S&P 500 ← DAX 40 Global Buffett Indicator Correlation

Macro RG — Market-Level Approximation

A macro extension of the Reality Gap framework, applying the RG lens to entire equity universes rather than individual companies.

Macro approximation — not full RG Monthly series · 1746 observations Data through 2026-06 · fetched 2026-06-18 CAPE series is earnings-only — TE-corrected variant in §2

1. Current Reading

M(S&P 500)RG10 · TE-corrected

2.43+

1/(1/PB + 10/CAPE) · as of 2026-07-05

Record territory — above every year-end since 1999, incl. dot-com

Highest point of the corrected series (1999–present) — above the dot-com year-end 1999-12 (2.36).

Earnings-only (upper bound)

4.13+

CAPE / 10 · Shiller CAPE 41.3 · 2026-06

Ignores tangible equity. The true macro RG lies between 2.43 (corrected, lower bound) and 4.13. CAPE long-run average: ~17.8.

Construction

Published: 1 / (1/PB + 10/CAPE)

Upper bound (historical series): CAPE / 10

The full macro RG is MC / (BookValue + 10·SmoothedEarnings). Since BookValue = MC/PB and SmoothedEarnings = MC/CAPE, this simplifies to 1/(1/PB + 10/CAPE). The TE-corrected construction is published above and in §2 (P/B via multpl.com); CAPE/10 remains the long-history series and is always the higher bound.

Trend signs: corrected value vs. the last year-end point of the corrected series; earnings-only value vs. 12 months prior. ++ >+20% · + >+5% · = ±5% · - >-5% · -- >-20%

2. The Missing Half — TE-Corrected Macro RG

The firm-level RG divides market cap by the full fundamental base TE + N·G. CAPE / 10 captures only the earnings half — tangible equity is missing from the denominator, so the CAPE-based value is a systematic upper bound. The missing half can be recovered from the index price-to-book ratio via an exact identity:

Identity

1 / RG_N = TE/MC + N·G/MC = 1/PB + N/PE_smooth ⇒ RG_N = 1 / (1/PB + N/PE_smooth)

PB = index price-to-book, PE_smooth = CAPE (S&P 500) or trailing portfolio P/E (other indices). Because index P/B uses book equity (incl. goodwill and intangibles) rather than tangible book, the corrected value is a lower bound — the true macro RG lies between the corrected and the earnings-only reading.

Index	Earnings-only RG10	TE-corrected RG10	Bottom-up ΣMC / Σ(TE+10·G)	P/B used	Earnings basis
S&P 500	4.13	2.43	2.26 (n=30)	5.92	Shiller CAPE (10y real)
DAX 40	1.83	0.94	0.83 (n=27)	1.91	trailing 12m portfolio P/E (EXS1.DE)
Nikkei 225	2.25	1.21	0.94 (n=19)	2.60	trailing 12m portfolio P/E (1321.T)
Hang Seng	1.24	0.63	0.46 (n=42)	1.27	trailing 12m portfolio P/E (2800.HK)

Two independent constructions cross-validate: for the S&P 500 the top-down corrected value (2.43) and the bottom-up aggregate over the 30 covered constituents (2.26) land close together — far below the earnings-only reading of 4.13.

Bottom-up: value-weighted ΣMC / Σ(TE + 10·G) over the constituents covered in this dataset (exact RG formula incl. tangible equity; coverage subset — top caps only). Top-down P/B sources: multpl.com (S&P 500), replicating-ETF portfolio ratios via yfinance (DAX 40, Nikkei 225, Hang Seng). Non-US earnings basis is trailing 12m P/E, not CAPE. Updated daily. Data as of 2026-07-05.

3. Heuristic Interpretation Bands

Indicative reference only. These are not thresholds or signals — history shows that markets can remain in any zone for extended periods. These bands are calibrated to the earnings-only CAPE scale and do not apply to the TE-corrected metric, which runs on a compressed scale — its own reference points are shown below the table.

M(S&P 500)RG10	CAPE equivalent	Heuristic label	Context
< 1.0	< 10	Below long-run avg / historically attractive	Rare outside major bear markets or crises. 1982, 2009 briefly.
1.0–1.8	10–18	Around long-run average — normal zone	Long-run CAPE mean ~17. Typical in post-WW2 recovery cycles.
1.8–2.5	18–25	Somewhat above average — caution	Common in extended bull markets (1960s, 1990s, 2010s).
2.5–3.5	25–35	Significantly stretched — elevated risk	Pre-GFC 2007 (~2.7), post-COVID 2021 (~3.9).
≥ 3.5 ← earnings-only (4.13)	≥ 35	Historically very hot — rare territory	Dot-com peak 2000 (~4.4), late-2021 peak (~3.9), today (~3.9).

TE-corrected series — own reference points (year-end values, 1999–present)

0.87 GFC low (2008-12) 1.42 median 2.12 post-COVID peak (2021-12) 2.36 dot-com year-end (1999-12) 2.43 current — 100th percentile, record

On its own scale, the corrected value is not in a moderate zone: it stands above every year-end reading since 1999, including the dot-com year-end. The compressed scale (book equity in the denominator dampens swings) makes cross-reading against the CAPE bands misleading.

