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So just how pricey is the U.S. stock market compared to Canada and international stocks? Robert Shiller’s CAPE ratio is the valuation metric that most financial gurus and experts point to in answering this question. In his Michael James on Money blog republished here last week, Michael J. Wiener provided a useful definition of the CAPE Ratio and how he uses it in his own portfolio. See How I handle high stock prices in my portfolio.
In this blog, we once again polled dozens of financial experts and business owners on both sides of the border via Linked In and Connectively.
We’ve picked roughly a dozen of the 34 responses submitted, presented below, with subheads summarizing the main points made in each submission. Linked to their respective websites are contained in the italicized bios that end each contribution.
Here’s how we posed the question at Connectively:
What is your current view of US and global stock market valuations? Based on Robert Shiller’s CAPE ratio do you regard US and global/Canadian stocks as fairly valued or in danger of being overvalued and vulnerable to a major correction? If so, what actions would you suggest investors take, depending on their age and risk tolerance?
Waiting for CAPE ratios to normalize can also cost you
Based on Shiller’s CAPE ratio, U.S. stock valuations have been quite elevated from their historic average for some time now, but the readers who kept hoping for the CAPE to normalize before buying have basically missed an entire decade of gains, which makes me very skeptical of relying solely on CAPE ratios to time the market.
What I recommend telling the people is that high CAPE implies certain things about low future return on investment over the following 10 years, but nothing can be said about the upcoming months or the upcoming year: that’s the most important point for those building a strategy for the future, and not reacting to the headlines.
Those who still have decades to go before reaching Retirement should probably just keep all the money invested and use dollar cost averaging as the main way to get through the volatility period. In case of those approaching retirement (within 5-10 years), it would be wise to reassess the allocations, have enough cash to survive at least one or two years without investing anything, and maybe increase the allocation in non-US markets, as they currently trade at relatively more attractive multiples (Canada and Europe).
My concern with MintWit readers is not overvaluation itself: but that people would panic-sell during the upcoming market correction due to ignoring their risk tolerance for many years during the growth period. — Scott Brown, Founder, MintWit
Rebalance away from high-multiple growth equities into defensive dividend assets, short-duration bonds, and cash equivalents
Based on the Shiller cyclically adjusted price-to-earnings ratio, I view United States equity valuations as historically elevated and vulnerable to a correction. Conversely, international and Canadian equities trade at more reasonable multiples, offering comparatively defensive valuation buffers.
In this environment, asset allocation must align with individual horizons and risk tolerance. Younger investors with long horizons and high risk tolerance should maintain disciplined dollar-cost averaging into global indexes while tilting toward undervalued non-US markets. Meanwhile, older investors and conservative individuals nearing retirement should actively de-risk portfolios. I recommend rebalancing away from high-multiple growth equities into defensive dividend assets, short-duration bonds, and cash equivalents to preserve accumulated wealth against drawdown risk. — RUTAO XU, Founder & COO, TAOAPEX LTD
A high CAPE is not a signal to panic or exit, it is a signal to temper expectations and rebalance toward your actual targets
The number tells the story better than any opinion could. The Shiller CAPE ratio for the S&P 500 sits at roughly 42 as of August 2026, more than double the long run historical median of 17, and only 18 months in over a century of data have ever read higher, all of them clustered around the year 1999. That is not moderately expensive, that is rare territory, the kind the market has visited only once before.
History does not treat a high CAPE as a countdown clock. It has almost no power to call the next 12 months, and the market spent most of the 1990s looking expensive by this same measure while doubling anyway. What it does predict, fairly consistently, is weaker average returns over the following decade, not a specific crash date.
Globally the picture is not uniform either, since markets like Taiwan, South Korea, and Japan currently show some of the richest valuations after a sharp rally, while earnings growth there has kept ordinary P/E multiples looking more reasonable than CAPE alone suggests. The lesson I would offer is this: A high CAPE is not a signal to panic or exit, it is a signal to temper expectations, rebalance toward your actual targets, and make sure your risk exposure matches your time horizon, not the headline. — Swayam Doshi, Founder, Suspire
“The U.S. stock market is undeniably skating on historically thin ice.”
