Shiller CAPE Tops 42 as Analysts Challenge 26-Year Bubble Signal
Updated
Updated · Business Insider · Aug 7
Shiller CAPE Tops 42 as Analysts Challenge 26-Year Bubble Signal
2 articles · Updated · Business Insider · Aug 7
Summary
July’s Shiller CAPE ratio rose above 42 for the first time since 2000, reviving warnings that the S&P 500 is at its most expensive level outside the dot-com era.
David Rosenberg called the market “the most overpriced” in recorded history beyond the tech bubble, while earlier CAPE-based forecasts had implied decade returns as low as 1%-3%.
Recent market performance has undercut that signal: from a CAPE of 38 in July 2021, the S&P 500 has gained 73%, or more than 14% annualized over five years.
Fidelity found weak 10-year returns after high CAPE readings usually coincided with shocks such as World War II or the Great Recession, suggesting crises—not valuation alone—drove the damage.
Goldman Sachs strategist Ben Snider argues today’s valuations may persist, projecting 7% annualized returns as profit margins have climbed from 7% in 2000 to about 13% now.