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The warning signal is the Shiller cyclically adjusted price-to-earnings ratio, or CAPE. The Motley Fool reported on October 13, 2026, that it had moved above 40 for only the second time in history, with 1999 the previous instance. That is a notable valuation reading, not a reliable countdown to a crash: CAPE describes how expensive stocks look against long-term earnings, but it does not predict when—or whether—a downturn will occur.
What is the Shiller CAPE ratio?
CAPE compares the market’s price with average earnings over a long period, adjusted for inflation. Using a decade of earnings is intended to smooth out the effects of short-lived booms and recessions that can make a conventional price-to-earnings ratio unusually high or low. A high CAPE therefore signals that prices are elevated relative to this longer-run earnings measure. It is a valuation gauge, not a direct measure of what the market will do next.
Robert Shiller’s Yale-hosted Online Data page describes monthly stock-price, dividend, earnings and consumer-price-index data extending back to 1871. For data since 1926, monthly dividend and earnings figures are calculated from S&P four-quarter totals and interpolated between observations. Earlier dividend and earnings figures draw on historical Cowles material and interpolation. Those construction choices are worth keeping in mind: CAPE is a carefully assembled historical measure, not a perfectly uniform reading handed down unchanged across every era.
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What makes the October 2026 warning notable?
The Motley Fool’s October 13, 2026 article said CAPE had crossed 40 for only the second time in history, naming 1999 as the previous episode. The article’s historical comparison makes the reading unusual, but it does not establish that the same market path must follow again. The Yale data page provides context for the long-running series; the specific claim about the number of times CAPE exceeded 40 is the Motley Fool’s report.
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The article also pointed to weakness among individual S&P 500 constituents beneath the index’s headline performance. It reported that 44% of stocks were at least 20% below their 52-week highs, a threshold the article described as bear-market territory. It further reported 24% down at least 30%, 8% down at least 40%, and 3% down at least 50%.
| Reported decline from 52-week high | Share of S&P 500 stocks | Source and date |
|---|---|---|
| At least 20% | 44% | The Motley Fool, October 13, 2026; citing a MarketWatch observation |
| At least 30% | 24% | The Motley Fool, October 13, 2026 |
| At least 40% | 8% | The Motley Fool, October 13, 2026 |
| At least 50% | 3% | The Motley Fool, October 13, 2026 |
These are dated figures reported by that article, not live readings. The percentages offer a different view from the index level: an index can appear resilient while many of its members have fallen substantially from recent highs. Breadth is useful context, but it does not by itself prove that a broad market crash is imminent.
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Does a high CAPE mean a crash is coming?
No. A high CAPE indicates that prices are high relative to long-term, inflation-adjusted earnings. It can support a concern about elevated valuation risk, but it does not specify the timing, size or certainty of a decline. The Motley Fool article explicitly cautioned that CAPE does not predict market crashes.
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Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How payout policy complicates long-term comparisons
Shiller’s Yale data page also discusses an alternative called total-return CAPE. It reinvests dividends and scales earnings to account for changes in how companies return value to shareholders, including the increased use of share repurchases. That matters because conventional CAPE’s earnings denominator can be affected by shifts in payout practices over time. The alternative is a methodological adjustment, not proof that one measure can deliver a dependable market-timing signal.
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How to read the warning responsibly
- Treat CAPE as valuation context. It says something about prices relative to smoothed, inflation-adjusted earnings, not about tomorrow’s market direction.
- Keep the date attached to the breadth figures. The percentages above were reported for October 13, 2026, and should not be treated as current without a fresh measurement.
- Separate index performance from constituent performance. A strong-looking index can coexist with substantial declines in many individual stocks.
- Do not turn one historical match into a forecast. The reported 1999 comparison is notable, but it does not establish a repeatable countdown to a crash.
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