Valuation

CAPE (Shiller PE) and S&P 500 relative to GDP

CAPE (Shiller PE)

S&P 500 price divided by the 10-year average of inflation-adjusted earnings

CAPE (Shiller PE)

40.54

1 wk

↓ -0.27

1 mo

↑ +0.12

1 yr

↑ +1.23

Source: Shiller (Yale)

Notes

What is happening: The cyclically adjusted price-earnings ratio of the S&P 500 is 41.9 (9 October), the second-highest in 140 years, behind only the 44 of late 1999; the long-run average is 17.
Why it matters: Valuation says little about the next year and a lot about the next decade: readings this high have gone with 10-year annualised returns near 3%.
What's driving it: Concentration in a handful of AI-linked companies, record profit margins, and a decade of cheap money still in the price.
What to watch: Earnings: the ratio can normalise through profits rather than prices. A CAPE back below 35 without a bear market would be the benign path.

Total US corporate equity market value (nonfinancial corporations) as a share of GDP — Warren Buffett's preferred market-valuation gauge

Buffett Indicator

255.0%

1 wk

↑ +35.6%

1 mo

↑ +35.6%

1 yr

↑ +41.7%

Source: FRED

Notes

What is happening: The market value of US nonfinancial corporate equities is 255.0% of GDP in the second quarter of 2026, a record, after 219% in the first quarter and 229% at the end of 2025: a 36-point jump in one quarter, far more than prices rose, so part of it is likely a revision in the Fed's Financial Accounts released on 11 September.
Why it matters: The market cannot outgrow the economy forever: a ratio this high means either earnings catch up or prices come down.
What's driving it: The same forces as the CAPE, plus the rising weight of listed companies in the economy, which lifts the ratio's normal range over time.
What to watch: Nominal GDP growth against index gains: a year of flat prices with 5% nominal growth takes a dozen points off the ratio without a correction.