Shiller PE nearing second highest value ever

[surprising]

Shiller PE is about to overtake the Covid rally as second highest ratio ever recorded. Highest ever goes to dotcom peak. 4th highest is right before Black Thursday in 1929. All peaks were followed by significant crashes. Stocks are crazy expensive right now, mostly fueled by tech and AI, where they are commanding insanely high PEs right now. My crystal ball says that when Nvidia ever shows any kind of weakness, it will selloff pretty hard and take down the rest of the market.

But, on the flip side, I've also read that due to AI, big tech will continue to significantly improve EPS because they are firing lots of humans and replacing with cheaper AI. EPS will continue to go higher for the foreseeable future, so investing in S&P or nasdaq, which is heavily weighted tech, will continue to be profitable.

 

[aja8888]

John Hussman's article posted today is some good reading in this regard:

The Impression of Invincibility - Hussman Funds

With our most reliable stock market valuation measures at the highest extremes in U.S. history, record negative readings on our most reliable 'equity risk premium' gauge (estimated S&P 500 total returns vs. Treasury yields), and the narrowest junk bond risk premiums in history, it’s useful for...

www.hussmanfunds.com

You can’t possibly call a bubble or a bust to the right day, except once every several lifetimes. What you can do, though, is to identify bubbles that eventually burst. That turns out, in the past to have been intellectually pretty straightforward. You can measure them, and all of them eventually go back to trend. And that movement from very high back to trend has always made cash look very much better for quite a few years. These are not insignificantly long periods of time. They add up to half of all the time.

In terms of a historian, I put a lot of weight on 1929, I think it’s a wonderful example. Japan of course, the mother of all of them. It would be highly unlikely for this one to not be similar, and at or around several years in the future, 5, 10, even 15, it’s highly likely – from a historical point of view – you’ll reach a point where you would have rather been in cash.”

– Jeremy Grantham, GMO, The Master Investor with Wilfred Frost, July 10, 2025

 

[audreyh1]

Yeah, I keep seeing that. We’ve been mostly above thirty for many years now!

 

[Dtail]

The Schiller PE on a conceptual basis makes sense. When it was developed and back dated, it appeared to have a high correlation between a high PE and market downturns.
However after it was developed, it has not been particularly accurate.
If one only bought equities when it was at the average number in the last 25+ years, then one would have only bought equities in March 2009.
As a very broad concept, yeah okay, but to make any investment decisions off of it, nah.

 

[Dtail]

John Hussman's article posted today is some good reading in this regard:

The Impression of Invincibility - Hussman Funds

With our most reliable stock market valuation measures at the highest extremes in U.S. history, record negative readings on our most reliable 'equity risk premium' gauge (estimated S&P 500 total returns vs. Treasury yields), and the narrowest junk bond risk premiums in history, it’s useful for...

www.hussmanfunds.com

Isn't Hussman a perma bear?

 

[FREE866]

OMG guys cmon. You’re better than this.

John Hussman articles? That guy has made a living off gloom and doom advice for decades and his funds have been the worst performers as well

The Shiller PE? The creator himself is on record as saying it’s not a timing tool. PEs are not predictive. We have history that debunks it. If it were only that simple. It’s noise. And a catchy headline.

 

[FREE866]

Isn't Hussman a perma bear?

Yes. He’s a carnival barker. One of the worst.

 

[aja8888]

Isn't Hussman a perma bear?

Sure is, but his articles are well written! And full of pretty scatter graphs and great quotes!

(just another perspective)

 

[imbatman]

IDK about Hussman but this chump sees no need to put new money into a stock market with those trend lines and this level of political upheavel. Totally happy to slum it with 4.5%+ returns elsewhere......

 

[FREE866]

I'm actually disappointed in anyone taking this guy seriously.

That article is the classic Gobbledygook this guy has been peddling for decades. Remember, the bear case always SOUNDS smart.

The proof is in the actual numbers though.

His equity funds he has are:

HSGFX
1.23% expense ratio and since inception in 2000 has an annualized return of .78%

HSAFX
2% expense ratio and since inception in 2019 has an annualized return of 5.28%

 

[Al18]

Portfoliovisualizer says HSAFX has an expense ratio of 1.29% and a CAGR of 5.29% since its inception 8/29/19. Assets are small at 28.28 M. This is a 50% stock/50% fixed income fund. Glad I don’t invest in it. By comparison FBALX, a 60% stock/40% bond fund has a CAGR over the same period of time of 11.61%, which assets of 57.46 B

 

[Texas Proud]

The normal stuff about a market being expensive....

My question would be 'how expensive?'.... and the next would be...'when is it going to correct?'...

AND... when to get back in?

