Robert Shiller's CAPE Ratio Archives - the patient investor %

December 27, 2025

US Market Snapshot

The gauge on the left indicates whether the market is in a bull or bear phase, and the indicator on the right reflects the current stock market valuation. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks because market valuations are high; however, we recommend exercising caution when adding new positions.

Bull/Bear Market

The Bull/Bear indicator remains at 40%, warning of a bear market ahead, with three of five indicators signaling risk-off.

Bull-Bear Market Indicator

Heavy truck sales were revised down to 25,500 units in November, with the 12-month MA falling to 35,200. Declining truck sales are now at recession levels, indicating that economic growth is slowing.

Heavy Truck Sales (Units)

Stock Pricing

Stock pricing increased to 98.57 percent, close to its October high of 98.66, and above the low of 95.04 percent in April. The extreme pricing warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its historical data, with results expressed in standard deviations from the mean. We then calculate an average of the five readings and convert that to a percentile. The higher stock market prices are relative to their historical mean, the greater the risk of a sharp drawdown.

Warren Buffett’s favorite stock market valuation metric compares market capitalization to nominal GDP. The ratio has reached a record high of 2.99 compared to a 50-year average of 1.18, indicating that stock market pricing is extreme.

Stock Market Capitalization/GDP

Robert Shiller’s CAPE ratio compares the S&P 500 index to a 10-year average of inflation-adjusted earnings. The current value of 40.1 is the highest outside of the 1999-2000 Dotcom bubble.

Robert Shiller's CAPE Ratio

Conclusion

The bull-bear indicator at 40% signals a bear market ahead, while extreme pricing increases the risk of a significant drawdown.

Acknowledgments

Prof. Robert Shiller: CAPE 10 Data
S&P Global: S&P 500 Sales and Earnings Estimates
University of Michigan: Survey of Consumers
Federal Reserve of St Louis: FRED Data
Bureau for Economic Analysis: Motor Vehicles Data

Notes

See Managing Risk to learn more.
See Bull-Bear and Stock Valuation for more on our composite market indicators.

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

November 29, 2025

US Pricing Extreme

The gauge on the left indicates whether the market is in a bull or bear phase, and the one on the right reflects the current stock market valuation levels. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks because the market valuation is high; however, we recommend exercising caution when adding new positions.

Bull/Bear Market

The Bull/Bear indicator remains at 40%, signaling a bear market ahead. Two market indicators (marked in orange below) are delayed due to the recent US government shutdown.

Bull-Bear Market Indicator

The Chicago Fed National Financial Conditions Index eased to -0.534 on November 21, indicating loose monetary conditions that support high stock prices.

Chicago Fed National Financial Conditions Index

However, a steep plunge in Bitcoin warned of a liquidity contraction during the government shutdown.

Bitcoin (BTC)

The Treasury General Account at the Fed increased during the government shutdown, removing liquidity from financial markets. We expect liquidity to improve as the TGA balance declines in December.

Fed Liabilities: Treasury General Account (TGA)

Continued unemployment claims are close to 2 million, while the unemployment rate rose to 4.4%. Rising claims above 2 million typically forewarn of a recession, but an unemployment rate below 5.0% is not generally associated with recessions.

Continued Claims & Unemployment Rate

Stock Pricing

Stock pricing increased to 98.55 percent, compared to a high of 98.66 percent in late October and an April low of 95.04 percent. The extreme pricing warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its historical data, with results expressed in standard deviations from the mean. We then calculate an average of the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Robert Shiller’s CAPE has climbed above 40 for the second time in its more than one hundred-year history. The first time was during the 1999-2000 Dotcom bubble. CAPE compares the S&P 500 index to its 10-year inflation-adjusted history. The average since 1974 is 22.25.

S&P 500 Price-to-Sales

Conclusion

The bull-bear indicator at 40% warns of a bear market ahead, while extreme pricing increases the long-term risk of a significant drawdown.

Acknowledgments

Prof. Robert Shiller: CAPE 10 Data
S&P Global: S&P 500 Sales and Earnings Estimates
University of Michigan: Survey of Consumers
Federal Reserve of St Louis: FRED Data
Bureau for Economic Analysis: Motor Vehicles Data

Notes

See Managing Risk to learn more.
See Bull-Bear and Stock Valuation for more on our composite market indicators.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 1, 2025

US Stock Pricing at New High

The gauge on the left indicates bull or bear market status, and the one on the right reflects stock market valuation levels. Stock market pricing indicates whether stocks are cheap or expensive relative to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks because the market valuation is high. Still, we would advise investors to be circumspect about adding new positions without carefully investigating the underlying value.

Bull/Bear Market

The Bull/Bear indicator remains at 40%, warning of a bear market ahead. Updates to three market indicators (highlighted in orange below) are delayed because of the US government shutdown.

