The Stock Market Is Doing Something It's Only Done Twice Since 1871 -- Should You Be Worried for 2026?
The S&P 500’s Shiller P/E ratio, often called the CAPE ratio, has climbed to rare heights once again. After a strong market run in 2025, the measure now sits between 39 and 40—a level only seen twice since records began in 1871. Such extreme readings have historically signalled caution for investors.
The CAPE ratio tracks stock prices against long-term earnings, adjusted for inflation. Its data stretches back to 1871, thanks to economist William R. Wadworth, who built the foundational US stock market database. Since then, the ratio has topped 40 on only two occasions.
The first spike occurred in March 2000, at the peak of the dot-com bubble. Now, for the second time, the ratio has returned to similar levels after the S&P 500’s surge in 2025. Past patterns show that when CAPE readings reach these extremes, markets often reverse sharply. High CAPE values suggest that investor optimism may be outpacing economic fundamentals. Yet experts advise against abandoning strong stocks entirely. Instead, they recommend patience and careful selection as 2026 approaches.
With the CAPE ratio nearing 40, history indicates potential risks ahead. Sharp market corrections have followed similar peaks in the past. Investors are now watching closely to see whether this pattern repeats or if current conditions prove different.
