Executive Summary
Current US equity market valuations are at historically elevated levels, with the S&P 500's recent 10-year annualised return of approximately 14.6% significantly exceeding the long-term average of 10.5%. Multiple valuation metrics–including the Buffett Indicator at ~220% and the Shiller CAPE ratio near 40–suggest the market is trading at levels seen only twice before: the late 1990s dot-com era and briefly in late 2021. While strong returns have historically been possible from elevated valuations, probability-weighted future returns from current levels tend to be more modest.
Rolling Returns: Current vs Historical
10-Year Rolling Returns S&P 500
| Period | Annualised Return |
|---|---|
| Current (to Nov 2025) | 14.6% |
| Best (ending Aug 2000) | 20.0% |
| Post-GFC (Jun 2009–May 2019) | 13.9% |
| 100-Year Average | 10.5% |
| Worst (ending Feb 2009) | -3.0% |
20-Year Rolling Returns S&P 500
| Period | Annualised Return |
|---|---|
| Current 20-Year Average | 11.1% |
| Best (ending Mar 2000) | 18.0% |
| Median (since 1928) | 7.3% |
| Worst (ending May 1979) | 6.4% |
| Worst (1929–1948) | 0.6% |
Valuation Indicators
The ratio of total US stock market capitalisation to GDP. Warren Buffett once described it as "probably the best single measure of where valuations stand."
The Cyclically Adjusted Price-to-Earnings ratio uses 10 years of inflation-adjusted earnings to smooth business cycle effects.
Historical Precedents
The Dot-Com Boom
The most comparable historical period. Five consecutive years of exceptional returns (including 34.1% in 1995 and 31.0% in 1997) drove valuations to extreme levels. The Shiller CAPE peaked at 44 in December 1999. This was followed by a three-year bear market with cumulative losses exceeding 40%.
Post-GFC Recovery
The decade following the Global Financial Crisis produced strong returns driven by recovery from deeply depressed valuations, sustained low interest rates, and corporate earnings growth. Starting valuations were attractive–the opposite of current conditions.
Post-War Economic Expansion
Extended period of strong returns fuelled by post-WWII economic expansion, rising consumer demand, and industrial growth. Notably, this began from very low valuations following the Great Depression and war years.
Key Takeaways
Important Disclosures
General Advice Warning: This document contains general information only and does not take into account your personal objectives, financial situation, or needs. Before acting on any information, you should consider the appropriateness of the information having regard to your objectives, financial situation, and needs. You should seek professional financial advice before making any investment decisions.
Past Performance: Past performance is not a reliable indicator of future performance. The value of investments can go down as well as up, and you may receive back less than you originally invested. Historical returns cited herein are for illustrative purposes only.
Data Sources: Return data sourced from S&P Global, Macrotrends, and academic sources including Robert Shiller (Yale University). Valuation metrics from CurrentMarketValuation.com, GuruFocus, and Federal Reserve data. Data as at November 2025 unless otherwise stated.
Limitations: Valuation metrics such as the Buffett Indicator and CAPE ratio are not reliable short-term market timing tools. They may remain elevated or depressed for extended periods. These metrics should be considered as one input among many in a comprehensive investment analysis.
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