there is that regardless where the SPX is now it'll be higher in 10 years. (Which Buffet has suggested it won't) That could be 5% higher if we're as high as the CAPE index suggests, to wit, 2-3% inflation over that 10 year period would equate to a loss. Unless, of course, you're a collector of over-valued stock receipts.

Krammsy

Yes, there's far too much money sitting in stocks instead of circulating (velocity). The problem, the biggest & fastest gains come @ the tops of bubbles, we're all playing the pennies - steamroller game with an administration that doesn't realize rising stocks alone doesn't make an economy. CAPE index - [https://www.multpl.com/shiller-pe](https://www.multpl.com/shiller-pe) Buffet's indicator - [https://en.macromicro.me/charts/105/us-market-cap-gdp](https://en.macromicro.me/charts/105/us-market-cap-gdp)

ttkk1248

Did you consider Shiller CAPE ratio?

VotedOut

The majority of the posts here in this thread saying we're not in a bubble are objectively wrong. Buffett Indicator, CAPE ratio, and Mean Reversion of S&P 500 are at dotcom level valuations. [We ARE most definitely in a bubble.](https://www.currentmarketvaluation.com/) A bunch of stocks with high price-to-sales ratios have inflated anywhere from 200-2000% in the last two years or one year (looking at you PLTR). Money losing trash companies that make less than $0.2B top-line annually have gone up like 1000-2000% and added billions in market cap this year (shit like IONQ, RGTI, QBTS, ASTS, OKLO, and other shit). Telltale signs of a bubble. The real question is: How soon will the bubble actually burst?

Ecstatic_Food1982

>Several classes of shares are not historically overvalued (based on CAPE ratios, PE ratios, etc.). >These include non-tech US shares, European shares, UK shares and more. Plenty of overvalued UK and European shares.

tooclouds

Hi thanks for your take on this. I was looking at ERP from many institutions (Kroll, blackrock, Schwab) but settled on Damodorans because he updates more frequently and his estimates were not too far away from what other institutions were saying (although it seems like his is the most pessimistic of the bunch). When you mention the ERP going to 4 and rebalancing again, I thought about writing on my thoughts for the scenario where we constantly go back and forth between under and over 4%. I agree that constant rebalancing via fees, commissions, and bid-ask will kill me in the long term. Why I decided to rebalance here was because I had to rebalance anyways. Per the book, the only time you should rebalance is either every 3 months or when your leverage falls below or exceeds your target range. They recommend a buffer of 0.2x (so for 2x leverage that would be 1.8-2.2x) however, I felt that was too narrow and so expanded it to 1.5x-2.5x. When the market pulled back, I was already on the higher end and this pushed it over the edge, hence the rebalance. If we look at Damodarn's ERP historical report, it illustrates how rare it is to have an ERP <4% which was last shown I think around 2012 (post real estate fall). To comment on the use of LEAPs it is because it is more capital efficient at this time. Leveraged ETFs would be easier, but the opportunity cost favors leaps, but unfortunately, it's more work. I plan to switch to futures once my account hits at least $35,000 because you need at least $25,000 overnight to hold futures products in a ROTH IRA. There was a section in the book that talked about not adjusted based on CAPE (or in this case ERP), but adjustments showed better returns in the long term. Yes you can make the argument that it working before doesn't mean that it will work in the future, but it helps me sleep better at night when I can have a reason to deleverage early in life when stocks are at all time highs haha. I believe in diversification. Within my trading account, I have been building both long and short positioning within markets stretching from grain commodities to crypto. I am planning to get into the real estate market as well, not because I think it's a better place to put your money, but I see an opportunity to rent out some of the units in a fast rent growing area (so this is more speculative, but this property in particular had some good numbers). It also adds to the benefit of diversification, but at my age I do think I should be mostly in stocks. However in your cause I don't know much about using uncorrelated assets to get more leverage unless you're talking about the access into SPAN margin. I think there is definitely a cause to diversify outside the US, but the options of internation funds typically don't go out more than 2 years so having leverage in international equities seems to pose a challenge from what I can see. I will look into Rob Carvers and the rational reminder forum. I haven't heard of these, thank you for the suggestions!

