The signal in the headline is a Shiller CAPE ratio above 40: an unusually high valuation reading, not a countdown to a crash. It can help frame long-term return expectations, but it cannot tell investors when a decline will begin or how severe it will be. The claim that this threshold has appeared only twice in a century should be treated cautiously: the latest monthly value and the historical crossing count have not been independently confirmed here.
What the Shiller CAPE measures
CAPE—short for cyclically adjusted price-to-earnings ratio—compares an index’s price with its average inflation-adjusted earnings over the previous 10 years. The Council of Economic Advisers defines it as “the composite index’s price divided by inflation-adjusted average earnings over the past 10 years.” Smoothing earnings across a decade is intended to make the measure less sensitive to a single unusually strong or weak year.
Robert Shiller’s Yale data page provides monthly stock price, dividend, earnings, and consumer-price-index data beginning in January 1871. Since 1926, monthly dividend and earnings observations are derived from S&P four-quarter totals and linearly interpolated; earlier observations draw on annual data interpolated to months. A long historical series is useful, but its monthly precision should not be mistaken for a record of independently observed monthly earnings.
What the reported numbers establish
The Motley Fool’s October 4, 2026 article identifies the signal as the S&P 500 Shiller CAPE moving above 40 and compares it with the dot-com bubble. The threshold crossing and the claim that it has appeared only twice in a century are the publisher’s claims; the available evidence here does not independently confirm the latest monthly reading or count all historical crossings.
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A separate, dated figure comes from the Council of Economic Advisers’ 2026 Economic Report of the President: CAPE averaged 37.1 during 2025, which the report says was 2.2 years above its 2024 average. That is a 2025 average—not an October 2026 monthly reading—and it neither verifies nor refutes a later move above 40.
What history can—and cannot—say about what comes next
High valuations are context, not a market-timing signal
A high CAPE means the index price is elevated relative to a decade of inflation-adjusted earnings. That can matter when thinking about returns over long horizons: if prices are high compared with earnings, future returns may be less attractive than they would be at lower valuations, all else equal. But CAPE does not specify when prices will fall. A high reading can persist, and the ratio alone cannot establish that a crash is imminent, assign a probability to one, or give a reliable forecast horizon.
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The dot-com comparison is not a forecast
The dot-com episode shows why investors pay attention to extreme valuations: very high readings can precede sharp declines. It does not show that every later crossing will produce the same decline, or that a downturn will begin on a predictable schedule. Market declines differ in size and duration, and the Motley Fool article itself notes that declines have eventually been followed by recovery. One historical comparison is not enough to estimate the odds or timing of the next one.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why CAPE is not a flawless yardstick
Shiller’s Yale data page cautions that changes in corporate payout practices can affect CAPE. In particular, companies’ use of share repurchases rather than dividends can alter earnings-per-share growth and the average real earnings used in the ratio. That means a reading should be interpreted with the measure’s construction and changing corporate practices in mind, rather than treated as a policy-invariant verdict on the market.
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Scan for outdated or missing drivers - takes under a minuteDriver Scan →Clear out junk files and repair common Windows errorsFree Scan →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →For investors, the practical use is limited but meaningful: CAPE can add valuation context to a long-term plan, but it is not a stand-alone buy-or-sell instruction. The threshold claim does not establish what the market will do next, and the reported 2025 average is not a substitute for a verified current monthly observation.
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