The U.S. stock market has reached its second-highest valuation on record, according to the Shiller price-to-earnings (P/E) ratio, trailing only the levels seen during the dot-com bubble of the early 2000s. The data underscores how investor optimism continues to elevate equity prices despite persistent economic uncertainty.
The cyclically adjusted P/E ratio, which measures stock prices relative to average earnings over the past decade, indicates that valuations are significantly above historical norms. Analysts warn this may leave markets vulnerable to corrections if earnings growth slows or interest rates remain elevated.
While strong corporate profits and enthusiasm around artificial intelligence have fueled the rally, some economists caution that such valuations have historically preceded periods of lower future returns.
