S&P 500 hits 41.4 CAPE ratio, matching dot-com bubble levels

The S&P 500 just hit its highest level ever. The index is up for six straight days and has gained about 13% so far in 2026. If the trend continues, it will mark the fourth straight year of double-digit gains — a streak not seen since the dot-com era.

This bull market is starting to look like the late 1990s in one key way. The Shiller CAPE ratio, which measures stock valuations against average earnings over the past decade, has just climbed above 40. That’s a level only matched once before — during the dot-com bubble. Back then, the ratio peaked at about 44. Today’s level of roughly 41.4 means investors are now paying $40 for every $1 of average inflation-adjusted earnings, more than double the historical average of $17.

History shows that when the CAPE is this high, trouble often follows. Of the handful of times it has exceeded 24, many ended in major crashes, including the Great Depression and the dot-com crash. While a high CAPE doesn’t guarantee a downturn, it does signal that stock prices are riding on unusually high expectations for future growth. If companies fall short — especially on big bets like AI spending — valuations could reset sharply downward.

Investors should be cautious. Favor quality over hype. Look for companies with strong balance sheets, steady cash flow, and real earnings rather than speculative valuations. High-quality stocks may not deliver eye-popping gains, but they’re less likely to crash when the music stops.