S&P 600‘s CAPE ratio

The CAPE ratio for the S&P 600 evaluates small-cap U.S. stocks by comparing current prices to inflation-adjusted earnings averaged over the past 10 years. This approach reduces the impact of short-term earnings fluctuations, offering a clearer view of long-term valuation trends. Applied to the S&P 600, which tracks smaller companies, the CAPE ratio helps investors gauge whether these stocks are overpriced or underpriced compared to historical norms. A high ratio suggests overvaluation and potentially lower future returns, while a low ratio indicates undervaluation and possible higher returns, aiding in long-term investment decisions.