As of January 1, 2025, the global stock market’s Cyclically Adjusted Price-to-Earnings (CAPE) ratio stands at 24.25. This ratio is calculated using an index of around 3,000 largest publicly traded companies worldwide, encompassing firms from the United States, developed markets, and emerging economies. U.S. companies account for approximately 66% of the index, with the Technology sector holding the largest share, followed by the Financial sector. The current CAPE ratio is above its long-term historical average, indicating that global equities may be overvalued based on historical valuation trends.
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Global Stock Market: CAPE Ratio
| Date | Global Stock Market Price Level | Global Stock Market CAPE Ratio |
|---|---|---|
| 12/31/2024 | 841.33 | 24.25 |
| 9/30/2024 | 851.78 | 24.84 |
| 6/30/2024 | 802.01 | 23.56 |
| 3/31/2024 | 783.58 | 23.28 |
| 12/31/2023 | 727.00 | 21.91 |
| 6/30/2023 | 682.84 | 21.08 |
| 12/31/2022 | 605.38 | 19.24 |
| 6/30/2022 | 596.77 | 19.68 |
| 12/31/2021 | 754.83 | 26.40 |
| 6/30/2021 | 719.97 | 26.35 |
| 12/31/2020 | 646.27 | 24.35 |
| 6/30/2020 | 524.91 | 20.11 |
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Cyclically Adjusted Price-to-Earnings (CAPE) ratio
The Cyclically Adjusted Price-to-Earnings (CAPE) ratio, also known as the Shiller P/E ratio, is a valuation metric used to assess whether a stock market is overvalued or undervalued relative to historical norms. It was developed by economist Robert Shiller and is used to evaluate long-term investment opportunities across global stock markets.
Unlike the traditional Price-to-Earnings (P/E) ratio, which compares a company’s stock price to its recent earnings, the CAPE ratio smooths out earnings fluctuations by using inflation-adjusted earnings over a 10-year period. This helps account for economic cycles, reducing the impact of short-term volatility in profits.
The CAPE ratio is considered a useful measure for predicting long-term stock market returns rather than short-term movements. Historically, high CAPE ratios have been associated with lower future returns, while low CAPE ratios have signaled stronger returns.