S&P 500 CAPE Ratio Hits Record High Since Dot-Com Bubble

The S&P 500's Shiller CAPE ratio has reached its highest level since the dot-com bubble, hitting approximately 41.1 in December 1999, with a long-term average of around 17.

To put this into perspective, the current reading places the S&P 500 in the top 1% of all historical valuations going back to 1881, and it's even closer to the all-time record of 44.2 set just before the dot-com crash.

The CAPE ratio works like a price-to-earnings ratio with a memory, using the average of ten years of inflation-adjusted earnings rather than a single year's worth.

The current elevated levels are concerning for investors, as historical data suggests that valuations above 30 to 40 have correlated closely with weak equity returns over the following decade.