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The Shiller CAPE ratio for the S&P 500 index has reached 41.8. This is the second-highest level in the metric's history and the highest since 1999.
In 155 years of data, the ratio has peaked above 30 on only five occasions. Several of those peaks preceded significant market downturns.
The CAPE ratio, or cyclically adjusted price-to-earnings, is a long-term valuation tool. It smooths out earnings volatility caused by business cycles and adjusts for inflation.
Analysts widely respect it for comparing S&P 500 valuations across different eras. However, the current reading of 41.8 has raised concerns among some investors that the market may be overpriced and due for a sell-off.
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