The S&P 500 May Be at an All-Time Inflation-Adjusted High
"On Thursday, the S&P 500 ended at 2,088.48 for its highest close this year. The index may have closed at an all-time inflation-adjusted high. That hasn’t happened in nearly 15 years. The only problem is, we can’t say for sure until the CPI for February comes out in about five weeks.
Here’s how it works. The S&P 500 made its all-time inflation-adjusted high on March 23, 2000. The index closed that day at 1,527.35. That’s actually one day before the market peaked, but the one-day gain was less than the rate of inflation. Going by the recent CPI data, which is for December, the close from March 23, 2000 works out to 2,099.30 in today’s dollars.
Here’s the catch: The CPI has been falling lately thanks to lower oil. As a result, the all-time inflation-adjusted high has been falling as well. The S&P 500 closed 0.52% below its inflation-adjusted high. So the question is, have prices deflated that much this year? I don’t know. But the lesson for investors is that the market can go a long time without making any real gains. Another lesson is the importance of dividends. Once we include dividends, then the S&P 500 is well above its 2000 peak, with or without inflation." Eddy E. CWS
"to borrow a famous phrase from Warren Buffett’s parlance. Racking up growing dividends while owning an immensely profitable company that will be so for years to come is a great way to go through life."
CrossingWallStreet, Feb 13 2015