What is the FTSE 100 CAPE?
The FTSE 100 CAPE ratio applies Shiller's cyclically adjusted earnings methodology to Britain's flagship large-cap index. By dividing the real index price by a ten-year average of inflation-adjusted earnings, it strips out cyclical noise to expose the market's underlying valuation. The FTSE 100 has spent much of the past decade among the cheaper developed markets on a CAPE basis, reflecting its heavy exposure to slow-growth sectors such as energy, materials and banking, its limited technology weighting, and lingering post-Brexit caution among global investors. A low CAPE has historically implied stronger long-run return potential, so persistent cheapness is often highlighted by value investors as a reason to favour UK large-caps. As always, CAPE is a long-horizon tool best used to compare valuation across regions and against a market's own history, rather than to time entries and exits.
Formula & Methodology
Created by Robert Shiller methodology applied to the UK.
Historical Performance & Limitations
The FTSE 100's commodity and financial tilt makes its earnings especially cyclical, so the ten-year smoothing can lag turning points. Heavy overseas earnings and currency effects further complicate interpretation.
Status Classification
| Level | Meaning |
|---|---|
| Strong Undervaluation | Market trading significantly below historical average |
| Fair Value | Market aligned with historical valuation metrics |
| Moderate Overvaluation | Market elevated above historical norms |
| Severely Overvalued | Extreme historical deviation; high downside risk |