Let’s get the legal record straight first: I am a consumer finance and bankruptcy attorney, not a Wall Street portfolio manager or a licensed investment advisor. My daily work involves helping people survive the financial wreckage of bad decisions, not predicting market tops. But after thirty years watching market cycles pop and drop, I know exactly what overvaluation looks like right before it hits my desk in the form of Chapter 7 bankruptcy petitions.
If we look at Robert Shiller’s Cyclically Adjusted Price-to-Earnings (CAPE) ratio, the U.S. stock market is undeniably skating on historically thin ice. With the U.S. CAPE ratio consistently hovering well above its long-term historical average of about 17, equities are priced for absolute perfection in a world that is notoriously messy.
While global and Canadian stocks are valued somewhat more reasonably, a severe correction in New York will inevitably drag Toronto, London, and Tokyo down with it. The market is vulnerable, and ignoring this is a luxury only the financially reckless can afford.
The action you should take depends entirely on your financial runway:
For Boomers and those near retirement, “sequence of returns risk” is your mortal enemy. If the market corrects 20% tomorrow and you are forced to sell equities to fund your daily life, your portfolio may never recover. My advice? De-leverage aggressively. Enter retirement completely debt-free. Build a two-year cash or short-term Treasury cushion completely outside the stock market. This ensures that if the market takes a dive, you can live off your cash buffer without being forced to sell your depreciated stocks at clearance-sale prices.
For Gen Z and Millennials, a major market correction is actually a gift. You have the ultimate asset on your side: time. If the market drops, do not panic, do not look at your account balance, and under no circumstances should you sell. Keep your job, protect your emergency fund, and continue dollar-cost averaging into broad, low-cost index funds. You are simply buying world-class assets on sale, and your future self will thank you.
Valuations tell us about the market weather, but your personal debt levels and emergency reserves determine whether your financial house will survive the storm. Do not let market greed outpace your common sense. — Lyle Solomon, Principal Attorney, Oak View Law Group
This is “not a market screaming for a correction. It is a market with very little margin of safety left …”
I’d rather answer this with our own numbers than with a CAPE reading, because CAPE describes an index and says almost nothing about the company someone actually owns.
Across the 881 U.S. and European companies we cover, our valuation model currently rates 67% fairly valued, 24% undervalued and 9% overvalued. Of the 487 names where we publish a fair-value estimate, 31% already trade above it, and the median remaining upside on the rest is 14.5%.
That is not a market screaming for a correction. It is a market with very little margin of safety left, which is a different and less dramatic problem. A high CAPE has preceded flat decades and strong ones; as a timing signal it has been unreliable enough that acting on it has cost more than ignoring it. What it does tell you reliably is that a dollar invested today buys less future earnings than it used to.
On what investors should do about that, split by age and risk tolerance: I can’t answer that responsibly. Those decisions turn on income stability, time horizon, existing holdings and tax position, none of which I can see, and one answer covering everyone would be worth less than no answer.
The discipline that survives the question is narrower and duller: when the median name carries thin upside, the edge comes from refusing to overpay, not from predicting the turn. That is a rule about your own behaviour, and it needs no forecast. — Razvan Luca, Founder, Talval Research
“Nobody, at any age, should bet money they need within five years on today’s prices.”
The honest read: Shiller’s CAPE ratio has been sitting well above its long-term historical average for years, and when valuations stretch that far, forward returns over the next decade tend to disappoint.
That doesn’t guarantee a crash next quarter, but it tells you the margin of safety is thin. US stocks look expensive; Canadian and broader global markets trade at meaningful discounts, which is exactly why diversifying across geographies matters more than conviction in one hot market.
My advice by age and risk tolerance is straightforward. If you’re under 40, stay invested, keep buying through any correction, and let time do the heavy lifting; volatility is your friend when you’re accumulating. If you’re 40 to 55, this is the window to rebalance, trim concentrated winners, and shift some exposure toward undervalued international markets and bonds so a 30 percent drawdown doesn’t wreck your timeline.
If you’re near or in retirement, you can’t afford to ride out a lost decade, so hold two to three years of expenses in cash and short-term instruments and keep the rest diversified. Nobody, at any age, should bet money they need within five years on today’s prices.
