An advisor friend sends the following observations about S&P 500 prices after adjusting for inflation. Stocks for the long run, indeed:
Attached are data and a few charts on S&P 500 prices adjusted for inflation. A few things caught my eye: * In real terms, the market was higher in the late 1960s than at the infamous ’72/’73 peak.
* Adjusted for inflation, the S&P was 600 at the ’72/’73 peak. If we reach your forecast of a 600 bottom, then the real per-share value of US corporate equity will have been flat over a 35-year period.
* The S&P was around 400 at the 1929 peak. We’ve barely doubled since then.
* If you invested at the 1929 peak, it took 29 years for the value of your shares to recover in real terms; if you invested at the 1968 peak, it took 24 years. The takeaways are: 1) dividends have provided the lion’s share of long-term stock market returns; real capital gains have been comparatively modest; and 2) if you invest at a peak, you probably won’t see a real capital gain for a quarter-century.
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