D74248

Historically 10 and 15 year returns in the US market have been dismal when starting with CAPE over 30 — it is currently 40. Along that line, the major brokerage firms have been warning that US valuations are high and recommending a larger international allocation. So your plan is in line with the thoughts of people who do this for a living. It won’t be in line with this sub, which is a meeting place for *The Church of VOO and Chill*” It took QQQ **16 years** to recover from the last tech bubble.

D74248

> I’m 45, been a financial advisor for years. And you are telling a 77 year old to put money in the S&P 500 when CAPE is over 40? Incredible.

SpellAccomplished541

First, don't take financial advice from me! See my post above. Also, I am now retired and have lower risk tolerance. That being said, CAPE has never been this high since the dot com bubble so the market price is high and expects perfection. Last week even beating all estimates wasn't enough for NVDIA. What I mean by priced for perfection is that the market will continue as long as every company meets beats earnings perfectly, but if the don't then they could take a bigger hit than they should. Also... they say everything is priced into the market... if so then that means the rate cuts and QE are already priced in because the market assumes those things will happen because they are likely. Again... don't take financial advice from me... I'm just a regular person who posted here to say that I wish I used ETF's instead of following the advice of 'financial expert'

SpellAccomplished541

Thanks. That's why I'm posting while the market is at high CAPE again. I hope to steer more young people toward r/boggle.

Lucky_Platypus341

If everyone agreed on valuation, the market would be there already. Markets are emotional and you're sensing the disconnect between fundamentals (CAPE, recession) vs current valuations. No one can tell you whether today's close is the highest it will be for the next two years or the lowest (likely in-between, lol). Vanguard and most other analysts seem to believe fundamentals will catch up to the market and returns over the next decade will be much lower. That may or may not be the case. All that really matters is what YOU think and what YOUR risk tolerance is. If you go all in and it drops 50% over the next couple years (OrangetheFruit's 'downward bleed') how will you feel? If you go 60% bond and the market returns 20% next year, how will you feel? Which situation is more tolerable to YOU? You have a long time horizon. If you decide to go heavy equities and figure it only matters where it is in 30yrs, that's reasonable. If you decide to hedge your bets and see where things go over the next few years, that's reasonable, too. You can listen to Vanguard. You can listen to us reddit randos. Ultimately, it's your money and decision.

Sharp_Attitude6358

Schiller's CAPE?

Cracked_Tendies

>and we are now in a much larger bubble than the DotCom one, combo AI/crypto/Real Estate/Gold bubble Hey, you forgot pokemon cards! >we are near all time highs in CAPE ratio, worst possible bet to make now would be Triple Leverage ETF, just wait it out in QQQ or better yet cash, then when down 50-75% then buy TQQQ Man, ifkr. Investing is the only life sector where people love a ripoff and hate a bargain. In all actuality, it's likely going to be another 10-15 years before TQQQ is even remotely a good idea

Aggressive-Donkey-10

15 years is not long term how did it do from 2000-2010? Oh, that's right, not one levered fund traded then as they kept going broke during their simulations. we are near all time highs in CAPE ratio, worst possible bet to make now would be Triple Leverage ETF, just wait it out in QQQ or better yet cash, then when down 50-75% then buy TQQQ , QQQ dropped 83% in 2000-2002, and we are now in a much larger bubble than the DotCom one, combo AI/crypto/Real Estate/Gold bubble

throwaway3113151

Have you checked out the CAPE ratio recently?

