According to the time-tested Shiller Price-to-Earnings (P/E) Ratio, which is commonly referred to as the cyclically adjusted P/E Ratio, or CAPE Ratio, this is the second priciest stock market in history, dating back to January 1871. The only time stocks have been more expensive than they are now is in the months leading up to the bursting of the dot-com bubble, which saw the S&P 500 and Nasdaq Composite shed 49% and 78% of their value, respectively, on a peak-to-trough basis.
Bottom Line: The market is expensive by historical standards, but that doesn't mean it crashes tomorrow. It could stay expensive for months or years. But the risk/reward ratio has shifted - there's less upside potential and more downside risk than usual.
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