The S&P 500 just flashed a rare warning signal last seen in the dot-com bubble — and only the 2nd time in 100 years. Crashproof your wealth now

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

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

Even so, this doesn’t mean a market crash or recession is imminent. While the CAPE ratio shows that stocks are currently pricey compared to the past, it can’t predict exactly when the market might drop.

A price tag from the past

Unlike a traditional price-to-earnings ratio, which measures earnings over the previous year, the CAPE ratio measures a stock’s price in relation to the company’s inflation-adjusted earnings per share over a decade to smooth out economic booms and recessions. It can also be used in this way to assess indices.

A CAPE ratio of 41.33 means investors are paying roughly $41.33 for every $1 of inflation-adjusted earnings generated over the previous 10 years.

According to Shiller’s research, higher CAPE ratios have been associated with lower long-term returns.

However, they have not been reliable indicators of when exactly a downturn will begin. For instance, the ratio remained elevated for years during the late 1990s before the dot-com bubble finally burst.

Rather than trying to predict market tops, valuation metrics like CAPE are best for assessing risk and determining whether portfolios are appropriately diversified. In other words, it’s not a market-timing tool — it’s more like a risk management tool.

Don’t put all your eggs in one index

The old advice of just “buying the index” to spread out your risk is perhaps not as effective these days, as much of the total weight of the S&P 500 is becoming increasingly concentrated on the top companies. In fact, the 10 largest companies by market cap accounted for 41% of the index at the end of 2025, up drastically from 19% at the end of 2015.

Further accelerating this “Great Narrowing” is the concentration of big technology companies at the top, meaning it acts more like a tech fund than a broad mix of the American economy.

This situation could become problematic in the future, as many of these tech giants have constructed a circular, interdependent ecosystem that is leaning heavily into AI. The billions of dollars spent among them are used to build out AI infrastructure and are largely being recycled among themselves — one company buys hyper-advanced microchips from the other, while a third leases massive cloud data centers from a fourth and so on.

This closed-loop funding structure can create something of an echo chamber of corporate revenue, one that could trigger a domino effect impacting the earnings of the entire top tier of the index.

But what does this mean for the average investor?

Most importantly, it means that a standard retirement portfolio is uniquely exposed to structural, single-sector fragility. As a result, retail investors might want to consider looking beyond publicly traded stocks to diversify their portfolios with assets that may respond differently to changing economic conditions.

Looking beyond Wall Street’s gallery

To lower risk, some investors go beyond stocks and bonds by adding other types of investments to their portfolios.

Real estate is one of the most common ways Americans build wealth outside the stock market. According to data from the Federal Reserve’s Survey of Consumer Finances, a primary residence accounts for roughly a quarter of all household assets nationwide. For American families in the bottom 50% of wealth distribution, the value of their home is the largest part of their wealth, indicating that owning property — not financial investments — is their primary source of financial security.

Similarly, rental properties have long been a proven source of steady, passive income for high-net-worth investors. It’s no wonder that real estate accounts for nearly 25% of the typical family office portfolio. But, the time, effort and costs involved in managing and maintaining multiple properties prevent many from investing.

Mogul is the gamechanger here. This real estate investment platform was founded by former Goldman Sachs real estate investors to help its users find and purchase fractional ownership in blue-chip rental properties, potentially giving them monthly rental income, real-time appreciation and tax benefits — without the need for a hefty down payment or late-night tenant calls — at a fraction of the usual cost.

Each property undergoes a vetting process that requires a minimum 12% return, even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Their cash-on-cash yields, meanwhile, average between 10% to 12% annually. With investments typically ranging between $15,000 and $40,000 per property, offerings often sell out in under three hours.

Every investment is secured by real assets, not dependent on the platform’s viability. Each property is held in a standalone Propco LLC, so investors own the property — not the platform. Blockchain-based fractionalization adds a layer of safety, ensuring a permanent, verifiable record of each stake.

Getting started is quick and easy. You can sign up for an account and then browse available properties. Once you verify your information with their team, you can invest like a mogul in just a few clicks.

The art of diversifying

Large organizations like pension funds have been diversifying their portfolios for a long time, investing in alternative assets so they don’t rely too heavily on any one class. Billionaires have similarly followed this strategy, carving out a slice of their portfolios for an asset class that doesn’t move in lockstep with public markets and comes with strong rebound potential: post-war and contemporary art.

It may sound surprising, but more than 70,000 investors have followed suit since 2019 — through Masterworks. Now, you can own fractional shares of works by Banksy, Basquiat, Picasso and more.

Masterworks has sold 27 artworks so far, yielding net annualized returns like 14.6%, 17.6% and 17.8%.*

Moneywise readers can get priority access to diversify with art: Skip the waitlist here.

*Past performance is not indicative of future returns. Investing involves risk. See important Regulation A disclosures at Masterworks.com/cd.

All that glitters

Gold has historically attracted investors during periods of inflation, geopolitical uncertainty and market volatility.

While gold prices can fluctuate significantly, research suggests that gold is on average a good hedge against economic uncertainty or safe haven in extreme market conditions.

If you’re interested in breaking into the gold and silver market, one way that also provides significant tax advantages is to open a precious metals IRA with the help of U.S. Gold Bureau.