Is the CAPE signalling a bubble in US equities?

The fact that the valuation of the US stock market is already high compared to its long-run averages on the cyclically-adjusted price/earnings (CAPE) measure is a good reason to be wary of forecasting further large gains in equity prices. Nonetheless, the CAPE has many limitations, especially in timing market calls. The current readings are also still well below previous extremes. We do not therefore believe that the CAPE provides compelling evidence of another bubble about to burst.