Krammsy

I don't see how this isn't the early start of a bear market. Mass layoff's both public and private, tariffs (Google Smoot-Hawley if you're not sure what tariffs can do), a president openly displaying the demeanor & ethics of a mob boss. Beyond that, Warren Buffet's recent rationalization for going cash, that this market isn't for buy and hold for the next ten years, or, Google a chart of the CAPE index.

Equal_Calligrapher_3

1) stock market is disconnected from the economy 2) market trajectory today doesn’t fit definition of a crash 3) awareness of market concentration, Buffet index, CAPE Ratio, and highest ever valuation metrics has been reaching outside of finance professionals

Lucky_Platypus341

Yep. It often moves in opposition to the S&P. Today it was up while the market was down. If tech crashes (handful of tech rep 40% of S&P atm), people will still flock to Costco (gotta eat), so it's a bit of a hedge. It almost doubled last year, so not surprising it's meh this one -- down 2.5% YTD but offers pretty good dividends (0.6%) given how high valuations are right now in general (CAPE). t's a good company with a good (ethical and profitable) business model and a lot of cash on hand, so not likely to fail if the economy bits a major bump. FWIW they've said they're not interested in stock splits because modern trading allows fractional shares so there's not really a point. You kinda lucked out on the cost basis, so the question is if there's someplace other than Costco you'd rather have $9k rn.

SPQR0027

That's good stuff, thanks. With the Buffett Indicator at 215% when the mean is 85%; CAPE breaking 40 when the mean is 17; Indexes vs M2 Supply 50% higher than should be... I want these indexes cut in half!

Stunning_Practice9

I’m not looking for a dramatic single day crash, I’m fine laddering down. When the CAPE ratios come back down to earth, I’ll start buying again. But yeah, in the meantime, getting a 4 figure interest payment every month is more than good enough. I’m rich but I live in a lower middle class area. People are struggling, this economy is dogshit. I think investors are figuring this out…

ok_read702

I wouldn't say it's useless. https://bestinterest.blog/wp-content/uploads/2022/04/10-year-annualized-CAPE-1536x876.png Valuation is a weak form of gravity. But it's still gravity.

unbalancedcheckbook

The CAPE ratio is at very high levels and peaks like that strongly correlate with crashes soon after. It happened in 1929, and happened in 1999.

unbalancedcheckbook

CAPE ratio is at 1999 levels...

Plate_Expensive

Stocks are priced for perfection, though the last few weeks let out some pressure. Stocks have had an insane multi year run, every asset is inflated, CAPE really can’t go any higher for long. Private equity is the first domino to fall then the major institutions whom need to fund endowments/redemptions will start pulling money from the market and there will be few to no buyers at these levels. It will be a quick gap down as always.

D74248

And it is not just Vanguard cautioning about 10 year returns. Historically 10 year returns starting with CAPE over 30 have been dismal. CAPE is at 39.

Old_Ape_General

The current Shiller CAPE is about 40 which is only second to the dot com bubble So… we gotta pump those numbers up Calls at open

