(Zero Hedge)—Today, the S&P 500’s cyclically adjusted price-to-earnings ratio (CAPE) is nearing historic highs, signaling market valuations may be in overheated territory.
In December 2024, the S&P 500 CAPE ratio stood at 37.9 – well above its long-term average of 17.6. Notably, it has only exceeded this level during the Dot-Com bubble and in 2021.
As Visual Capitalist’s Dorothy Neufeld shows in this graphic from Picton Mahoney Asset Management shows the S&P 500 CAPE ratio since 1920.
The S&P 500 CAPE Ratio Across Major Bubbles
The CAPE ratio is a widely used metric for assessing stock market valuations, comparing equity prices to their 10-year average earnings.
By smoothing out short-term fluctuations, it accounts for economic cycles and offers a more stable view of long-term value. Higher CAPE levels often signal stretched valuations, with historical trends showing that ratios above 22 typically indicate heightened market optimism.
Here are the peak CAPE ratios during major market bubbles over the past century:
The CAPE ratio hit an all-time high during the Dot-Com bubble in 1999, which was followed by a 40% decline in the S&P 500 from 2000 to 2002.
More recently, the ratio climbed to 38.6 in 2021, its second-highest reading ever, fueled by massive pandemic stimulus and a big tech rally. The following year, the S&P 500 sank 19.4% as the Federal Reserve kicked off its monetary tightening cycle.
Similarly, the CAPE ratio has risen sharply as AI enthusiasm—particularly for Magnificent Seven stocks—has led stock prices to soar, making stock prices expensive by historical standards.
Diversification Strategies for Market Bubbles
At a time of outsized investor expectations, a more balanced portfolio allocation may reduce exposure to market bubble risk.
Investors and advisors can implement Picton Mahoney Asset Management’s Innovative Portfolio, which offers a strategic 40/30/30 mix of equities, bonds, and alternatives to hedge against a potential asset bubble.
At Last, a Company With Integrity in the Gold IRA Industry
For several years, I’ve been vetting out precious metals companies in search of the best. I believe in gold and silver but it’s hard to find integrity in the Gold IRA industry. The vast majority operate with shady tactics and gigantic spreads that take advantage of Americans who simply want to protect their life’s savings.
I’ve found a handful that I like and I’ve worked with some of them. By no means would I “unrecommend” them because, again, I vetted them out and found them to be above the fold. Unfortunately, it isn’t hard to be better than the rest when the rest are so darn awful.
After years of searching, I finally found a company that truly operates with integrity. Augusta Precious Metals has three important attributes that set them far above the competition:
- Non-Commissioned Sales Team: I cannot stress how important and unique this is. With just about every other company in the Gold IRA industry, the sales teams make commission from every account they open. This means they steer their clients toward the gold and silver products with the highest commission. With Augusta Precious Metals, the team is solely focused on putting the best gold and silver for their clients into their IRA. They get paid to serve the best interests of the Gold IRA client, NOT their own commission pay.
- Incredibly Low Fees: Most Americans would be shocked if they knew the spread other Gold IRA companies charge. Augusta charges just 5% versus up to 45% elsewhere.
- No Pressure, No Gimmicks: There’s an understanding among most in the Gold IRA industry that fear and pressure is the way to go. Augusta Precious Metals takes a sober approach when working with clients because they hold integrity in the highest possible regard. This is why they don’t offer gimmicks like “free” or “bonus” silver. It’s also why they do not apply pressure tactics to get quick sales. Their educational and transparent approach to doing business is exceedingly rare in the Gold IRA industry.
Tyler might have read my essay on our fake stock market.
https://worldyturnings.com/2025/01/22/beginning-of-the-end/