Yep, none of the models can give answers to these questions so I stay in equities and live with the ups and downs... and have been rewarded handsomely...

 

[tulak]

I’ll ride this out too, with a high equity allocation, because what’s the alternative?

I have a nice TIPS ladder, in case SHTF.

 

[FlyingCircus]

Shiller PE is about to overtake the Covid rally as second highest ratio ever recorded. Highest ever goes to dotcom peak. 4th highest is right before Black Thursday in 1929.

Shiller PE (~CAPE?) is best used as an indicator of potential forward return expectations average for the next n years - n between 5 and 10 - not a bear market warning.
15 years ago the trailing 20 year average of PEs on the S&P500 was 25.5. 5 years ago it was 25.1. Now its 24.1. (Jan 1 annual measures).

Current PE is slightly over 30, (7/21/25) which seems to start raising eyebrows.

S&P 500 PE Ratio by Year - Multpl

S&P 500 PE Ratio table by year, historic, and current data. Current S&P 500 PE Ratio is 32.04, a change of +0.18 from previous market close.

www.multpl.com

 

[Dtail]

Sure is, but his articles are well written! And full of pretty scatter graphs and great quotes!

(just another perspective)

All these perma bears are correct when the bear market hits and that is emphasized. This includes the so called bond king.

 

[COcheesehead]

They’ll be a pullback and likely in the next 30-90 ish days, generally the weakest seasonally. It presents opportunities too.

 

[Dtail]

Shiller PE (~CAPE?) is best used as an indicator of potential forward return expectations average for the next n years - n between 5 and 10 - not a bear market warning.
15 years ago the trailing 20 year average of PEs on the S&P500 was 25.5. 5 years ago it was 25.1. Now its 24.1. (Jan 1 annual measures).

Current PE is slightly over 30, (7/21/25) which seems to start raising eyebrows.

S&P 500 PE Ratio by Year - Multpl

S&P 500 PE Ratio table by year, historic, and current data. Current S&P 500 PE Ratio is 32.04, a change of +0.18 from previous market close.

www.multpl.com

So remember how many predictions there were that the 2020's decade would be a lost decade for stocks.

 

[fognostic]

Current PE is slightly over 30, (7/21/25) which seems to start raising eyebrows.

Agreed. Our base plan is 55-60 percent equity in early retirement to mitigate SOR risk, and we'll raise equity allocation over time. As we approach having whatever is left of SS for an income base, we'll get more comfortable tolerating more equity. Not comfortable going higher with equity allocation in our early days though, especially today.

 

[FlaGator]

Agreed. Our base plan is 55-60 percent equity in early retirement to mitigate SOR risk, and we'll raise equity allocation over time. As we approach having whatever is left of SS for an income base, we'll get more comfortable tolerating more equity. Not comfortable going higher with equity allocation in our early days though, especially today.

This is prudent, IMO. I dialed equities down from 85% to 60, when the paycheck stopped and expenses were high with a new wife, big house, and kids at home. Felt there was only so much risk I could take.

After a few years and some good markets, let it float back up. With a big reduction in expenses due to those three factors gone or substantially reduced, and SS now coming in, I'm comfortable at 70%+

 

[donheff]

Yeah, time to stay with my long-term AA. Eventually something will happen, and we will have a significant crash. I'm amazed all the tariff mad DOGE BS didn't precipitate one. I'm not going to try to time it.

As for AI bubble comparisons with 1999, who knows. The entertaining Gartner hype cycle already shows Generative AI (which is the stunning front man that fed the frenzy) in the trough of dissolution, meaning businesses have figured out its limitations and difficulties. I get the impression that most companies are actively addressing AI but more cautiously than some of the goofy crap we bought into in the dot com period. I'm way on the outside looking in - so I may be misreading things.

 

[Onda]

Yeah, time to stay with my long-term AA. Eventually something will happen, and we will have a significant crash. I'm amazed all the tariff mad DOGE BS didn't precipitate one. I'm not going to try to time it.

Such as a Treasuries crisis and massive losses in long bonds? Maybe inflation quietly destroying their real value? That’s definitely a possibility. The distortions in the bond market feel like a slow-motion crash waiting for a trigger. Staying disciplined with long-term asset allocation is probably the only sane move right now.

 

[frayne]

Everyone's crystal ball is right until it's not and no one bats a 1000.

 

[ncbill]

"Stock prices have reached what looks like a permanently high plateau"

 

[latexman]

IIRC, Warren has a record high of dry powder. Take heed.

I always consider . . . WWWD?

 

[COcheesehead]

"Stock prices have reached what looks like a permanently high plateau"

I just read an interesting article yesterday with data from past markets. When volatility is low, like now with no 1% movements, the longer that goes, the more likely the next big move is down, not up.