The stock market is flashing a valuation warning that has appeared only rarely in its 155-year history. The S&P 500's cyclically adjusted price-to-earnings (CAPE) ratio, which measures prices against 10 years of inflation-adjusted earnings, has climbed to about 41. Its long-term average over 155 years is 17.8, while the only comparable extreme was the roughly 44 reading reached at the height of the dot-com bubble in 2000, according to a report by Yahoo Finance.
That backdrop comes as Warren Buffett, one of the most closely watched investors in the world, has issued a blunt message about the current market mood. Between 1965 and 2025, Berkshire Hathaway, the company he once led, delivered an annual compound return of about 19.7%, compared with 10.5% for the S&P 500 including dividends.
