Here is a update in response to a standing request from David England, a professor who has developed a popular college level stock market classes at John A. Logan College in Carterville, IL. In his presentations, he likes to disprove the standard message of Wall Street, “Don’t worry! The market will always come back.” I furnished David with some charts, and I now share them with regular visitors to my Advisor Perspectives pages.
Specifically, David had asked for real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq Composite. So I created two overlays — one with the nominal price, excluding dividends, and the other with the price adjusted for inflation based on the Consumer Price Index for Urban Consumers (which I usually just refer to as the CPI). The charts below have been updated through Friday’s close.
The charts require little explanation. So far the 21st Century has not been especially kind to equity investors. Yes, markets usually do bounce back, but often in time frames that defy optimistic expectations. Investors in the Nikkei 225 have been waiting a long time for a return to the peak of 1989.
The charts above are based on price only. But what about dividends? Would the inclusion of dividends make a significant difference? I’ll close this post with a reprint of my latest chart update of the S&P 500 total return on a $1,000 investment at the 2000 high.
Total return, including reinvested dividends, certainly looks better, but the real (inflation-adjusted) purchasing power of that $1,000 investment remains negative.
Images: Flickr (licence attribution)
About The Author
My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.
My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.
Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.
Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool