Warning: The S&P 500 Could Be on the Verge of Doing Something for the First Time in 155 Years, and It's Not Good News for Investors
The S&P 500 CAPE ratio is at its second-highest reading in history.
Warning: The S&P 500 Could Be on the Verge of Doing Something for the First Time in 155 Years, and It's Not Good News for Investors
Overview
With all of the volatility in the stock market this year, most investors probably don't realize the S&P 500 (SNPINDEX: ^GSPC) is sitting at a precarious peak. The index's cyclically adjusted price-to-earnings (CAPE) ratio now hovers near a reading of 41 -- a territory that historically signals serious trouble ahead.
The CAPE ratio captures something deeper than daily price movements: It reveals how much investors are willing to pay for every dollar of long-term earnings power. At its current level, the S&P 500 appears to be pricing in unprecedented levels of optimism while quietly laying the foundation for a painful reckoning.
Details
All told, the index looks like it's on a collision course with economic reality, and history suggests the landing may be rough. Read on to learn why.
Source
Originally published at www.fool.com.