VotedOut

Agree on some things, disagree on others. Just TSLA and PLTR over-valued - disagree: I might edit this post later to list stocks that gone up hundreds/thousands of percent trading in single or double-digit billions in market cap that burn money and have just a small number of employees. I haven't saved the tickers to my memory so I'll have to find them again. Crypto - Strongly disagree: Nobody in the real world is using Bitcoin or crypto. And it's just worthless nothingness that can be generated with a few lines of computer code that serves no purpose and doesn't do anything better than what already exists in "traditional finance". That shit ain't worth trillions of dollars of market cap. It's no better than paying trillions of dollars in market cap for handfuls of dirt in the ground. JPMorgan and Blackrock are only "embracing it" so they can collect fees from crypto-bros who want to gamble on crypto without having to buy coins directly from a shady exchange. Pretty much every single pro-crypto talking point [has been debunked](https://www.reddit.com/r/CryptoReality/wiki/talkingpoints/) for a while now. Gold - disagree My point was that the rise in price of Gold has far exceeded actual inflation... unless I missed something where we've had 100% inflation in just two years (we haven't). Here's the [inflation-adjusted gold price](https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart), higher than it has ever been in history (including the 70s/80s inflation fears era). VIX and the Fear & Greed Index - Sure I'll kind of agree on that one. But a couple things: It spent all of May-September in Greed. Also, the C[NN Fear & Greed index](https://www.cnn.com/markets/fear-and-greed) hasn't made much sense to me lately (maybe I'm just not reading it right). It says Put/Call ratio is 0.67, but says that it's "Extreme Fear". But usually 0.67 indicates "Greed", and CNN's explanation of the indicator only seems to reinforce that. Waiting for OpenAI to IPO before crash - Sure I'll give you that that is something that's "missing" in order to have the perfect A+++ setup for a market topping. But will that A+++ setup happen? OpenAI themselves have stated they don't expect to be profitable until like 2030 at the earliest. Also: I find it odd that the combo of CAPE Ratio, Buffett Indicator, and Mean Reversion being 2-standard deviations over-valued gets brushed off by almost everyone I bring it up to, and I see very few people talking about it. However, it has been an accurate signal in predicting a crash EVERY SINGLE TIME SO FAR thus far in history, with no false positive (like... it's literally measuring how absurdly stretched market prices are getting). And the fact that most people are unaware of it, ignore it, or continue to brush it off makes me think that the likelihood of it being an accurate signal again is pretty high.

VotedOut

CAPE Ratio, Buffett Indicator, and Mean Reversion are 2 standard deviations over-valued compared to historical trend. That is objectively euphoric, regardless of the commenting you see online. Many stock prices are objectively at euphoric prices. Sure, I'll see posts and discussions about "bubble or not". But then I look at the daily thread and other places and it's mostly just throw-away comments of "we go up" idiots who can't even throw more than one sentence together. I mean, you could be right that the bubble will get crazier from here. But then you'd need to argue that CAPE Ratio, Buffett Indicator, and Mean Reversion will get much crazier than they have historically ever been before the market snaps. Market bubbles generally burst months (or even years) in advance before the earnings data and economic data/cycle plateaus or goes south. Earnings growth and economic data often looks good and "in the clear" at the top of a market bubble. Many of the hot stocks are already baking in like 5-10 years of uninterrupted growth in advance right now. And there's many flashing warning signs if you're paying attention: Dog-shit money losing stocks with near-zero revenues have been getting pumped like crazy this year just for saying the words "AI, blockchain, hyper-scaler, data center, quantum computing, space rockets" or whatever other bullshit. PLTR at $440B market cap is over 100x price-to-sales ratio is the most expensive mega-cap in history. TSLA at $1.4T has no growth and has been propped up on Elon's bullshit grifting. The market cap of Gold has doubled in just 2 years from $14T to [$28T](https://companiesmarketcap.com/gold/marketcap/), far out-pacing inflation. Crypto (with it's multi-trillion dollar "market cap") has been the biggest scam bubble for years now that has been propped up by stable-coin printing, Microstrategy buying, and other financial chicanery non-sense. Right now though, with the broken technicals on the crypto charts and MSTR, as well as the apparent "pause" in stable-coin printing... it is looking like the collapse of the crypto house of cards may now \*potentially\* be happening. And if crypto collapses, I think it will spill over some into weakness in the rest of the market.

VotedOut

No, no, no, no. You're repeating common myths here. When CAPE ratio, Buffett Indicator, and Mean Reversion are all this extreme, it has historically been the END of a bull-run, not the middle. For every person like me that is skeptical, there many more that have your attitude that the bull runs has much further to go. The crap that gets parroted here that "a crash doesn't happen until every single last skeptic has thrown in the towel and bought in" is bullshit. There will ALWAYS be a decent chunk of skeptics, even at the tippy-top. "Usually it happens when we least expect it". Well, there's plenty of people with their heads in the sands that aren't expecting it anytime soon like you. And I think there's a "silent majority" of investors that aren't even really paying attention to what is being said on financial media, WSB, or other stock forums. All that said, my broken crystal ball agrees a small bit with you in the sense that I think the market may have another "fake-out crash" before the real crash happens just to fake-out and trap the crowd of people saying "bubble" like me.