I run the free QR code generator at Scale By SEO, and the discipline transfers more than people think. We never promise clients outcomes we can’t measure; that’s why our SEO plans carry a six-month performance guarantee where work continues for free if KPIs aren’t met. I bring that same skepticism to markets: demand evidence, demand accountability, and never confuse a bull market for skill. Before we publish guidance, we research it, and before you act on valuation fears, you should too.
Overvalued markets don’t have to crash; they can simply grind sideways for years, and the investors who win are the ones who sized their risk properly long before headlines turned negative. Position for the world as it is, not as you hope it becomes. — Melissa Basmayor, Marketing Coordinator, Freeqrcode.ai
“CAPE should influence portfolio construction, not dictate market timing.”
My current view is that U.S. equities look expensive, and CAPE is flashing a genuine long term warning, but I would not use it as a signal to call the next crash.
The S&P 500 CAPE is around 41 to 42, far above its long-term average and close to historically extreme levels. That suggests future real returns from U.S. equities could be much lower than investors have become accustomed to. Vanguard also currently describes U.S. equity valuations as effectively at their highest historical percentile.
I would be more comfortable with international and Canadian equities than simply owning more U.S. mega cap technology, although they are not immune to a correction. The Bank of Canada itself says Canadian equity valuations remain elevated and increasingly stretched compared with history. So I would call the US clearly expensive, Canada and many international markets less extreme, but not cheap.
What I would not do is sell everything because CAPE is high. Markets can stay expensive for years, and valuation is much better at predicting long-term returns than predicting when a correction will happen. I remember seeing investors make this mistake before, waiting for the crash that never arrived while the market continued moving higher.
For younger investors, I would keep investing regularly, diversify geographically, and avoid concentrating a portfolio in the most expensive parts of the U.S. market. For someone approaching retirement, I would be more defensive, with enough high-quality bonds and cash to avoid being forced to sell equities during a major drawdown. For retirees, protecting the next several years of spending matters more than squeezing out the last few percentage points of return.
The bigger lesson is that CAPE should influence portfolio construction, not dictate market timing. At spectup, I see a similar mistake among founders, people often optimize for the most attractive headline number instead of managing the downside. In markets, having a margin of safety matters just as much. — Niclas Schlopsna, Managing Partner, spectup
The CAPE Ratio “is useful as a thermometer, not a crystal ball. It tells you the temperature. It doesn’t tell you when the fever breaks.”
I’m Runbo Li, Co-founder and CEO of Magic Hour. I spend my days building an AI video platform, but I think about capital allocation constantly because running a startup forces you to understand where value is being created and where it’s being imagined.
U.S. markets are expensive. The CAPE ratio hovering around 35-37 tells you that. But here’s the thing people miss: the CAPE ratio has been “warning” investors since 2015, and anyone who sat on the sidelines missed one of the greatest wealth-creation runs in history. The metric is useful as a thermometer, not a crystal ball. It tells you the temperature. It doesn’t tell you when the fever breaks.
What I actually see is a bifurcation. A handful of mega-cap tech companies are driving the multiple expansion. Strip those out and the rest of the market looks far more reasonable. Canadian and international markets trading at CAPE ratios of 18-22 look like relative bargains, but they’ve looked that way for a decade. Cheap can stay cheap.
Here’s how I think about it through the lens of someone who bets on the future every day. If you’re under 40, a correction is a gift. When I was at Meta, I watched colleagues panic-sell during drawdowns and then miss the recovery. The ones who kept buying, especially into high-quality companies building real things, compounded their way past everyone else within 18 months. Time is your edge. Use it.
If you’re over 55, the math changes. You can’t afford a 40% drawdown with a 5-year recovery window. That’s where international diversification, some fixed income, and keeping 12-18 months of expenses in cash actually matters. Not because the crash is coming tomorrow, but because you won’t be forced to sell at the bottom.
The action I’d take regardless of age: own things that produce real cash flows. Whether that’s a business, dividend-paying equities, or real assets. Speculation works until it doesn’t, and elevated CAPE ratios just mean the margin for error is thinner.
The best hedge against overvaluation isn’t timing the market. It’s building or owning something that generates value whether the market is up or down. — Runbo Li, CEO, Magic Hour AI
“U.S. equities look richly priced … while Canadian and broader global stocks generally trade at more reasonable multiples. That gap matters.”
