Yale University economics professor Robert Shiller has a warning for investors.
The Nobel laureate says low volatility paired with a questionable price-earnings ratio could wipe out a chunk of the stock market's value.
"The price increase just went step-by-step with the earnings increase. I think it's an overreaction to good earnings," said Shiller on Wednesday's "Trading Nation."
His comments came as the , Dow and Nasdaq were hitting fresh all-time highs and the CBOE Volatility Index dropped to a record low.
In a special note to CNBC, Shiller writes that low volatility could be "the quiet before the storm." It's a phenomenon which Shiller says is making him "lie awake worrying."
And, that's not the only issue he's raising.
His Shiller PE Ratio, also known as CAPE, shows the price-earnings ratio based on average inflation-adjusted earnings from the last 10 years is over 30. The number carries significance because the only times it's been higher was just before the Great Depression in 1929 and mid-1997 to mid-2001.
"I worry that historically earnings have been trend-reverting," said Shiller. "Admittedly, we do have a president who's going to 'make America great again.' So if he's right, maybe then we're launching out in a whole new path. But it would be the first time in American history."
Shiller's latest analysis shouldn't be taken lightly.
His forecasting skills were recognized in 2013 when he won the Nobel Prize in Economics. He's known for predicting both the dot-com bubble and the housing bubble in his book "Irrational Exuberance."
If Shiller is right and the stock market ultimately goes back to trend, it could create havoc.
"It would definitely be a negative for equities. It would be pretty big. We are at a high valuation. The only time we've had a higher valuation than where we are now was around 1929 and around 2000," Shiller said.
"We could see a major correction," he said. "This is not a forecast. It's a worry."