The Shiller CAPE Hit 40.9: What Followed Its Three Highest Prior Peaks in 1929, 2000 and 2022

As of September 2026, the Shiller CAPE ratio for the S&P 500 sits at roughly 40.9, according to Robert Shiller's own dataset (Yale University) as compiled by data trackers such as multpl.com and GuruFocus. In about 145 years of monthly data, that level has only been exceeded once: the dot-com peak of December 1999–January 2000, when CAPE hit 44.2. Today's reading is higher than the 1929 peak (32.6) and higher than the December 2021 peak (38.3). That makes this the second-most expensive the U.S. stock market has ever looked by this particular yardstick. Below is what happened after each of the three highest prior CAPE peaks, with the actual numbers instead of a vague "history suggests caution."

This article walks through the three highest prior CAPE peaks as case studies. For whether today’s reading predicts a crash and what it means for a long-term portfolio, see Does a CAPE of 41 Mean a Crash Is Coming?

Facade of the New York Stock Exchange building on Wall Street
The New York Stock Exchange, seen from Federal Hall. Photo: Andy C, CC BY-SA 3.0, Wikimedia Commons.

What the CAPE ratio is actually measuring

The cyclically adjusted price-to-earnings ratio, developed by economist and Nobel laureate Robert Shiller, divides the S&P 500's real (inflation-adjusted) price by the average of the prior 10 years of real earnings. Smoothing over a decade is the point: a single year's earnings can be distorted by a recession, a one-time write-down, or a boom, and a normal trailing P/E built on one year of earnings will swing wildly as a result. CAPE trades that noise for a longer, steadier earnings base. It says nothing about timing — a market can stay expensive, or get more expensive, for years — but it has historically correlated with lower-than-average returns over the following decade when it starts this high.

The full distribution: the three highest prior peaks

Going back to 1881, the three highest prior Shiller CAPE peaks before the current one came in September 1929 (32.56), December 1999 (44.19) and January 2022 (36.94). Each is a distinct case study, not a repeat of the same story.

PeakCAPE at peakWhat followed
September 192932.6Dow Jones Industrial Average fell 89% from its September 3, 1929 close (381.17) to its July 8, 1932 trough (41.22) — the Great Depression crash. The Dow did not reclaim its 1929 high until November 1954, 25 years later (Federal Reserve History).
December 1999 / January 200044.2The S&P 500 fell approximately 49% peak-to-trough from March 2000 to October 2002 (the dot-com crash). The 2000s decade went on to post an annualized total return of roughly -0.9% including dividends — the "lost decade."
December 202138.3The S&P 500 fell about 25% from its January 3, 2022 close (4,796) to its October 2022 low, and finished 2022 down roughly 19% for the year. It then recovered and went on to make new highs within about two years — the fastest reversal of the three precedents.
September 2026 (current)~40.9Unknown — this is the open question this article can't answer, only frame.

As-of dates and sources: CAPE values from Robert Shiller's dataset (Yale), as tracked by multpl.com and GuruFocus, September 2026 snapshot; 1929 Dow figures from Federal Reserve History; 2000s and 2022 S&P 500 figures as commonly reported in market-history summaries citing S&P Dow Jones Indices data. All are nominal price-index figures unless noted; the 2000s "-0.9%" figure includes reinvested dividends.

Where today sits in that distribution

Three things stand out when you line the four episodes up. First, today's 40.9 is closer to the 44.2 dot-com extreme than to either the 1929 or 2021 peaks — this is not a borderline reading, it is deep into territory the market has visited exactly once before. Second, the outcomes that followed a high CAPE reading were not uniform: one produced a generational depression, one produced a two-year crash followed by a lost decade, and one produced a sharp but short correction followed swiftly by new highs. Third, in all three cases the CAPE reading itself gave no information about *when* the decline would start or how long it would last — 1929's peak was followed by weeks of continued gains before the crash; 2021's peak preceded a decline that started almost immediately. A high CAPE has historically told you more about long-run return math (starting valuation mechanically caps long-run compounding, all else equal) than about next quarter's direction.

The writer's judgment: a valuation signal, not a timing signal

Reading these three precedents side by side, the honest takeaway is that CAPE at this level has never once preceded a decade of strong, low-volatility returns — but it has preceded outcomes ranging from catastrophic to merely disappointing to (after a sharp scare) a continuation of the bull market. Treating a 40.9 reading as a prediction of an imminent crash is not supported by the 2021 case. Treating it as irrelevant is not supported by the 1929 and 2000 cases either. The more defensible reading is that CAPE is a probabilistic headwind on long-run (10-year-plus) expected returns, not a short-term trading signal, and that today's concentration in a handful of mega-cap technology companies (a separate but related story covered in this site's own coverage of S&P 500 concentration) makes the current episode structurally different from 1929 or 2000 in ways that could cut either direction.

