Op-Ed: The Market Is Giving Us a Warning Sign

Investors staring at the roaring US stock market may want to note one uncomfortably old-fashioned warning: valuation. Or, in this case, overvaluation. In the Telegraph, columnist Russ Mould explains that by one key yardstick, US shares now look pricier than they did before the 1929 crash and the 2000 tech bubble. Based on Nobel laureate Robert Shiller's cyclically adjusted price/earnings ratio, or CAPE ratio, stocks in the S&P 500 now trade at 41 times their average earnings over the last 10 years, more than double UK and European markets and the biggest gap on record.

"It's more or less the financial equivalent to the tide receding before a freak tsunami," writes Joe Wilkins at Futurism, amplifying Mould's column. "While it can't tell us exactly when the wave will come, or how big it will be when it does, a Shiller ratio this high indicates danger; the fact that at some point in the not-so-distant future, things are going to get rough."

Bulls argue that strong profits, especially from tech, plus AI-driven productivity justify the optimism: Analysts now see S&P 500 earnings hitting records in 2026 and 2027, with growth rates well above long-term trends. Bears counter that such surges have preceded painful comedowns before, and that history shows a simple pattern: the higher the CAPE, the weaker the next decade's returns tend to be. Mould doesn't predict a crash—but he does suggest US stocks may be heading for a tougher 10 years. Read his full piece.