US stocks hit extreme valuations as Fed’s December decision looms
Major US stock indices are trading at unusually high valuations by historical standards. The Shiller CAPE Ratio for the S&P 500 now sits near 40x—almost double its long-term average. Meanwhile, volatility measures suggest investors remain calm despite looming uncertainties from the Federal Reserve’s December policy decision and the holiday season ahead.
The S&P 500’s CAPE ratio has climbed to around 40x, far above its 17.67x historical average. This places it among the most expensive levels in the index’s history. The NASDAQ 100’s CAPE ratio is even higher, at 52.56x, after expanding rapidly in recent years.
High valuation ratios combined with muted volatility suggest investors may be underestimating risks. The upcoming Fed decision and holiday period could test this complacency. For now, options markets provide a cheaper way to bet on further gains, but the potential for sudden volatility spikes remains.
