2nd highest on record

In his book Irrational Exuberance, Professor Robert Shiller introduced the Shiller Price-to-Earnings ratio, a valuation metric that smooths market earnings over ten years and adjusts them for inflation. The goal is to provide a more normalized view of how expensive the stock market truly is.

Today, this measure stands at 38.8 times earnings—its second-highest level in 150 years, surpassed only during the peak of the internet bubble in 1999. The current surge is driven largely by a handful of technology megacaps at the forefront of the AI revolution.

While their future may be bright, investors should remain disciplined. Paying too high a price—even for great businesses—can weigh heavily on long-term returns. At ECP, our focus is precisely on staying grounded, avoiding excesses, and investing in companies where the earning power justifies the valuation.