Rare valuation signal raises concern about U.S. stock market

The S&P 500’s Shiller price-to-earnings ratio reached 42.04 at the close of trading Aug. 31, near its bull-market high of 42.84 and its all-time high of 44.19. The measure, based on 10 years of inflation-adjusted earnings, has exceeded 40 for more than a month only once before in nearly 156 years of data.

That earlier stretch ran from January 1999 to September 2000 and preceded the dot-com bubble’s collapse. The S&P 500 and Nasdaq Composite later lost 49% and 78%, respectively. Historical comparisons do not identify when a market peak will occur, but they show that exceptionally high valuations have preceded major downturns.

Read the full story at finance.yahoo.com.