Understanding Cyclically Adjusted Price to Earnings (CAPE) Ratio

The Cyclically Adjusted Price to Earnings (CAPE) ratio is a metric that divides the S&P's price by its adjusted earnings over the last 10 years to smooth out the impact of economic cycles. Currently standing at almost 35 times, it is at historically high levels, only surpassed by the dot com boom and briefly during the 2021 'everything bubble'. Despite being concentrated in certain sectors, the CAPE ratio is expected to rise further.