“The market can stay irrational longer than you can stay solvent,” by John Maynard Keynes By most popular valuation metrics the stock market is overvalued. According to “The Buffett Indicator,” which divides the total US stock market value ($65.47T) by the gross domestic product ($30.15T), the US stock markets valuation in June, 2025 was 217% or roughly 68.63% above the historical average. In this article, we’ll explore what “overvalued” means, examine key valuation metrics and share smart strategies for investing in today’s richly priced market. What Does an Overvalued Stock Market Mean? Shiller P/E Ratio (CAPE) One of the most respected valuation tools, the Shiller or CAPE (Cyclically Adjusted Price-to-Earnings) ratio, compares today’s S&P 500 price to the average inflation-adjusted earnings over the past 10 years. This method smooths out earnings volatility and adjusts for inflation. October 2025 Shiller P/E Ratio: 39.00 Historical Average: 17.29 Implied Overvaluation: ~126% [embed]https://youtube.com/watch?v=t5zV19N_O6k&si=ZwoudgjTFNYXU9Ep[/embed] S&P 500 Price-to-Sales Ratio This metric divides the S&P 500’s market price by its trailing 12-month sales (as of March 2025): Current Ratio: 3.31 Historical Average: 1.80 Implied Overvaluation: ~84% Buffett Indicator As mentioned earlier, the Buffett Indicator currently sits at 217%, suggesting the market is strongly overvalued. Taken together, these metrics suggest the market is overvalued by 69% to 126%, depending on the measure. Is the Stock Market in a Bubble Now? Historically, the only time the Shiller P/E ratio exceeded today’s level was in October 1999, when it hit 44.19. That peak preceded the dot-com crash, during which the S&P 500 fell from $1,465 in December 1999 to $735 in February 2009. Does this mean a stock market crash is coming? Not necessarily. Markets tend to revert to their mean valuations, but timing corrections is notoriously difficult. S&P Value from 1985 – 2025 Source: yahoo!finance For those of you who don’t remember, at it’s peak valuation the S&P 500 was priced at $1,465 in December 1999. During the ensuing decade, as the dot com boom ended and the tech bubble burst, the stock market fell to $735 in February 2009. Does that mean that a stock market crash is coming? Not necessarily. The stock market typically reverts to its mean valuation, eventually. But the timing of the next stock market decline is unknown.  Maybe the Stock Market Isn’t in a Bubble Some analysts argue that AI-driven productivity could justify higher valuations. If corporate earnings grow faster than asset prices, valuations could normalize without a crash.  Others believe that today’s market leaders are profitable and established, unlike the speculative tech firms of the late 1990s. At the close of the last millennium, many companies with minimal earnings were richly valued. Where to Invest in an Overvalued Market? In the “S&P Value from 1985 – 2025” chart above, stock market prices have peaks and valleys, yet the long term trend remains upward. Those that sell during downturns typically get burned. That’s because you need to be correct twice, first, when to

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