The Real Stock Chart

Michael Mandel

As I was working on my commentary this week, I constructed a stock chart the way it is supposed to be:

1) Total return on the S&P 500, rather than just the price of stocks

2) Adjusted for inflation

3) On a logarithmic scale (so that equal percentage moves look the same)

Here it is. It's set for December 1996 =100 (the date of Greenspan's irrational exuberance speech) Notice that the 1987 crash looks like a horrifying but ultimately small blip. Note also that we have still not gotten back to the peak (we are at 174 now, the end-of-month peak was about 199 in August 2000)

Here are some real rates of return for the inflation-adjusted S&P500 total return index:

Total Real Return, S&P 500
Total annual return on S&P500
Adjusted for inflation
January 1970-today 6.5%
March 1987-today (20 years) 7.4%
December 1996-today 5.6%
March 1997-today (10 years) 5.5%
as of March 19, 2007, midday

I would have to say for a long-term investor, the previous ten years looks pretty good. If you had put your money into the broad stock market when Greenspan talked about irrational exuberance, you'd be up about 75% or so in real terms. (assuming reinvestment of dividends)

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