Thursday, May 31, 2007

S&P Really Down 17%

The S&P 500 stock market index just surpassed the old record of 1526 set in March 2000, closing at 1530 on Wednesday. Of course, stock market indicies are in nominal terms, i.e. not adjusted for inflation. The consumer price index (CPI) has risen from 171 in March 2000 to 206 last month (1982-84 = 100). Therefore, the real value of the S&P 500 is about 17% lower. So, even though the price of a share of an index fund is the same as it was at the last peak, if you sell that share, you could buy about 17% less stuff with the proceeds than you could have if you'd sold it in 2000. (Incidentally, the BLS has a handy chart-making tool for the CPI and other data on its web site - click on the green dinosaurs to use it).


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