S&P 500 CAPE Ratio Hits 40.13 Amid AI Boom

The S&P 500 Shiller Price-to-Earnings (P/E) Ratio, or CAPE Ratio, closed at 40.13 on October 30, 2026. This figure is 130% above the long-term average of 17.44 and marks only the fifth time in 30 years that the ratio has surpassed 30. Current valuations are driven by record share repurchases, the adoption of quantum computing, and the build-out of artificial intelligence infrastructure.

Historical data suggests this peak may foreshadow a market downturn. Previous instances where the ratio exceeded 30 occurred in 1997, 2017, 2019, and 2020, with some followed by major crashes such as the dot-com bubble and the COVID-19 pandemic. Analysts suggest a pullback of 20% to 35% might be necessary to return the ratio below 30.

Despite these signals, long-term trends remain positive. Bespoke Investment Group notes that bull markets typically last longer than bear markets, and Crestmont Research reports that the S&P 500 has not declined over any rolling 20-year period since 1900.