Investors shouldn’t be worried — just aware of the why.
When something makes history in the stock market, it’s always best to clarify if it’s good or bad history. Sometimes, history can be comforting; other times, it can be concerning. Needless to say, both have very different implications.
The S&P 500 (^GSPC +0.79%) is making history as one of the most expensive markets ever, based on the Shiller price-to-earnings (P/E) ratio, also known as the CAPE ratio.
This metric looks at the S&P 500’s earnings over the past 10 years, adjusting them for inflation to prevent one-off events from skewing the numbers. For example, an event like a drop in corporate profits during the COVID-19 pandemic’s height wouldn’t cause the ratio to spike and be misleading.
Image source: Getty Images.
How expensive is the current S&P 500?
At the time of this writing, the Shiller P/E ratio is 40.22. This means…
