Shiller CAPE Ratio Hits 41.5 Signaling Market Risk
Investor Matt DiLallo is shifting to defensive holdings after the Shiller CAPE ratio reached its second-highest level in 150 years.
The Shiller CAPE ratio, which measures stock prices against a decade of inflation-adjusted earnings, has climbed to 41.5. This figure represents the second-highest level in 150 years and has historically served as a precursor to major market downturns, such as the 2022 bear market and the 1999 dot-com bubble burst.
In response to this valuation signal, investor Matt DiLallo is transitioning his portfolio toward defensive holdings to improve stability. He is increasing positions in Berkshire Hathaway, noting the company's diversified operating businesses and its $365 billion cash reserve.
DiLallo's strategy also includes Realty Income, a real estate investment trust that has outperformed the S&P 500 in 11 of the last 13 market corrections. Additionally, he identifies Procter & Gamble as a durable option for stability, citing the company's 70-year streak of dividend increases and its resilient consumer household brands.
