The table below lists the current & historical CAPE ratios by Sector, calculated using the 500 largest public U.S. companies. If the cyclically adjusted price-to-earnings ratio (CAPE) of a sector is lower than its historical average, this might indicate that the sector is currently undervalued and vice versa. The year 2022 was terrible for the U.S equities and the CAPE multiples of most of the sectors decreased considerably compared to the beginning of the year. The main exception were Energy companies that clearly outperformed all other industries. The overall CAPE of the U.S. stock market as a whole is currently 31.12 (July 1st, 2024).
Among the largest companies, Apple Inc, Microsoft Corp & Nvidia Corp belong to the Information Technology sector, Alphabet Inc & Meta Platforms Inc belong to the Communication Services sector, and Amazon.com Inc & Tesla Inc belong to the Consumer Discretionary sector.
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CAPE Ratio by Sector (Large Cap U.S. Companies)
| GICS Sector | 6/30/2024 | 12/31/2023 | 6/30/2023 | 12/31/2022 | 6/30/2022 |
|---|---|---|---|---|---|
| Communications | 33.10 | 27.82 | 25.86 | 20.23 | 25.57 |
| Consumer Discretionary | 34.61 | 34.19 | 33.15 | 25.73 | 28.67 |
| Consumer Staples | 23.16 | 22.13 | 23.15 | 23.69 | 23.58 |
| Energy | 28.72 | 26.78 | 27.19 | 31.71 | 27.02 |
| Financials | 18.27 | 17.41 | 16.32 | 17.21 | 16.77 |
| Health Care | 26.52 | 25.68 | 26.02 | 27.95 | 27.96 |
| Industrials | 27.51 | 26.62 | 26.06 | 24.73 | 22.73 |
| Information Technology | 58.55 | 48.56 | 46.40 | 34.42 | 37.70 |
| Materials | 24.26 | 24.19 | 24.25 | 23.79 | 24.00 |
| Real Estate | 30.76 | 33.06 | 31.98 | 32.52 | 37.69 |
| Utilities | 19.24 | 18.33 | 19.32 | 21.35 | 22.74 |
Need access to the full data? Check the Professional Subscription Plan to our Global Equity Valuations database that provides you the latest and historical P/E (TTM) ratios, P/B ratios, CAPE ratios, EV/EBITDA multiples and Dividend yields by Sector (calculated using the top 500 U.S. companies) since the year 1979, including valuation data of the major global equity indices. Check a sample dataset from here.
Cyclically Adjusted P/E & Sector Performance
The CAPE ratio, also known as the Shiller P/E ratio, is a valuation measure that adjusts the Price-to-Earnings (P/E) ratio by averaging earnings over a 10-year period to smooth out fluctuations in earnings that occur due to economic cycles. The ratio was developed to estimate the overall valuation of the U.S stock market but can the CAPE ratio be used to predict what will be the future performance of a specific market sector or industry? In a white paper published by Barclay’s research department and Professor Shiller (to promote the new ETN/Exchange Traded Note), the group developed a sector rotation strategy that outperformed annual returns of the S&P 500 total return index with nearly 4%. The returns are promising but it is always easy to beat the market using historical data. Time will tell if the CAPE ratio will remain as a useful measure in the future.
Comparing the valuations of different Sectors using CAPE ratio
Comparing the valuations of different industries is tricky. Different sectors have often different economic cycles, trends and growth prospects. For example, technology companies have pretty much always much higher growth expectations compared to e.g. utilities. Some sectors are also more cyclical than others (e.g., Consumer Discretionary vs. Consumer Staples). This cyclicality affects earnings and will influence CAPE ratios despite the 10-year smoothing out of earnings. The ratio works best when used to compare the current CAPE ratios to historical averages for each sector.