4. M(S&P 500)RG10 — Monthly Series (1881–2026-06)

Monthly observations — same series standard as the current value above. Dashed line = long-run average (1.78×).

Primary: Yale ie_data.xls (1881-01 – 2023-09). Supplemented with multpl.com (2023-09 – 2026-06).

M(S&P 500)RG10 Long-run average (1.78×) RG10 = 1.0 reference 10-yr Treasury (GS10, right axis) TE-corrected RG10 (annual, since 1999 — see §2)

Monthly values · 1746 data points · range 0.48× – 4.42×. CAPE series begins 1881 (requires 10 years of prior earnings starting 1871).

5. Key Historical Peaks

Episode	Date	CAPE	M(S&P 500)RG10	Note
Great Crash — post-peak	1929-09	32.56	3.26	Significantly stretched
Dot-com bubble peak	2000-01	43.77	4.38	Historically very hot
Pre-GFC peak	2007-10	27.32	2.73	Significantly stretched
Post-COVID peak	2021-11	38.58	3.86	Historically very hot
Current reading	2026-06	41.32	4.13+	Historically very hot

6. Other Equity Universes

Macro RG currently provides a published historical series for the S&P 500. DAX 40 is included as a provisional market-level extension based on trailing P/E. TE-corrected current readings for S&P 500, DAX 40, Nikkei 225 and Hang Seng are published in §2. Additional long-run series will be added once sufficiently robust data can be independently verified.

Notation	Universe	Current	Data source	Status
M(S&P 500)RG10	S&P 500 (US large-cap)	4.13×	Shiller ie_data.xls / Yale · CAPE / 10	live
M(DAX 40)RG10	DAX 40 (German large-cap)	1.82×	yfinance ETF proxy · trailing P/E / 10 (not CAPE)	live
M(Nikkei 225)RG10	Nikkei 225 (Japanese large-cap)	—	Current TE-corrected reading in §2; long-run series pending	planned
M(Hang Seng)RG10	Hang Seng (HK-listed China)	—	Current TE-corrected reading in §2; long-run series pending	planned
M(STOXX 600)RG10	STOXX Europe 600	—	MSCI / Barclays European CAPE	planned
M(EM)RG10	MSCI Emerging Markets	—	MSCI CAPE data	planned

7. Methodology and Limitations

Dimension	Detail
Measure name	M(S&P 500)RG10 — M for macro, (S&P 500) for the universe, RG10 for the capitalization factor N=10
Formula	M(S&P 500)RG10 = CAPE / 10, where CAPE = P / (10-year average real EPS). This equals Price / (10 × smoothed real earnings), mirroring the RG earnings term.
What is included	Price relative to long-run inflation-adjusted earnings (CAPE numerics). Captures earnings smoothing and cyclicality.
What is NOT included	Tangible equity is absent from the CAPE series (upper bound). Section 2 publishes the full construction RG10 = 1/(1/PB + 10/CAPE) with P/B from multpl.com; since index P/B uses book (not tangible) equity, that corrected value is a lower bound. The true macro RG lies between the two.
Series standard	All values — current reading and historical chart — use the same monthly series. No annual downsampling. 1746 monthly observations (1881-01 – 2026-06).
Current value	Latest monthly observation: 2026-06, CAPE = 41.32, M(S&P500)RG10 = 4.132. Trend (+) = 12-month % change in CAPE.
Long-run average	Long-run CAPE mean ≈ 17.8 (1881–2026), implying an M(S&P500)RG10 long-run mean of ≈ 1.78. The "normal" zone is around 1.7, not 1.0.
Primary data source	Robert Shiller, Yale University — ie_data.xls. Coverage: 1881-01 – 2023-09. CAPE series requires 10 years of prior earnings; raw price series starts 1871.
Supplement source	multpl.com Shiller PE table — used for months after the Yale cutoff (2023-09). multpl.com tracks the same Shiller CAPE series. Supplement covers 2023-09 – 2026-06.
Trend computation	12-month % change in CAPE (monthly). ++ >+20% · + >+5% · = ±5% · − >−5% · −− >−20%.
10-yr Treasury (GS10)	The 10-year US Treasury rate is shown on the chart's right axis (green dashed line). Source: Shiller ie_data.xls column GS10. Available monthly from 1871 through the Yale data cutoff. This context line helps distinguish high-RG periods driven by zero-rate policy (2010s–2021) from structurally driven peaks (1929, 2000).
Interpretation	The bands are heuristic reference points, not thresholds for buy/sell decisions. High CAPE can persist for years. Low CAPE does not guarantee near-term outperformance.

Primary data: Robert Shiller, Yale University — Irrational Exuberance dataset, Yale (1881-01 – 2023-09). Supplemented with multpl.com for months after 2023-09. Last fetched: 2026-06-18. Series standard: monthly throughout (current value and chart use the same series). This page presents a macro approximation for research purposes only. It is not the full Reality Gap indicator and must not be used as investment advice. M(S&P 500)RG10 = CAPE / 10. Tangible equity is not included in this macro construction.