Shiller CAPE Ratio Hits Warning Level: What Investors Should Know

The Shiller CAPE ratio has reached its second-highest level on record at 41.5, prompting some investors to sound warning signals.

This metric measures whether the market is cheap or expensive relative to historical earnings, and it has only been above 40 one other time over the last 150 years.

The Shiller CAPE ratio's previous peak in 1999 was followed by a dot-com bubble burst, while its more recent high of 38.6 in October 2021 preceded a 25% crash in the S&P 500 the following year.

Berkshire Hathaway, Procter & Gamble, and Realty Income are defensive holdings that may be worth considering during a potential market downturn, according to one analyst.