The case against taking CAPE at face value

CAPE has well-documented critics, and their arguments deserve equal space. Jeremy Siegel and others have argued that accounting rule changes since the 1990s (particularly around goodwill impairment and depreciation) mechanically understate reported GAAP earnings relative to pre-1990s figures, which inflates CAPE for the modern era relative to its own history. The index's sector composition has also shifted heavily toward asset-light, high-margin technology and software companies that command structurally higher multiples than the industrial-heavy S&P 500 of 1929 or even 2000. Real interest rates matter too: a higher CAPE can be partly justified when the discount rate applied to future earnings is lower, and the 2010s low-rate era pushed valuations up across nearly every asset class, not just stocks. None of these arguments make 40.9 "cheap" — they argue for comparing today's reading to a modern-era average (closer to 27-28 since 1990) rather than the full 145-year average of 17, which narrows but does not close the valuation gap.

There is also a more specific argument unique to 2026: unlike the dot-com era, when many highly valued companies had little or no profit, today's largest S&P 500 constituents are, by and large, genuinely and heavily profitable, with elevated capital spending directed at AI infrastructure that management teams argue will compound those margins further. The counter-argument, made by skeptics of that narrative, is that 1999-2000 also featured real, profitable, dominant companies trading at extreme multiples on the assumption that internet-driven growth would justify the price indefinitely — and that being right about a technology's long-run importance (the internet did transform the economy) was not the same as being right about the price paid for it in March 2000. Both of those things can be true at once, which is exactly why a valuation ratio like CAPE cannot resolve the argument by itself; it can only tell you how rare the starting point is, not which narrative wins.

What this actually changes for an investor's checklist

A high CAPE reading is not personalized investment advice and does not tell any individual investor to sell, and this article does not intend it as such. It is, however, a reasonable prompt to check a few things about your own portfolio rather than the market as a whole:

  • What percentage of your equity exposure sits in the ten largest S&P 500 constituents, versus the other 490-plus? Concentration risk compounds valuation risk.
  • Does your time horizon for this money exceed 10 years? CAPE's predictive relationship is strongest at that horizon and weak to nonexistent at a 1-year horizon.
  • Are you still dollar-cost averaging new contributions, or trying to time a lump sum? The 2021 case shows that waiting for a visible top can mean missing a fast recovery entirely.
  • Have you rebalanced toward your target allocation recently, or has a multi-year rally quietly pushed you overweight equities relative to your own plan?
  • Do you have a specific, written rule for what you would do in a 25% drawdown (the 2022 scenario) versus a 50%-plus drawdown (the 2000 or 1929 scenario), decided now rather than during the decline itself?
  • Have you checked whether your exposure is genuinely diversified across sectors, or whether a broad-market index fund has quietly become a concentrated bet on a handful of the same mega-cap names that are driving the CAPE reading higher in the first place?

None of this is a forecast. The point of laying out 1929, 2000, and 2021 side by side is not to predict which script 2026 will follow, but to show that "the market is historically expensive" and "the market is about to crash" are two different claims, and only the first one is currently supported by the data. History offers three outcomes, not one, and a plan built to survive all three — rather than a bet placed on which one repeats — is the more defensible way to use this information.

This article is for general investment education only. It is not personalized financial, tax, or legal advice, does not recommend buying or selling any specific security, and does not predict future returns. CAPE values and historical performance figures are shown as of the dates noted above and are sourced from the providers listed; past performance does not guarantee future results. Readers should consult a licensed financial advisor for decisions specific to their own circumstances.

Tip: If you want to go deeper on valuation metrics like CAPE and how they have (and haven't) predicted long-run returns, a good stock market investing book is a solid next step. Logging your own allocation decisions and the valuation readings behind them in an investment journal also makes it easier to review them honestly later. (These are Amazon Associate links — we may earn a small commission on qualifying purchases.)

Correction (October 31, 2026): An earlier version said CAPE had closed a calendar year above 30 in only three prior episodes and that this was the fourth such time. The table lists peak readings, and the 1929 peak was 32.56; the wording and headline now describe the three highest prior peaks.

Sources

Related reading on this site: S&P 500 Concentration Has Passed the 1932 Record · How to Read a 10-K Filing: A Step-by-Step Guide

Have you checked where your own portfolio's valuation exposure sits relative to these historical extremes? The concentration piece linked above is a useful next step if most of your equity holdings are index funds.

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