Chart of the week: Rain falls on the bulls’ parade

S&P 500 chart

The S&P 500, the world’s most widely watched stockmarket index, has hit over 30 new record highs this year. The latest gains have propelled the index above the 2,000 mark. But “it’s time to pour inflationary rain on the bull parade”, as Gene Epstein puts it in Barron’s.

If we factor in the loss of purchasing power investors have suffered owing to inflation, the market still has some way to go to reach a record in real terms.

The S&P 500 previously hit an inflation-adjusted, all-time high in March 2000. Since then, US inflation, as measured by the Consumer Price Index (CPI), has climbed by almost 40%. Factoring that in transforms the previous record to 2,124, notes Epstein, and the market is still more than 5% below this milestone.

Meanwhile, the technology-heavy Nasdaq Composite has done far worse in real terms since 2000; investors in the Dow Jones index, on the other hand, have managed to make a small profit.