Warren Buffett sends a blunt message to stock market investors

The Shiller CAPE ratio stood at roughly 41.9 as of early August, according to The Motley Fool. The CAPE divides S&P 500 prices by 10 years of inflation-adjusted earnings. The historical all-time high was 44.2, set in December 1999 at the peak of the dot-com bubble. The current reading is the second highest ever recorded. The long-term average sits near 17. The current reading is more than twice that.

What happened the last time valuations were this high

The CAPE first crossed 30 in 1996. The S&P 500 kept rising for four more years before the crash. Valuation extremes do not set a specific date for a correction. They do have a strong historical relationship with weaker returns over the following decade.

After the dot-com peak in March 2000, the S&P 500 needed more than seven years to recover its previous high. The Nasdaq took even longer. Investors who bought technology stocks near the peak in 1999 waited over a decade to get back to even. Many never did.

The current environment is different in at least one important way. The largest companies in the S&P 500 are generating real profits at enormous scale. Apple, Microsoft, Nvidia, and Alphabet reported combined profits of more than $400 billion in the most recent fiscal year. That was not true of the companies driving the dot-com bubble. Most of them had little or no revenue. Buffett acknowledged the difference in July, when he told CNBC he personally initiated Berkshire’s investment in Alphabet, calling it one of the stronger businesses he has looked at.

What Buffett’s warning means for long-term investors

Buffett has not told investors to get out of the stock market. He said prices for “an awful lot of things will look very silly” in hindsight. He is saying many individual assets are priced as if nothing can go wrong. That is not the same as calling a crash.

The S&P 500 has returned more than 700% since 2000 including dividends, living through the dot-com crash, the 2008 financial crisis, and a global pandemic. Investors who stayed in through all of it came out far ahead of those who exited at the first sign of stretched valuations. Buffett’s own 2001 warning about the Buffett indicator came three years before markets recovered from the dot-com collapse.

Buffett’s own record makes the same case. Berkshire has been cautious for years and still holds enormous equity positions. Apple remains its largest holding. He is not out of the market. He is out of the parts of the market he considers overpriced. That is the actual message he delivered in May 2026 and repeated in July: spend less on gambling, more on investing.

Related: Warren Buffett keeps pointing at the same ETF for a reason

This story was originally published by TheStreet on Aug 7, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.