How to Read Valuation Percentiles
A percentile rank turns a raw valuation number into context. Here is how to interpret where today's reading sits within decades of history.
A valuation number on its own — "CAPE is 28" — means very little without context. Is 28 high? Low? Normal? The answer depends entirely on the metric's own history. That is what a percentile rank is for.
What a percentile means
The percentile rank tells you what share of all historical readings were at or below today's value.
- A reading in the 90th percentile means today is more expensive than 90% of history.
- A reading in the 20th percentile means today is cheaper than 80% of history.
- The 50th percentile is the median — the exact middle of the distribution.
Why we prefer percentiles to averages
Averages can be skewed by extreme periods — a single bubble or crash drags the mean around. A percentile is robust: it simply ranks today against every other month on record, so a few outliers cannot distort the picture as much.
That said, the two work best together:
| Statistic | What it answers |
|---|---|
| Current | Where are we right now? |
| Mean / Median | What is a typical level? |
| Percentile | How extreme is today versus all of history? |
A word of caution
Percentiles describe the past. A metric sitting in its 95th percentile is historically expensive, but it can still climb higher, and the "normal" range itself can shift over decades as economies change. Percentiles add context; they do not predict.