U.S. P/E10 Reaches 37.9 as Inflation Is 4.0%
The cyclically adjusted P/E (P/E10) rose to 37.9, near late-1990s tech-bubble levels, while year-over-year inflation was 4.00% and the 10-year Treasury averaged 4.32%.
The monthly market valuation update reports the cyclically adjusted price-to-earnings ratio (P/E10) for U.S. stocks at 37.9 in the latest monthly reading. Year-over-year inflation for the same period is reported at 4.00%.
The P/E10 level is well above the historical average of 17.7. The update identifies readings of 25 or higher as comparable to the late-1990s tech bubble, which it dates from June 1997 to January 2002. The analysis maps the relationship between P/E10 and inflation across three periods: January 1881 to December 2007, January 2008 to February 2020, and March 2020 to the present. The report highlights an inflation range of roughly 1.4% to 3.0% that has historically coincided with higher valuations; at 4.00% inflation the current reading falls outside that band.
The report also examines the link between P/E10 and the 10-year Treasury yield using data from 1960 onward, a starting point chosen because yields began to respond more consistently to inflation after that year. The latest monthly average for the 10-year Treasury yield is 4.32%. The period after the 2008 financial crisis featured yields below about 2.5% alongside P/E10 ratios above 20. The report notes that the recent rise in yields has shifted those metrics away from the low-yield, high-valuation pattern seen after 2008 and closer to conditions observed around the tech bubble.
Charts in the update include scatter plots showing how inflation and the 10-year yield corresponded with valuation levels across the long-term record and the more recent subperiods. The report describes the current P/E10 of 37.9 as occupying “extreme valuation territory.”
A methodological note states the October 2025 inflation figure was extrapolated from the two prior months because official Consumer Price Index publications were delayed by a federal government shutdown. The update uses year-over-year changes in inflation for its comparisons.
The report indicates that policy developments and investor responses will be monitored in subsequent monthly updates.
Articles by this author