Entraprenure

OP, you are completely wrong. I don’t know where you got your stats from, but PE ratios are historically VERY high right now. A CAPE ratio (Shiller PE ratios) of anything over 25 is considered “bubble territory”. The market’s cape ratio is above 25 about 10% of the time. 1999 and 2021 are examples of when the CAPE ratio was greater than 25. The current CAPE ratio is 38.4. This is the second highest CAPE ratio we have seen in history, the only time it has ever been higher was during the dot com bubble peak (44). The current PE ratios are greater than 1929. We are ABSOLUTELY in bubble territory. The S&P500 is currently trading almost 2.5x greater than fair value, the only question is if AI will actually cause the fundamentals to catch up. Also, reverse repos (institutions parking their money with the fed) are at historical lows, which indicates a severe restriction of liquidity in the market.

VotedOut

Your comments in this thread are a bubble indicator to me: * Large six-figure positions in UPRO an TQQQ when the S&P 500 valuation measures by CAPE ratio, Buffett Indicator, and Mean Reversion metrics are all at 1929/2000/2021 levels [(2 standard deviations above historical trend](http://currentmarketvaluation.com), which were all bubbles in the past that preceded crashes). Valuation-wise, there is almost no denying that the market is in a bubble. * "Not even Trump attempting to nuke the entire economy could bring it down 25%." A 25% market drawdown wouldn't even come close to bringing the market valuation down to the historical average line. It could go down much further than that. * A 50% market drawdown will be a killer for anyone who just went all-in lump sum any time semi-recently. A 50% market drawdown is definitely plausible when the market is this over-valued. And with so many more degenerates crowding into call options, leveraged ETFS, meme bubble stocks (crypto, NVDA, TSLA, PLTR), and going in big on every single dip/rip more than ever, that 25-50% market drawdown will be more like a 90%+ drawdown for most degenerates in reality. * You say that so many people are waiting for a crash as a buying opportunity that it's going to immediately be over-purchased and money will get pumped. But then in a follow-up comment you offer up evidence that too many people have already piled in already (Retail going from 10% of total equities trading volume in 2010 to approximately 25% by 2021, with recent estimates at 30% and 37% of daily trading volume). * Faulty logic: "We'll continue toward the moon because we have no where else to go." Here's where else we could possibly go: DOWN. * Famous last words: "And I fully believe we can't even crash anymore."

JacquesHome

There are two markets right now: S&P490 and the top 10 companies. The S&P490 is fairly valued. Most the CAPE P/E is being driven by the top 10 (NVIDIA, ORCL, etc). The problem is that if the top 10 + OpenAI and some other privates misstep, it brings down the whole shebang.

Elibroftw

The stock market is still poised to return more than 10 year treasury yields according to TR CAPE.  https://blog.elijahlopez.ca/posts/gold-vs-sp500-returns/

No-Block-2095

Schiller CAPE comes with an assumption that business has been somewhat steady, with some up & down smoothed over ten yrs. Look at the profits 10, 9, 8,… yrs ago of MSFT, Meta, Goog, NVDA, AMZN etc. They make massively more profits now not because of where we are in a business cycle but because they grew their business. - cloud computing in 2016 wasn’t that big. - Youtube revenue was 36B jn 2024 and 5.5B in 2015. Another reason valuations are different: Dominant companies today are tech and they sell sw and ads. Nvidia and Apple are fabless and use someone else factories. Marginal cost of selling more is minimal so they can scale up faster. Dominant corp in the past needed a lot more assets to generate profits. A sw company will get a higher valuation than a railroad or brick& mortar.

