Shiller CAPE Ratio Hits Highest Level Since Dot-Com Bubble

The Shiller CAPE Ratio, a valuation metric for the 500 largest publicly traded U.S. stocks, reached its highest level since the dot-com bubble as of September 19, 2026. This cyclically adjusted price-to-earnings ratio previously peaked in 1929 shortly before the Great Depression, serving as a historical warning sign for large-cap stock valuations.

While some analysts suggest a new normal where higher valuations are sustainable, others view the current levels as a potential AI bubble. In response to these concerns, investors are exploring diversification into small-cap stocks to mitigate risk.

The Vanguard Group forecasts that U.S. small-cap stocks will outperform large-cap and growth stocks over the next 10 years. This projection supports the shift toward smaller companies as a hedge against the high valuations currently seen in the largest U.S. equities.