A Trump Bull Market Correction May Be Coming. Here's What 150 Years of Data Says.
Key Points
The CAPE ratio has a flawless track record of predicting a market crash when it rises above 24.
It currently sits at 36.48, suggesting such a crash may be imminent.
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The stock market has largely performed well on Donald Trump's watch. Even recent economic shocks like new tariffs and oil price spikes haven't chased away the Wall Street bulls.
At least, not yet.
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But a top historical indicator of a looming bear market is now flashing red, and its 150-plus-year track record of success speaks for itself. Here's why a Trump bull market correction may be coming soon.
President Donald J. Trump delivers remarks at a press conference, March 9, 2026. Image source: Official White House Photo.
What goes up...
The price-to-earnings ratio, or P/E ratio, is one of the most common tools for evaluating how expensive an individual company's stock price is. But it couldn't evaluate the entire market...until economist Robert Shiller developed a version for the entire S&P 500. Thus the Shiller cyclically adjusted P/E ratio -- or CAPE ratio -- was born.
Although it was only created in 1988, the CAPE ratio has been retroactively calculated back to 1871, giving us 155 years of history to evaluate. And things look ominous.
...must come down
Since 1871, the CAPE ratio has been above 24 on only six occasions (a higher number means the market is pricier):
- In 1901, just before the Panic of 1901.
- In the late 1920s, just before the Great Depression.
- In 1966, just prior to the stagflation era.
- In the late 1990s, before the dot-com bubble burst.
- In the late 2000s, prior to the Great Recession.
- Right now.
That's a 100% correlation of a high CAPE ratio preceding a major market downturn.
The CAPE ratio currently sits at 36.48, not far from its all-time high of 44.2. So if you've been thinking stocks in general look pricey right now, you're not wrong. That should make investors very nervous.
This doesn't mean a stock market crash is going to happen tomorrow, or even this year. Before the dot-com bust, the CAPE ratio surpassed 24 in 1995, and the reckoning didn't come until 2000. But the ratio's flawless track record suggests there's a high probability of a bear market starting before President Trump leaves office, and maybe even sooner than that.
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John Bromels has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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