Author Topic: S&P 500 graphed in real terms looks a lot different  (Read 3414 times)

ChpBstrd

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S&P 500 graphed in real terms looks a lot different
« on: January 16, 2018, 07:28:09 AM »
Found this on the Financial Times. From the article:

"There are many definitions of a secular bear market, but a popular one is that a new secular bull market only starts once the previous peak has been taken out for good, in real terms."

I don't think this conclusively debunks the "top is in!" crowd, but it does help me realize that nominal charts make everything look like a bubble, when in fact much of what we are observing is the inverse of inflation.

Mr. Green

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #1 on: January 16, 2018, 08:15:25 AM »
It's quite possible that we are in the middle of a run up comparable to the 1940s, which are some of the best starting years in historical 30-year periods of market performance. No one will know until it's hindsight but it's hard to come up with major economic reasons to put us into a bear market. Unemployment is historically low, labor markets are tight. Things are looking pretty solid right now as long as it doesn't get screwed up politically.

sol

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #2 on: January 16, 2018, 09:54:17 AM »
Things are looking pretty solid right now as long as it doesn't get screwed up politically.

So, Dow 10k by Christmas?

RWD

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #3 on: January 16, 2018, 11:00:36 AM »
Very interesting way to look at it, thanks for posting. The SP500 has returned only 3.32% annually after inflation (dividends reinvested) since March 2000.

DS

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #4 on: January 16, 2018, 11:12:49 AM »
It's quite possible that we are in the middle of a run up comparable to the 1940s, which are some of the best starting years in historical 30-year periods of market performance. No one will know until it's hindsight but it's hard to come up with major economic reasons to put us into a bear market. Unemployment is historically low, labor markets are tight. Things are looking pretty solid right now as long as it doesn't get screwed up politically.

Top is not in???

ChpBstrd

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #5 on: January 16, 2018, 11:36:32 AM »
It's quite possible that we are in the middle of a run up comparable to the 1940s, which are some of the best starting years in historical 30-year periods of market performance. No one will know until it's hindsight but it's hard to come up with major economic reasons to put us into a bear market. Unemployment is historically low, labor markets are tight. Things are looking pretty solid right now as long as it doesn't get screwed up politically.

Politics is why we can't have nice things.

TheAnonOne

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #6 on: January 16, 2018, 12:04:49 PM »
Very interesting way to look at it, thanks for posting. The SP500 has returned only 3.32% annually after inflation (dividends reinvested) since March 2000.

Though, assuming we hit the same PE of 44, those returns would be much higher.

I think we all want to avoid the PE continuing its march up though. To a degree the whole "PE10" is somewhat pointless, but to see it jump by another 50% would be a little scary, in terms of future returns at least.

Mighty-Dollar

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #7 on: January 17, 2018, 02:31:14 AM »
We haven't been in the latest bull market for that long.
http://www.risadvisory.com/images/uploads/Rydex_Historical_trends.pdf

YoungInvestor

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #8 on: January 17, 2018, 05:04:57 AM »
We haven't been in the latest bull market for that long.
http://www.risadvisory.com/images/uploads/Rydex_Historical_trends.pdf

Doesn't this chart exclude dividends (which were higher back in the early 20th) from its analysis?

To me, this shows what happens when valuations get too high, which may or may not be the case currently, what with these tax cuts. International doesn't look so bad at this point.

Mr. Green

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #9 on: January 17, 2018, 07:34:51 AM »
Things are looking pretty solid right now as long as it doesn't get screwed up politically.

So, Dow 10k by Christmas?
Who's to say? Trump has done a lot of dumb stuff already. That's why we just have to let it ride.

ChpBstrd

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #10 on: January 17, 2018, 07:52:17 AM »
Things are looking pretty solid right now as long as it doesn't get screwed up politically.

So, Dow 10k by Christmas?
Who's to say? Trump has done a lot of dumb stuff already. That's why we just have to let it ride.

I agree he's done a lot of dumb stuff, but in terms of legislative accomplishments, there's only the tax bill. Some of his proposed ideas could demolish multiple industries, including healthcare (O-care), agriculture (immigration, protectionism), manufacturing (protectionism), and clean energy (coal subsidies, end of tax credits). However, #45 seems more content golfing and tweeting than hustling up votes or drafting legislation. The markets have observed this ineffectiveness and concluded this environment is similar to gridlock - which is a very bullish condition. As various investigations heat up, legislation might get even more infrequent. One problem: a war would be a nice distraction right about now and that could trigger a recession.

BTDretire

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #11 on: January 17, 2018, 04:53:41 PM »
It's quite possible that we are in the middle of a run up comparable to the 1940s, which are some of the best starting years in historical 30-year periods of market performance. No one will know until it's hindsight but it's hard to come up with major economic reasons to put us into a bear market. Unemployment is historically low, labor markets are tight. Things are looking pretty solid right now as long as it doesn't get screwed up politically.

Politics is why we can't have nice things.

  LOL :-)

BTDretire

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #12 on: January 17, 2018, 05:00:23 PM »
We haven't been in the latest bull market for that long.
http://www.risadvisory.com/images/uploads/Rydex_Historical_trends.pdf

 That is a scary chart, although I'm aware that there have been long times between growth spurts.
I wish it went to the end of 2017!

aspiringnomad

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #13 on: January 17, 2018, 05:43:47 PM »
We haven't been in the latest bull market for that long.
http://www.risadvisory.com/images/uploads/Rydex_Historical_trends.pdf

 That is a scary chart, although I'm aware that there have been long times between growth spurts.
I wish it went to the end of 2017!

It's a little less scary knowing that its logarithmic and doesn't include dividends.

kayvent

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Re: S&P 500 graphed in real terms looks a lot different
« Reply #14 on: January 17, 2018, 06:11:29 PM »
We haven't been in the latest bull market for that long.
http://www.risadvisory.com/images/uploads/Rydex_Historical_trends.pdf

 That is a scary chart, although I'm aware that there have been long times between growth spurts.
I wish it went to the end of 2017!

It's a little less scary knowing that its logarithmic and doesn't include dividends.

Typically when someone tells me how scary something is and that I should give them money, it doesn't instill worry in myself. On their site with that chart they state "our active management approach is designed to help our clients achieve their goals in various market environments."

Looking at the charts, the boundary points seem abritary. For example, why end the Bull from 1896 to 1905? I must not understand their methodology for drawing lines at arbitrary points in time; it seems like I could have ended at 1902, then a 5-year "secular bear" followed by a 21-year "secular bull".
« Last Edit: January 17, 2018, 08:26:47 PM by kayvent »