Shiller CAPE Tops 40 Again: What It Signals Now

TL;DR: The Shiller CAPE ratio has stayed above 40 since May, a level it has reached in only one earlier stretch, the 1999 dot-com peak, according to The Motley Fool. That says stocks are expensive against a decade of earnings. It does not say when prices will fall, and last time the decline took over a year to start.

The unease is showing up in the indexes. The S&P 500 and the Dow Jones Industrial Average have each slipped about 2% from their all-time highs, and the Nasdaq Composite is down close to 6%, according to The Motley Fool via Yahoo Finance, reporting on October 25, 2026. If your portfolio is mostly public stocks, it is worth understanding the ratio behind that unease before you decide whether anything needs to change.

What is the CAPE ratio telling investors right now?

It says U.S. stocks are priced about as high against long-run earnings as they have been once before. That is rare. The ratio compares prices to the average of the past 10 years of inflation-adjusted earnings, and The Motley Fool reports it reached 41.4 earlier this year and has stayed above 40 continuously since May.

The long-run average is about 17, per the same report. The only higher reading came in December 1999, when it peaked at 44.

CAPE reading	When	Source
About 17	Long-run average	The Motley Fool
44	December 1999 peak	The Motley Fool
41.4	Earlier in 2026, above 40 since May	The Motley Fool

Over more than 150 years, a reading above 40 has happened in only two stretches, so any conclusion rests on one earlier example.

What happened the last time CAPE crossed 40?

The S&P 500 finished in the red in 2000, 2001 and 2002, losing about half its value from peak to trough, according to The Motley Fool. The bear market officially began in March 2000, just over a year after the ratio first passed 40, per The Motley Fool via Yahoo Finance.

That lag matters for you. The ratio crossed 40 in early 1999, and the bear market did not begin until March 2000.

Does a high CAPE mean a crash is coming?

No, and the technical picture is similarly mixed. CNBC's chart analysis notes the S&P 500 has struggled to break decisively above 7,800 since late July. The analyst adds that the similarities with earlier setups "don't guarantee another significant decline, but they deserve attention."

Michael Burry has also called the market "uncannily close" to 2000, with unusually weak breadth under an index near record highs, according to Stocktwits. That is one well-known investor's reading, and nobody can verify it as a forecast.

Sentiment is leaning cautious. The Motley Fool, citing the latest American Association of Individual Investors survey, reports that nearly 46% of respondents expect lower prices over six months and 37% are bullish.

Where is the concentration risk hiding?

In the funds many investors treat as the safe core. The Invesco QQQ Trust, which tracks the Nasdaq-100, lists Nvidia at 8.10%, Apple at 8.08% and Microsoft at 6.20% of holdings, according to The Motley Fool.

You may own those three companies several times over, through an S&P 500 fund, a Nasdaq fund and individual shares. The overlap is where a valuation reset would hit hardest.

What can an accredited investor do with a signal like this?

The first move is a plain inventory of what you own and how fast you could sell it. Wall Street's menu of index funds and target-date funds can leave you holding the same expensive companies in several wrappers, and access to private markets does not fix that on its own. Judgment does, and judgment here means downside first: how you could lose money before how you might make it.

Some investors look at assets that do not move with the S&P 500, though each has its own costs. Our pieces on gold, silver and commodities for accredited investors and how family offices allocate to alternatives show the trade-offs. Private holdings add their own risk, covered in our look at private credit's insurance exposure and in what down rounds mean for investors.

Illiquidity is a cost. Moving money out of public stocks into something you cannot sell for years trades one risk for another.

Common mistakes

The first is treating CAPE as a timer. It describes how expensive the market is, and the 1999 example shows prices can keep rising after it flashes red.

The second is counting funds instead of holdings. Three index funds can be one big bet on the same ten companies.

The third is selling everything and calling it prudence. If the market runs another year, you have locked in a cost to avoid a loss that may not arrive on your schedule.

FAQ

How likely is the stock market to crash in 2026? Nobody can say. CAPE above 40 and Burry's warning are bearish readings, and CNBC's analyst notes similar chart patterns do not guarantee a decline.

What is Warren Buffett saying about the stock market right now? Berkshire Hathaway's shareholder letters and annual meeting remarks are the primary record of his views. Read those directly before trusting a headline summary of what he supposedly thinks.

Can private investments protect me from a stock market decline? Not automatically. Private holdings can lose value too, and you often cannot sell them quickly. Read about down rounds before assuming they sit apart from public markets.

What to do today

Open your brokerage statements and list your ten largest positions, including what your index funds hold inside them. Then write down how much of your portfolio you could not turn into cash within a week. If either number surprises you, that is the thing to fix, whatever CAPE does next.

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Educational content only. Not investment, tax, or legal advice. Not an offer or solicitation to buy or sell securities. Past performance does not guarantee future results. Private-market investments are illiquid and involve risk of loss, including total loss of capital. Consult qualified advisers. Angel Investors Network is not a broker-dealer or investment adviser.