Is A Highly Valued Stock Market A Warning Or The New Normal?

Sep 25, 2025

Summary

Equity valuation is certainly lofty. The Shiller CAPE Ratio, for example, is approaching a record high, which is no trivial affair for data that reaches back to 1871.
Federal Reserve Chairman Powell weighed in this week, noting: “Equity prices are fairly highly valued.”.
We’ve been here before, of course, and it usually ended in tears for stocks. Reversion to the mean doesn’t operate like clockwork, but trees don’t grow to the sky either, or so history reminds.

Wooden block cubes flipping for new normal word to changing new lifestyle or business and economy after coronavirus pandemic — picture/iStock via Getty Images

The legendary investor Sir John Templeton famously warned: “The four most dangerous words in investing are: ‘This time it’s different.’” The caveat is once again topical as the stock market continues to rise despite high valuations. The rationale: artificial intelligence