Skip to content




Stock Returns and Inflation

Visualizing Economics has a nice infographic showing the nominal returns of the S&P 500 versus the real returns since 1871.  The sad truth is that real returns were half that of nominal returns.

Annualized growth rate of since 1871:
Nominal stock price return= 4.0%
Real stock price return = 1.9%

We are often fooled by the wonder of rising asset prices.  The sad truth is that we feel “wealthier” when our asset values increase even though the same dollar buys less goods.  This is why governments love inflation, because citizens throw fewer tantrums about theft through inflation versus theft through direct taxes.  They might even have silly smiles on their faces because the nominal value of their retirement plans went up…hooray!  Some of the wind will be taken out of their sails when they figure out that food prices have hit an all time high

Be Sociable, Share!

Posted in Economics, Markets, Politics.

Tagged with , , , .


0 Responses

Stay in touch with the conversation, subscribe to the RSS feed for comments on this post.



Some HTML is OK

or, reply to this post via trackback.



Get Adobe Flash player
Copyright © 2009-2013 SurlyTrader DISCLAIMER The commentary on this blog is not meant to be taken as an investment advice. The author is not a registered investment adviser. There is no substitute for your own due diligence. Please be aware that investing is inherently a risky business and if you chose to follow any of the advice on this site, then you are accepting the risks associated with that investment. The Author may have also taken positions in the stocks or investments that are being discussed and the author may change his position at any time without warning.

Yellow Pages for USA and Canada SurlyTrader - Blogged

ypblogs.com