LSUTigers34_

This is still disproved by the fact that the CAPE ratio hasn’t steadily increased over time for the sp500. More and more information has been available for market participants since the buttonwood agreement but the CAPE ratio has not gradually risen during that time period. You’re relying on a time period that’s coincident with a gradual decrease in interest rates since 1981, which is evidence that higher valuations on the cape ratio in the past 40-45 years have been driven by a decrease in interest rates, and not more information in the market, although there is correlation there simply by virtue of the fact that information availability increases over time.

TheDeHymenizer

>Your example suggests that the market is overvalued and not efficiently priced, otherwise there would still be more PE deals. No. It would suggest the past was undervalued. A healthy market isn't one where a small group of people are going around liquidating companies. And naturally speaking these would always be bidded into not being profitable anymore in a world where it does happen. So if we were both 1980's corporate raiders looking for these we would both be bidding the price up until it no longer exists. IE the market was undervalued then not overvalued now (in regards to this example). >our argument also can’t account for 2008-09 when stocks were woefully underpriced despite similar levels of information. It similarly cannot account for the 2010 flash crash. The fact is that the market has boomed and busted for centuries and the CAPE ratio is decent at spotting an extremely overvalued market. This cycle has continued despite more and more efficiency of information. Lol liquidity events are a thing and if an example of 1980's corporate raiding happening in the modern era happened - I'd imagine they'd of been purchased during those windows. While the market wasn't being efficiently priced.

LSUTigers34_

Your example suggests that the market is overvalued and not efficiently priced, otherwise there would still be more PE deals. Moreover your example can’t control for interest rates as a factor. Your argument also can’t account for 2008-09 when stocks were woefully underpriced despite similar levels of information. It similarly cannot account for the 2010 flash crash. The fact is that the market has boomed and busted for centuries and the CAPE ratio is decent at spotting an extremely overvalued market. This cycle has continued despite more and more efficiency of information.

LSUTigers34_

Your example suggests that the market is overvalued and not efficiently priced, otherwise there would still be more PE deals. Moreover your example can’t control for interest rates as a factor. Your argument also can’t account for 2008-09 when stocks were woefully underpriced despite similar levels of information. It similarly cannot account for the 2010 flash crash. The fact is that the market has boomed and busted for centuries and the CAPE ratio is decent at spotting an extremely overvalued market. This cycle has continued despite more and more efficiency of information.

Leading_World_3813

The Shiller PE dipped is a smart caution, not overhype, since CAPE over 35 has historically delivered just 3-5% annualized returns over the next decade. I don't think the 10-year average is obsolete for AI. It's essential in filtering out the noise from Mag7 capex surges to reveal if growth is a marathon or mirage. Hyperscalers are tracking a gobbling 60% of operating cash flow and already juicing GDP by 1.1%. Enterprise adoption is still low and ROI gaps widening, we'll need meaningful profits soon or we get reversion. The actual earnings are a sturdier shield than Dot Com vaporware. The internet sparks post-bubble, AI sustainability is still a coin flip.

Efficient-Impact-328

As a pessimist, I think that the reason CAPE is near dotcom levels while TTM PE is lower is largely because today's market speculation is concentrated in private companies (e.g., OpenAI, Anthropic), which are excluded from the S&P 500's earnings calculation, thus artificially inflating the index's current TTM earnings.

Flimsy_Roll6083

Equities today are expensive, but the growth per dollar of investment is also higher than it has ever been. The corporate IRR on investment in new technology is high, so reinvested earnings will have a geometrically progressive effect on future earnings. The comparison to the dot-com era is without basis. While the CAPE ratio today is approaching levels seen during the dot-com bubble, the underlying conditions are materially different. In 1999, a significant portion of equity valuations rested on companies with little or no EBITDA and business models that were untested. Today, although P/E ratios are elevated, the market is driven by companies with substantial revenue, strong EBITDA, robust free cash flow, and well-understood monetized technologies. The high CAPE today reflects expensive future earnings, but not the kind of speculative, pre-profit optimism that characterized the dot-com era.

