S&P 500 Shiller PE Ratio Exceeds 40

The S&P 500 Shiller PE Ratio, also known as the Cyclically Adjusted PE Ratio, has remained consistently above 40 since May 2026. As of October 26, the ratio reached 40.66, placing it 133% above its long-term average of 17.44. This marks only the third time in 28 years that the market has reached this valuation level.

Market gains are currently driven by share buybacks, record-breaking initial public offerings, and artificial intelligence infrastructure. Historical data suggests that such premium valuations often precede significant directional shifts, similar to the 2000 dot-com bubble burst and the 2022 bear market.

Despite the risk of a correction, research from Bespoke Investment Group and Crestmont Research indicates that bull markets typically last longer than bear markets. Additionally, 20-year rolling returns for the index have remained positive since 1900.