S&P 500 Hits Highest Level in Over 26 Years: What History Says Comes Next

The stock market is repeating a pattern not seen in decades, and it's essential to understand what history says comes next. The Shiller P/E ratio, also known as the cyclically adjusted P/E ratio (CAPE ratio), provides perspective on how expensive the S&P 500 is. At its current level of 42.2, it hasn't been this high since the dot-com bubble in November 1999 when it peaked at 44.2.

The CAPE ratio looks at S&P 500 companies' earnings over the past 10 years and adjusts them for inflation. It's a useful metric because it puts into perspective how much you're paying for each dollar of earnings from S&P 500 companies. The higher the CAPE ratio, the more expensive the S&P 500 is considered.

Some may argue that this isn't an apples-to-apples comparison to the dot-com bubble, as many companies during that time didn't have meaningful revenue or profit. However, the current market's expensiveness is driven by the AI boom and skyrocketing valuations of big tech.