The Stock Market Just Did Something for the 2nd Time in 100 Years, and History Says What Comes Next
The CAPE ratio just hit a level we've only seen once before -- right at the top of the dot-com bubble. But before you panic, consider the facts.
Overview
The CAPE ratio is flashing a warning that, in over a century of stock market history, has only shown up once before: near the top of the dot-com bubble.
With the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite indexes both near record highs, it stands to reason to ask, should I be worried? Here's what you need to know.
Details
CAPE stands for the cyclically adjusted price-to-earnings ratio. It's basically a smoothed-out version of the regular price-to-earnings (P/E) ratio -- a standard valuation metric for a stock -- but applied to the whole market. It takes the price of the S&P 500 and divides it by the average of its inflation-adjusted earnings over the past 10 years.
Source
Originally published at www.fool.com.