Bull-Bear Market Indicator

The Philadelphia Fed Coincident Economic Activity Index deserves mention in the absence of updates for some of our regular indicators. A decline below 2.5% typically only occurs several months ahead of a recession.

Coincident Economic Activity Index
The Chicago Fed National Financial Conditions Index continues to signal loose monetary conditions, supporting high stock prices.

Chicago Fed National Financial Conditions Index

However, a decline in bank reserves below $3.0 trillion warns that repo markets are tightening.

Commercial Bank Reserves

And Bitcoin continues to test support at 110K, warning of tighter liquidity.

Bitcoin (BTC)

Stock Pricing

Stock pricing increased to a new high of 98.66 percent, compared to an April low of 95.04 percent. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Robert Shiller’s CAPE index climbed above 40 for the first time ever outside of the Dotcom bubble. CAPE compares the S&P 500 index to a ten-year average of inflation-adjusted earnings.

S&P 500 CAPE

Conclusion

The bull-bear indicator at 40% warns of a bear market ahead, while extreme pricing increases the long-term risk of a significant drawdown.

Acknowledgments

Prof. Robert Shiller: CAPE 10 Data
S&P Global: S&P 500 Sales and Earnings Estimates
University of Michigan: Survey of Consumers
Federal Reserve of St Louis: FRED Data
Bureau for Economic Analysis: Motor Vehicles Data

Notes

See Managing Risk to learn more.
See Bull-Bear and Stock Valuation for more on our composite market indicators.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 18, 2025October 18, 2025

US Stock Pricing at Extreme

Bull/Bear Market

The Bull/Bear indicator remains at 40%, warning of a bear market ahead.

Bull-Bear Market Indicator

Updates to three market indicators (highlighted in orange) are delayed because of the US government shutdown.

The Chicago Fed National Index of Financial Conditions dropped to -0.559 on October 10, indicating a return to pandemic-era loose monetary conditions. NFCI values above zero indicate monetary tightening, while values below signal loose financial conditions.

Chicago Fed National Financial Conditions Index

Stock Pricing

Stock pricing increased to 98.45 percent, compared to a high of 98.56 percent two weeks ago, and an April low of 95.04 percent. The extreme reading warns that stocks are at long-term risk of a significant drawdown.

Stock Market Value Indicator

Robert Shiller’s CAPE measure reached 39.20 this week, the highest ever recorded outside of the Dotcom bubble in 1999-2000.

S&P 500 CAPE

CAPE compares the S&P 500 index to a 10-year average of inflation-adjusted earnings.

Conclusion

The bull-bear indicator at 40% warns of a bear market ahead, while extreme pricing increases the long-term risk of a significant drawdown.

Acknowledgments

Prof. Robert Shiller: CAPE 10 Data
S&P Global: S&P 500 Sales and Earnings Estimates
University of Michigan: Survey of Consumers
Federal Reserve of St Louis: FRED Data
Bureau for Economic Analysis: Motor Vehicles Data

Notes

See Managing Risk to learn more.
See Bull-Bear and Stock Valuation for more on our composite market indicators.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

September 27, 2025

US bear market and extreme valuations

The gauge on the left indicates bull or bear market status, and the one on the right reflects stock market valuation levels. Stock market pricing indicates whether stocks are cheap or expensive relative to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks because the market valuation is high, but we would advise investors to be circumspect about adding new positions without careful investigation of the underlying value.

Bull/Bear Market

The Bull/Bear indicator remains at 40%, warning of a bear market ahead.

Bull-Bear Market Indicator

The Chicago Fed National Financial Conditions Index declined to -0.567, indicating loose monetary conditions that will likely support stock prices.

Chicago Fed National Financial Conditions Index

However, heavy truck sales are falling, reflecting industry concerns that economic activity is slowing.

Heavy Truck Sales

Stock Pricing

Stock pricing eased to 98.27 percent, from a new high of 98.32 percent last week, and an April low of 95.04 percent. The extreme reading warns that stocks are at long-term risk of a significant drawdown.

Stock Market Value Indicator

Robert Shiller’s CAPE ratio for the S&P 500 is at its highest ever level (39.20) outside of the 2000 Dotcom bubble.

Robert Shiller's CAPE Ratio

CAPE compares the current index value to a ten-year average of inflation-adjusted earnings.

Conclusion

The bull-bear indicator at 40% warns of a bear market ahead, while extreme pricing increases the long-term risk of a significant drawdown.

Acknowledgments

Prof. Robert Shiller: CAPE 10 Data
S&P Global: S&P 500 Sales and Earnings Estimates
University of Michigan: Survey of Consumers
Federal Reserve of St Louis: FRED Data
Bureau for Economic Analysis: Motor Vehicles Data

Notes

See Managing Risk to learn more.
See Bull-Bear and Stock Valuation for more on our composite market indicators.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.