Inevitable-Log3515

The CAPE ratio is now above 40, second only to the dot-com era, and way past the historical average of 15. Big names (like Nvidia and other tech giants) are making up a massive chunk of the market, with valuations that look wild compared to actual profits. Even some big investors are warning we could see a 30-40% correction in AI names, and lots of personal finance folks are waving red flags. Still, bubbles can last longer than anyone expects, and sometimes they don’t “pop” so much as just deflate and drift lower over time. If you’re buy and hold (like me), just keep your cool, nobody can really time these things. But it’s pretty clear that valuations are off the charts and there’s a lot of euphoria, so some caution is definitely warranted

Particular-Way-8669

CAPE has well known limitations one of which is the fact that if you experience high inflation in given 10 year period it gets completely fucked. Forward PE is much better metric and it is more than reasonable.

m0nsieurp

CAPE ratio at 40 and stock market to GDP at 230%. We can pretend all is well, valuations don't matter anymore and stock prices can go to infinity. But eventually reality sets in, one way or another.

slakmehl

> This is paid by existing earnings elsewhere. Then they aren't earnings. Which will push CAPE even higher. Note that CAPE should never, ever be this high for any reason. It is the single best predictor of future stock market returns known to man, and at the moment predicts negative real returns for the next decade. Unless there is indeed a productivity boom that so far is not in the data, we're in for some rough seas.

Inside-Kick5597

The cyclically adjusted P/E ratio (CAPE) is a good metric to look at to quantify this. The S&P500 is currently at 40, median if 16, mean is 17, max of 44 (Dotcom). https://www.multpl.com/shiller-pe

Double_Suggestion385

That argument oversimplifies what Shiller’s data actually shows. The long-term exponential growth of stock prices isn’t some kind of law of nature, it’s the result of specific historical conditions like productivity gains, population growth, inflation, and changing interest rates. Treating that log-linear trend as fair value assumes all those forces remain constant indefinitely, which they don’t. Shiller himself doesn’t argue that markets always mean-revert to a smooth exponential path. His CAPE ratio work shows that valuations can stay far above or below historical averages for long periods, and that long-term returns tend to be lower when valuations are high. In other words, reversion to the mean happens, but the mean itself shifts with fundamentals like profit margins, discount rates, and tax policy. Calling every deviation a minor fluctuation ignores how major structural changes like postwar growth, globalization, or today’s low-capital business models can change the slope of that trend entirely. Over sufficient time, inflation and compounding make almost anything look like a straight line on a log scale.

VotedOut

The point is that it was never this extremely over-valued during all those other years (CAPE ratio, Buffet Indicator, and Mean Reversions all 2 standard deviations strongly over-valued). But whenever it was this extremely over-valued (1929, 2000, 2021... a crash or bear market always soon followed).

Weak-Pomegranate-435

CAPE: Irrelevant metric F&G Index: Relevant but is a contrarian indicator

VotedOut

But... the CAPE ratio, Buffett Indicator, and Mean Reversion for S&P 500 are all over 2 standard deviations over-valued above historical trend ([Source 1](https://www.currentmarketvaluation.com/), [Source 2](https://www.multpl.com/)) And historically, every time that has been the case (1929, 2000, 2021), there has been a crash or bear market. So... what to do?

C0II1n

What does the shiller CAPE ratio fall to if you remove NVDA, PLTR, and other bloated stocks

goober2341

I find it insane how many people casually ignore the CAPE ratio being at 40. Yes, it's generally difficult to time the market, but that doesn't mean you should switch off your brain and treat the market as some sort of mythical black box which us retail mortals can never understand. Sometimes it's pretty obvious that the market is grossly overvalued and you're better off just staying in cash or looking at non-US assets.