What Is the Shiller CAPE Ratio? Explained
The Shiller CAPE (cyclically adjusted price-to-earnings) ratio divides the S&P 500's price by the average of its last ten years of inflation-adjusted earnings. In October 2026 it is about 40, against a median of 16.1 since 1871. Only 21 of 1,869 months were higher, almost all between 1999 and September 2000. It describes how expensive the market is, not when it will fall.
How is the CAPE ratio calculated?
Economist Robert Shiller built on an idea from Benjamin Graham and David Dodd: judge a company's earning power over many years, not one. The formula:
CAPE = S&P 500 price ÷ average inflation-adjusted earnings of the last 10 years
Averaging ten years of earnings smooths out recessions and booms, so one terrible or one spectacular year cannot swing the ratio. Adjusting for inflation keeps old earnings comparable with today's prices. Flip it over and you get a CAPE earnings yield: at a CAPE of 40.5, that is 100 ÷ 40.5, or about 2.5% a year, against a 10-year Treasury yield of 5.10% in mid-October 2026.
The glossary has the short definition, and the Crash Indicator shows today's reading.
Shiller CAPE since 1871 (January readings, plus October 2026). The dashed line is the 16.1 median. Source: Robert Shiller's data via multpl.com.
What is a high or low CAPE?
The ratio has ranged from under 6 to over 44. These monthly readings show the extremes and where today sits:
| Month | CAPE | What was happening |
|---|---|---|
| June 1932 | 5.6 | Bottom of the Great Depression |
| August 1982 | 6.6 | Start of the 1980s bull market |
| March 2009 | 13.3 | Financial-crisis low |
| Median since 1871 | 16.1 | The long-run middle |
| October 2007 | 27.3 | Peak before the 2008 crisis |
| September 1929 | 32.6 | Peak before the 1929 crash |
| December 2021 | 38.3 | Pandemic-era high |
| December 1999 | 44.2 | All-time high, dot-com bubble |
| October 2026 | about 40 | Higher than 99% of months since 1871 |
For a side-by-side with the 2000 and 2007 peaks on six other measures, see the bubble comparison.
What has a high CAPE meant for returns?
A high CAPE has gone with weaker returns over the next ten years. Using the OECD US share price index since 1957, the median annual price return over the following decade fell as the starting CAPE rose:
| Starting CAPE | Months tested | Median price return per year, next 10 years | Range |
|---|---|---|---|
| Under 15 | 193 | 10.4% | 4.0% to 14.8% |
| 15 to 25 | 373 | 5.4% | -2.4% to 14.4% |
| 25 or more | 151 | 4.0% | -2.9% to 8.6% |
Read it carefully: these are nominal price returns with dividends left out, and neighbouring months overlap, so there are far fewer independent episodes than 717 rows suggest. The pattern is real, but it is a tendency across decades, not a forecast for any one year.
Can the CAPE time the market?
No, and the data shows why. The CAPE reached 27.7 in December 1996, the month the Fed chair used the phrase "irrational exuberance". US share prices were still about 59% higher by March 2000. More recently the CAPE was 33.3 in January 2018, and prices are about 82% higher since. A stretched valuation can stay stretched for years.
- Good at: describing how much you pay for a dollar of long-run earnings, and what long-term returns have looked like from here.
- Poor at: saying when a decline will start. For that, look at credit spreads, the yield curve and the Sahm rule.
What are the criticisms of the CAPE?
- Interest rates: a low rate makes a low earnings yield less unattractive. Today's 10-year yield is above the CAPE earnings yield, which weakens that defence.
- Accounting changes: earnings rules changed over 150 years, so old and new earnings are not perfectly comparable.
- Business mix: today's index leans on highly profitable technology firms and buybacks, which can lift earnings per share.
- One country: the evidence comes mostly from the US, with a limited number of independent decades.
That is why this site shows the CAPE next to 25 other indicators and never turns them into one score. The reverse-DCF post shows the single-stock version of the same question: what has to go right to justify the price.
Shiller CAPE FAQ
What is a good CAPE ratio?
There is no single good number. The long-run median since 1871 is about 16, so readings well below that have gone with cheaper markets and readings above 30 with stretched ones. Context matters, including interest rates.
Is a high CAPE a sell signal?
No. A high CAPE has gone with weak returns over the following decade, but it says little about the next year. The market kept rising for more than three years after the CAPE passed 27 in December 1996.
How is the CAPE different from the regular P/E ratio?
A regular P/E uses one year of earnings, which swing with the business cycle. The CAPE uses the average of ten years of inflation-adjusted earnings, so one boom or bust year distorts it far less.
Why is the CAPE so much higher today than its long-run median?
Prices have risen faster than ten-year average earnings. Explanations include lower interest rates for most of the last 15 years, a market weighted to highly profitable technology firms, and changes in accounting rules. None of them removes the signal that prices are high relative to past earnings.
Where can I see today's CAPE ratio?
The Crash Indicator page shows the latest Shiller CAPE from Robert Shiller's data, refreshed weekly, with its median and the share of months since 1871 that were higher.