The S&P 500 has climbed 12% throughout 2026, continuing a bull market largely driven by excitement surrounding artificial intelligence (AI). Nevertheless, this upward trend has faced some volatility. Both the S&P 500 and the Nasdaq Composite have recently experienced significant pullbacks as market participants contend with persistent <a t buy Nvidia in 2005. But according to our analysts, we're only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout.
Does this mean the earnings (CAPE) ratio was popularized by economist Robert Shiller. A standard price-to-earnings (P/E) ratio measures stock prices against a single year of earnings. Conversely, the CAPE ratio calculates the S&P 500’s price by dividing it by the average of 10 years of inflation-adjusted earnings. By utilizing a long-term perspective, CAPE readings help smooth out profit fluctuations caused by economic booms or recessions.
At present, the CAPE ratio sits near 41, which is more than twice its long-term historical average of 17.8. Throughout 155 years of market history, the only other sustained period where the CAPE ratio moved above 40 occurred during the dot-com bubble. It reached a peak of approximately 44 in December 1999, just before the collapse of technology stocks.
