The S&P 500 just flashed a rare warning signal last seen in dot-com bubble. Crashproof your wealth now

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If you’re following the stock market closely, you might have already picked up on the warning signals the market’s currently flashing — the sort that has historically made investors nervous.

That signal is the Shiller Cyclically Adjusted Price-to-Earnings ratio — better known as the CAPE ratio — and it’s recently climbed to roughly 41.33 (1). This level has been reached only twice in the past century, with the last time occurring in the dot-com bubble.

The CAPE ratio, developed by Nobel Prize-winning economist Robert J. Shiller (2), compares stock prices to inflation-adjusted corporate earnings over the previous decade and is widely used as a measure of market valuation.

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Since 1871, Shiller’s CAPE ratio has exceeded 24 on only six occasions (3). The first five instances occurred immediately prior to major market downturns, including the crashes of 1929 (the Great Depression) and 2008 (the Great Recession).