Global anchor · Amplifiers · Valuation and Leverage
99hotat an extreme
Now 40.7 times earnings | Data for Oct 2026
Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.
What it is
Share prices divided by average inflation-adjusted earnings over the past 10 years (the Shiller CAPE).
One of the longest records of stock market valuation in public data (from the 1880s). Its position compares it with its own history, showing whether valuation is high or low relative to normal.
Share price divided by average inflation-adjusted earnings over the past 10 years.
Where it stands now
coldcoolneutralwarmhotHatched = earlier periods that were also hot
When it was here before
US stocks after it began, cumulative1 yr2 yr3 yr
For each period, the changes 1, 2 and 3 years after it began are cumulative and measured from its first month; “What happened next” is measured from every hot month, so the two give different numbers. The events named beside each period are major events of that time, not necessarily related to the readings here.
What happened next
Bars: median cumulative changeEarlier months with US valuation hot, excluding the current period (466)All months (1631)
Median of the deepest drop below the starting month within the next 5 years: −19.6% for months with US valuation hot; −10.5% for all months.
The hot months come from a small number of market episodes (8), and neighboring months are not independent events; rises and falls are all listed. This is the historical record, not a forecast. “US stocks” means the S&P 500 price index compiled by Professor Shiller (monthly average, excluding dividends).
| Median position | Back to neutral (40–60) | Still hot or more extreme | |
|---|---|---|---|
| 1 yr later | 92hot | 6% | 75% |
| 3 yr later | 89hot | 9% | 63% |
| 5 yr later | 83hot | 8% | 54% |
Has hot or cold lined up with later returns?
1890–2021: average yearly change in US stocks over the next 5 years
There is no clear relationship between hot or cold and what came next. The gaps between the bars are not consistent across months (rank correlation below 0.25); this is a record of the past, not a forecast.
What it is linked to
US 10-yr yieldtoUS valuationCommon explanation: Cause · opposite direction
Higher rates make future profits worth less today, weighing on valuations
This issue: US 10-yr yield at 91 (hot), US valuation at 99 (hot) — both above normal, not in line with the common explanation (this is an inverse link).
Weak or inconsistentAgreement +0.37 · in step in 24 of 49 5-year periods
Values
Data and sources