Nobel Economist Shiller Warns: S&P 500 May Struggle for a Decade

The Magnificent Seven has pumped U.S. stocks to dizzying heights—but Nobel Prize winner Robert Shiller just dropped a cold take: don’t expect much from the broad market over the next 10 years.

The Math Doesn’t Lie

Shiller’s CAPE ratio (cyclically adjusted P/E) hit 40+ in September, matching levels only seen once before—during the dot-com bubble peak in 1999. His model spits out a grim forecast: just 1.5% annualized returns for the S&P 500 through 2035. Minus the historical 2% dividend yield? You’re basically looking at flat-to-negative price appreciation.

The comparison is brutal: the 1990s tech mania preceded the “lost decade” of the 2000s. History rhyming again?

But Here’s the Plot Twist

Shiller isn’t saying sit in cash. He’s flagging where the actual value lives:

• Europe (CAPE: 21.4) → expects ~8.2% annual returns
• Japan (CAPE: 25.1) → expects ~6.5% annual returns
• Mid/small-cap U.S. stocks → way cheaper than mega-caps

The irony? European and Japanese indices are already up 25-30% this year, yet still trade at fractions of S&P 500 valuations.

The Real Warning

It’s not that AI won’t transform the economy—it will. But Shiller’s crystal-clear message: productivity gains will take years to materialize, while today’s mega-cap winners could crater. The next decade might reward diversification over concentration in overheated mega-cap AI plays.

TL;DR: The best 10-year returns might not come from where everyone’s looking.