Shiller PE Ratio Reaches Elevated Levels, Sparking Market Concerns
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Shiller PE Ratio Reaches Elevated Levels, Sparking Market Concerns
- The Shiller price-to-earnings (PE) ratio, also known as the Cyclically Adjusted Price-to-Earnings (CAPE) ratio, recently registered a value of 41.18 as of August 2026, significantly higher than its historical average.
- Nobel laureate Robert Shiller developed this metric, which Jonas Goltermann, Chief Markets Economist at Capital Economics, views with concern given its current trajectory.
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The Shiller PE ratio, a valuation measure developed by Nobel Prize-winning economist Robert Shiller, has recently reached levels that are drawing attention from market analysts. As of August 2026, the Shiller PE ratio stood at 41.18. This metric, which smooths out short-term fluctuations by dividing the current S&P 500 price by the average of the previous ten years’ inflation-adjusted earnings, is considered a long-term indicator of market valuation.
Jonas Goltermann, Chief Markets Economist at Capital Economics, has expressed apprehension regarding the current elevated state of the Shiller PE ratio. Historically, a high Shiller PE ratio has been associated with lower long-term stock market returns over the subsequent 10 to 20 years. For instance, the ratio reached 44 just before the dot-com bubble burst in 1999. While it is not a precise market timing tool, it serves as a “thermometer” for overall market valuation and potential risk.
The Shiller PE ratio is distinct from the traditional PE ratio, which can be heavily influenced by short-term earnings fluctuations, especially during recessions when earnings can temporarily plunge, leading to an artificially high standard PE ratio. By using a ten-year average of inflation-adjusted earnings, the CAPE ratio aims to provide a more stable and reliable picture of market valuation across business cycles.