Warning: The S&P 500 Could Be on the Verge of Doing Something for the First Time in 155 Years, and It's Not Good News for Investors
The S&P 500 CAPE ratio is at its second-highest reading in history.
Overview
With all of the volatility in the stock market this year, most investors probably don't realize the S&P 500 (SNPINDEX: ^GSPC) is sitting at a precarious peak. The index's cyclically adjusted price-to-earnings (CAPE) ratio now hovers near a reading of 41 -- a territory that historically signals serious trouble ahead.
The CAPE ratio captures something deeper than daily price movements: It reveals how much investors are willing to pay for every dollar of long-term earnings power. At its current level, the S&P 500 appears to be pricing in unprecedented levels of optimism while quietly laying the foundation for a painful reckoning.
Details
All told, the index looks like it's on a collision course with economic reality, and history suggests the landing may be rough. Read on to learn why.
Source
Originally published at www.fool.com.