Tuesday, 18 June 2013

Despite Rally this Year, the Real (CPI adjusted) S&P 500 Index Remains Substantially Below All-Time High

Although the S&P 500 index has rallied this year to new nominal record highs, the real (CPI adjusted) price of the index remains almost 18 % lower than its all-time high (based on monthly data from Professor Robert Shiller's website) from August 2000 when it peaked at 1995.46. The index price as of yesterday of 1639.04 is also 4.2 % lower than the peak before the "financial crisis" when the index (CPI adjusted) hit 1710.56 in October 2007.

So before jumping to conclusion that what goes up must come down, a nominal price chart does not always tell the full story. But based on the 10-year real earnings yield, as we've pointed out before (see here), the index is currently nonetheless richly priced in a historical perspective.

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