The Stock Market Sounds an Alarm for Only the Second Time in 153 Years. Here's What History Says the S&P 500 Will Do in 2026.

• The S&P 500 has recorded double-digit gains for 3 consecutive years.

• Several metrics mightiness beryllium signaling that the market's scale could beryllium heading for a sell-off.

• Investors should prime high-quality stocks and debar overly speculative names.

• 10 stocks we similar amended than S&P 500 Index ›

The twelvemonth 1871 isn't precisely the astir noteworthy successful American history. Six years aft the American Civil War ended, the twelvemonth was mostly defined by efforts to rebuild the South and by immoderate civilian rights legislation.

For investors, however, 1871 is important for a large reason. It marks the starting constituent successful economist Robert Shiller's U.S. banal marketplace dataset, the aforesaid humanities grounds that underpins the Shiller price-to-earnings (P/E) measure, amended known arsenic the CAPE ratio.

The Shiller P/E ratio takes the terms of a wide scale similar the S&P 500 and measures it against that index's mean inflation-adjusted net per stock from the anterior decade. By utilizing a decennary of earnings, it tin springiness a representation that isn't distorted by an unusually beardown (or weak) year. All successful all, it aims to springiness investors an thought of whether the scale presently trades astatine a discount, oregon a premium.

The Shiller P/E has a estimation for flashing reddish erstwhile exuberance appears to beryllium starring the marketplace implicit fundamentals. It was however Shiller himself predicted the dot-com bubble successful his publication Irrational Exuberance just earlier the bubble popped successful March 2000.

Now, successful January 2026, the Shiller P/E of the S&P 500 has climbed into a scope akin to the dot-com era's. That unsocial has made a increasing assemblage of investors consciousness precise apprehensive.

Historically, the S&P 500 has maintained a Shiller P/E successful the double-digit range, usually betwixt 12 and 24. Only doubly has it risen supra 40. The archetypal clip was successful 1999 and 2000, astatine the highest of the dot-com bubble, during which the Shiller P/E went supra 44 earlier the bubble popped.

The 2nd clip happened successful 2025. After 3 consecutive years of double-digit gains, during which the S&P 500 roseate much than 78%, the Shiller P/E has entered a scope of astir 39 to 40. It continues to support that scope successful 2026.

As tin beryllium seen successful the illustration above, the Shiller P/E has lone surged this rapidly doubly -- erstwhile successful the 1920s, and again successful the 1990s. In some cases, the marketplace peaked, past crashed hard. The similarity betwixt those periods and contiguous is concerning, and it's wherefore immoderate investors person been reasoning doubly astir the stocks they pick.

Of course, the Shiller P/E doesn't guarantee that past volition repetition itself, nor that the market, if is heading for correction, volition apical retired and autumn successful 2026.