SPX Monthly - Adjusted for Real Inflation
The assumptions are that money printing is real inflation as is often stated by Peter Schiff and M2 money supply is a good measure of the amount of money that has been printed into circulation. This data goes back to 1959 and makes the dot com bubble in 2000 look much more exuberant than current price levels. There is room for downside from here as the 1966 to 1974 decline and 2008 crash suggest.
The chart also suggests that there has been no real stock market growth since the 1960s. It should be noted that the stock market was a good place to keep capital as an inflation hedge and a source of dividends and that cash kept over this time period would have lost pretty close to all of its value while earning no dividends. It demonstrates how important it is to not let cash sit in a bank and collect dust and to be financially literate. The central bank system punishes savers and forces participation in markets.
The S&P can see a 75% increase or a 68% decrease from here and still be within its historical range. I’m leaning more bullish right now but these are very uncertain times, with the Fed having raised the fed funds rate to 4.75% and the stock market having declined for all of 2022. Nothing would surprise me but this chart helps to show that maybe the market isn’t as ridiculously priced as it looks when looking at the S&P 500 chart alone.
The chart also suggests that there has been no real stock market growth since the 1960s. It should be noted that the stock market was a good place to keep capital as an inflation hedge and a source of dividends and that cash kept over this time period would have lost pretty close to all of its value while earning no dividends. It demonstrates how important it is to not let cash sit in a bank and collect dust and to be financially literate. The central bank system punishes savers and forces participation in markets.
The S&P can see a 75% increase or a 68% decrease from here and still be within its historical range. I’m leaning more bullish right now but these are very uncertain times, with the Fed having raised the fed funds rate to 4.75% and the stock market having declined for all of 2022. Nothing would surprise me but this chart helps to show that maybe the market isn’t as ridiculously priced as it looks when looking at the S&P 500 chart alone.
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