The valuation of the US stock market has reached a dangerous level. By the end of 2025, the Shiller Price-to-Earnings Ratio (CAPE) of the S&P 500 surged to 40.74, the second-highest extreme in 150 years of US stock market history. What does this mean? On the eve of the Great Depression in 1929, it was only around 30 times, and now it is much higher—only the dot-com bubble in 2000 was crazier (peak at 44.19 times).

Compared to the historical average of 17 times, the current premium has reached 139%, meaning the market pricing has been inflated to an absurd level. This directly leads to the implied real yield being suppressed to 2.45%. More concerning is that this creates a typical "negative risk premium" phenomenon—investors are not getting reasonable risk compensation but are still bearing valuation risks at a historic level. From an allocation perspective, this imbalanced pricing structure has already put significant pressure on the attractiveness of benchmark assets.