What is the Shiller PE Ratio?

Key Takeaways: The Shiller PE Ratio uses a 10-year average of inflation-adjusted earnings to smooth out market volatility. As of April 2026, the Shiller PE is roughly 37.2, significantly higher than the historical average of 17.3. While excellent for predicting 10-year returns, the Shiller PE is a poor tool for short-term market timing. Last Updated: April 11, 2026. It’s April 2026. If you’ve glanced at your Vanguard or Fidelity account lately, you’re probably feeling a mix of thrill and a nagging sense of dread. The S&P 500 is hovering near the 6,700 mark, and the headlines are screaming about record highs. This is where the Shiller PE Ratio becomes your best friend. It’s the ultimate reality check for the stock market. At its heart, the Shiller PE Ratio—also known as the CAPE Ratio (Cyclically Adjusted Price-to-Earnings)—is a way to see if the market is overvalued. It was popularized by Yale professor Robert Shiller, who won a Nobel Prize for proving that markets aren't always efficient and can get caught up in 'irrational exuberance.'

How does the Shiller PE Ratio work?

The magic of the Shiller PE lies in two specific adjustments: time and inflation. Most PE ratios you see on sites like Yahoo Finance use 'trailing twelve months' (TTM) earnings. That’s fine for a quick look, but corporate earnings are incredibly jumpy. They swing wildly based on the economy, tax law changes, or even a global pandemic. The Shiller PE smooths this out by using a 10-year average.

Is the Shiller PE Ratio worth using for long-term investing?

If you're trying to figure out if you should be aggressive with your 401(k) or start moving some cash into a high-yield savings account, then yes, it's absolutely worth your time. In our experience, the Shiller PE has an incredible track record of predicting long-term returns. There's a very strong correlation: the higher the Shiller PE today, the lower your annual returns will likely be over the next decade.

What are the pros and cons of the Shiller PE Ratio?

The main advantage of the Shiller PE is its ability to filter out short-term economic noise to show true market valuation. The main drawback is that it is a poor timing tool; markets can remain 'expensive' for years during a bull run before reverting to the mean.

Investing

Shiller PE Ratio: A Plain-English Guide (2026)

Is the stock market in a bubble? Learn how to use the Shiller PE Ratio (CAPE) to evaluate market valuations and predict long-term returns in 2026.

Expert Reviewed Fact-Checked Last Updated: Apr 11, 2026

Apr 11, 2026 | 2 min read

Shiller PE Ratio: A Plain-English Guide (2026)

Reviewed by Sarah Mitchell, CFP

Written by Sarah Mitchell, CFP

Certified Financial Planner with 12+ years of experience in personal finance, investing, and tax planning. All content is reviewed for accuracy and educational value.

Disclaimer: The information provided on TheMoneyLive is for general informational purposes only and does not constitute financial, investment, or legal advice. Always consult a qualified financial advisor before making any financial decisions. We may earn commissions from affiliate links at no extra cost to you.

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