When CAPE ratios sit well above their historical averages, as U.S. stocks have for years now, I read that the way Dr. Fausto M. Escobedo reads screening numbers at our Weslaco clinic: elevated doesn’t guarantee a crisis tomorrow, but it means you’re operating with less margin for error. My take: U.S. equities look richly priced by Shiller’s measure, while Canadian and broader global stocks generally trade at more reasonable multiples. That gap matters.
The advice I’d give flows straight from the philosophy behind RGV Direct Care Family Clinic: prevention beats reaction. We built our practice around catching high blood pressure, cholesterol, and diabetes early through preventive screenings, because managing a risk before it becomes a crisis is always calmer and cheaper than scrambling after the fact. Smart investors think the same way.
Younger investors with decades of runway and real risk tolerance? Staying invested makes sense; time is their cushion, and corrections that feel catastrophic at 30 look like blips by 60.
People nearing or in retirement should treat portfolio risk the way we help families manage chronic conditions: steady monitoring, modest adjustments, no panic-driven overhauls. Diversifying beyond U.S. equities, keeping appropriate cash reserves, and rebalancing on a schedule instead of on emotion is the financial version of regular checkups rather than emergency room visits.
Here’s something I’ve learned building trust with families across the Rio Grande Valley: people don’t want guarantees, they want honesty about tradeoffs. Nobody can call the top of a market, and anyone claiming they can is selling something. What we can do is name the risk plainly, size our exposure to our own timeline, and stick to the plan.
So, fairly valued? No, U.S. stocks look expensive by CAPE, and elevated starting valuations historically raise correction risk even when timing is unknowable. The right response isn’t fear. It’s discipline, diversification, and an honest look at where you actually stand. That’s the same advice I’d give about your health, and it’s the kind that holds up over time.
— Belle Florendo, Marketing coordinator, RGV Direct Care
“CAPE is an important signal but it doesn’t provide any level of market timing.”
U.S. equities are extremely expensive based on nearly every historical measure. In particular, the Shiller CAPE is sitting above 41, which puts it around the 99th percentile of every monthly reading since 1881. The only months that ever ran hotter were 1999 and 2000.
On the surface, Canada appears materially better. The TSX CAPE was near 26 to start this year while the global aggregate is around 29. This appears to be a largely a US problem, and more specifically a U.S. mega-cap tech problem.
However, we all know that problems in the U.S. economy can ripple worldwide. Just because an issue is limited to the US does not mean it won’t economically impact other countries even if the Shiller CAPE has a better score.
Keep in mind though, CAPE is an important signal but it doesn’t provide any level of market timing. CAPE flashed overvalued in 2015, again in 2017, and again in 2021. Anyone who moved to cash on those readings alone gave up years of compounding waiting to be right.
As a portfolio manager, a high CAPE does not tell me to sell. It tells me the next decade of U.S. CAPE is an important signal but it doesn’t provide any level of market timing. returns has higher potential of being worse than the last one, and, more importantly, my margin for error is thinning.
If you are 25 to 45 years old, keep buying on schedule. Your horizon absorbs a bad decade, but don’t build your entire retirement plan assuming the last ten years will repeat.
If you are 45 to 60, this is where valuation actually bites. Rebalance to your target weights, and consider holding more outside US large-cap or mid-cap.
If you are 60 or older, sequence risk becomes the real threat (i.e., multiple drawdowns stacked on top of each other). Keep two to three years of spending in cash and short bonds so a drawdown never forces you to sell your equities at the bottom.
All that said, I would avoid going fully to cash based on a CAPE valuation reading. You will be right eventually, but can potentially lose out on compounding gains in the meantime. — Adrian Rosebrock, Founder and Portfolio Manager, AltFnd Capital
“Elevated CAPE readings have historically predicted lower ten-year returns more reliably than they predict crashes.”
My company is literally named after balance, so when I look at Shiller’s CAPE ratio sitting well above its long-run average, my instinct isn’t panic. It’s equilibrium. Speaking as a business operator, not a financial advisor, here’s my read: elevated CAPE readings have historically predicted lower ten-year returns more reliably than they predict crashes. That distinction matters. Stretched valuations are a headwind, not a scheduled demolition.
