S&P 500 'Approaching Bubble Territory:' US Stocks Remain Historically Overvalued Despite Recent Correction, Says Market Researcher

The S&P 500 index could still be hovering in the bubble territory as the cyclical adjusted price-to-earnings ratio, or the S&P 500 Shiller CAPE ratio, remains above the level of 30 for 18 consecutive months, underscoring a rare historical trend.

What Happened: Unlike the trailing P/E, the Shiller P/E is a valuation methodology that uses a 10-year inflation-adjusted average EPS, smoothing out the impact of short-term shocks and recessions on valuation.

According to an X post by Katusa Research, the market is “approaching bubble territory,” as this metric was nearly twice its historical average of 17.58.

“By this measure (recent correction included), stocks are still historically expensive,” the post stated.

According to the data by YCharts, the CAPE ratio was above the level of 30 for the 17th consecutive month in March and hovered at approximately 33.12 for April as of Thursday’s close.

According to a report by Motley Fool, over the last 154 years, the CAPE ratio has surpassed the level of 30 for two consecutive months, only six times.

Moreover, the S&P 500 index formed a death cross for the first time since March 2022 last week. According to i3 Invest CEO, Guilherme Tavares, the death cross, combined with an elevated CAPE ratio, has been historically observed only three times before April 2025.

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Why It Matters: The selloff is triggered by President Donald Trump‘s tariffs, which have created uncertainty among investors and businesses worldwide.

While China has been central in the tariff imposition and retaliation, the administration halted the tariffs on other countries for 90 days on April 9. However, the sector-specific tariffs continue to keep the stocks on edge.

As of Thursday’s close, the S&P 500 index was down 14.1% from its all-time high of 6,147.43 points. The Dow Jones Industrial Average was 13.15% below its 52-week high, whereas the Nasdaq 100 index was 17.84% lower than its previous record.

Price Action: The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, fell in premarket on Monday. The SPY was down 0.99% to $521.20, while the QQQ declined 1.08% to $439.26, according to Benzinga Pro data.