Markets

S&P 500 Valuation: Is the Market Overpriced? A Data-Driven Analysis

Current Shiller P/E stands at 38.2x, vs. the 25-year average of 27.1x. We break down what this means for forward returns using 95 years of data.

Sarah Chen, CFA
Sarah Chen, CFASenior Market Analyst
8 min readFact-checked
S&P 500 Valuation: Is the Market Overpriced? A Data-Driven Analysis

The Current Valuation Landscape

The S&P 500 Shiller P/E ratio stands at 38.2x as of January 2025. This places the index in the 95th percentile of historical valuations.

Key Data Points

MetricCurrent10Y Avg25Y Avg
Shiller P/E38.2x31.4x27.1x
Forward P/E21.8x18.2x16.4x
Price/Sales2.9x2.3x1.8x
EV/EBITDA16.1x13.7x12.2x

Historical Forward Returns

When the Shiller P/E has exceeded 35x historically, the subsequent 10-year annualized real return averaged 2.1%. Compare this to the long-run average of 6.8%.

What This Means for Your Portfolio

  • Reduce concentration risk. Diversify beyond U.S. large-caps.
  • Consider value tilts. Value stocks trade at a 40% discount to growth.
  • Maintain your allocation. Market timing destroys more wealth than overvaluation.

    • Bottom Line

    The data suggests muted forward returns, not a crash. Adjust expectations, not your entire portfolio.

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    About the Author

    Sarah Chen, CFA
    Sarah Chen, CFA

    Senior Market Analyst

    CFA, MBA Wharton

    15 years in institutional asset management. Former VP at Goldman Sachs. CFA charterholder. Specializes in macro-economic analysis and fixed-income strategy.

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