The way I think through risk at Equipoise Coffee comes from the same discipline we use at the roaster: trust the data, resist extremes. We didn’t get a smooth, less bitter cup by chasing trends. We got there with precise roasting science and patience, small batch by small batch. Investors need that same patience. If you’re young with decades of runway, elevated U.S. valuations argue for steady contributions, broad diversification, and tilting toward cheaper international and Canadian markets instead of piling everything into U.S. mega-caps. Time is the great equalizer.
But if you’re within ten years of needing the money, balance means something different: trim concentrated winners, hold more cash and bonds, and make sure a 30% drawdown can’t derail your plans. The worst moves I see are the emotional ones. It’s like cranking the roaster to scorch the beans because you got impatient. Panic selling after a correction locks in losses; euphoric buying at the top magnifies them.
We started in 2021, straight into brutal conditions for a small roastery, and we learned to prioritize ruthlessly when resources are tight. Households should do the same: kill expensive debt, keep an emergency reserve, and only invest money you won’t need soon.
Here’s my closing take: value balance over prediction. Nobody, Shiller included, knows when a correction arrives. Position yourself so that either outcome, boom or bust, leaves you okay. That’s equipoise, and it works for portfolios exactly like it works for coffee. — Rory Keel, Owner, Equipoise Coffee
“While the U.S. market might appear stretched, opportunities exist within undervalued emerging markets and certain Canadian sectors.”
Discussing stock market valuations necessitates a careful blend of data-driven insights and lived experience to guide strategic investor decisions.
The current U.S. market, as reflected by the historically elevated CAPE ratio, indicates signs of overvaluation, suggesting a cautious approach for long-term investors. Having led TradingFXVPS through periods of market volatility, I understand the critical importance of balancing risk and opportunity. For instance, we observed during the March 2020 downturn that clients with diversified global investments faced less severe portfolio drawdowns compared to those overly concentrated in U.S. tech stocks. This speaks to the value of geographic and sectoral diversification.
However, while the U.S. market might appear stretched, opportunities exist within undervalued emerging markets and certain Canadian sectors, as evidenced by a 2023 internal analysis that highlighted price-to-earnings ratios in select emerging markets 40% lower than their historical averages. For younger, risk-tolerant investors, a 70-30 weighting favoring equities globally over bonds could leverage higher-growth opportunities. Conversely, older investors nearing retirement may consider increasing allocations to safer assets like Treasury Inflation-Protected Securities (TIPS) to safeguard against downturns.
At TradingFXVPS, our focus on data-backed strategies underlines that timing markets should not be the goal. Instead, consistent recalibration of portfolios and leveraging technology for real-time analytics can shield against dramatic market corrections without succumbing to panic-driven reactions. My contrarian view is that the CAPE ratio alone doesn’t determine absolute market timing; instead, a multi-layered analysis of macroeconomic conditions and company fundamentals should shape investor decisions. Creating flexibility in asset management, coupled with technological efficiency, is the key to thriving amidst market uncertainty. — Ace Zhuo, CEO | Sales and Marketing, Tech & Finance Expert, TradingFXVPS
“I would respond through allocation rather than prediction.”
The U.S. market looks expensive to me, but “expensive” is a risk condition, not a market-timing signal.
The Shiller CAPE was above 42 in early August 2026, a level close to the extreme valuations seen around the dot-com era. That should lower an investor’s expectation for long-run returns from today’s starting price, but it does not tell us whether a major correction begins next month or several years from now.
I would respond through allocation rather than prediction. A young investor with decades ahead can keep diversified contributions going and rebalance rather than attempting an all-or-nothing exit. Someone near retirement should care much more about sequence-of-returns risk and make sure several years of near-term spending are not dependent on selling expensive equities after a decline.
I would also distinguish “U.S. stocks are expensive” from “therefore every foreign market is cheap.” Geography should be diversified on its own fundamentals and valuation, not used as a binary escape trade from the S&P 500.
CAPE is most useful as a reminder that the price you pay affects long-term return; it is much weaker as a crash calendar. — Cem Oner, Founder / Finance & Public Data Publisher, Hesap Cebimde
