Overview
- The S&P 500’s Shiller CAPE crossed above 41 on Monday, a reading seen only once before in 145 years at the 1999 dot‑com peak.
- The Buffett indicator reached an all‑time high above 240% on Aug. 18, a level Warren Buffett has warned suggests the market is dangerously large relative to the economy.
- Markets have been choppy in August after early gains — the S&P rose more than 6% in the first two weeks before pulling back about 2%, and the Nasdaq climbed nearly 10% then fell roughly 3%.
- Analysts caution these gauges can be distorted by share buybacks, accounting shifts, foreign earnings and the fact that markets now make up a bigger slice of the economy, so they are poor short‑term timing tools.
- Historically high CAPE readings have preceded weak decade‑ahead returns, so advisers point to diversification, shorter‑duration fixed income, defensive equity tilts and cash liquidity while also noting stronger recent earnings and large household cash buffers could alter outcomes.