CAPE

CAPE stands for Cyclically Adjusted Price-to-Earnings ratio, a financial metric used to evaluate whether a stock market is undervalued or overvalued. It takes the average earnings of a company over a span of ten years, adjusting for inflation, and divides that by the current stock price. This approach smooths out fluctuations in earnings due to economic cycles, providing a clearer long-term picture. Investors use CAPE to assess overall market conditions and make informed investment decisions, helping them gauge potential risks and opportunities in the stock market.