Market frenzy is pushing this one stock metric into the red zone
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- Shiller P/E ratio for the S&P 500 now sits at 41.3, just below the 44.2 all-time high reached in December 1999 at the peak of the dot-com bubble, and more than double the roughly 19 century average.
- Robert Shiller's metric relies on 10 years of inflation-adjusted earnings to smooth out cyclical fluctuations and temporary earnings booms, in contrast to conventional P/E ratios that use the prior year.
- S&P 500 forward P/E of roughly 21 times expected earnings over the next 12 months sits only a few percentage points above its 30-year average of 17.1, making the index look relatively inexpensive on that measure.
- AI infrastructure spending and capital investment have caused U.S. corporate earnings to soar, but the majority of that profit growth is concentrated in a small number of technology megacaps.
- SpaceX's record-setting $75-billion IPO came despite a net loss of nearly $4.9 billion on $18.7 billion in revenue, and S&P Global chose not to bend its waiting-period and profitability rules to fast-track the company into the benchmark index.
- A tentative peace deal with Iran is cited alongside the SpaceX IPO as part of the investor enthusiasm currently pushing the Shiller P/E toward dangerous territory.
Why it matters: The S&P 500 trades at 41.3 times inflation-adjusted 10-year earnings, nearly double its century average of ~19 and just 2.9 points below the 44.2 dot-com peak. SpaceX — a $75-billion-IPO company that lost $4.9 billion last year — is entering the same benchmark without the usual profitability wait, concentrating earnings power in fewer tech names and leaving the index more exposed to an AI capex reversal.
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