The S&P 500 Nears Its Inflation-Adjusted High

The stock market is up a little bit this morning. Of course, the stock market seems to only move in little bits these days. Looking at our Buy List, Ross Stores ($ROST) reports after the close today, and retail stocks have perked up lately. Ross has been as high as $83.47 today and Bed Bath & Beyond has been up to $73.41. That’s a nice rebound.

One shocking econ report today came from the Philly Fed. The latest report on manufacturing activity in the Philadelphia Fed region came in at 40.8. That demolished expectations of 18.5. In fact, the beat was so big that I suspect there may be something off. As always with economic data, we want to wait for more confirmation before we can declare a new trend.

The Labor Department said that consumer inflation was flat last month. But if you take out food and energy, inflation was up by 0.2% in October. Inflation is up 1.664% in the last 12 months.

Speaking of inflation, the S&P 500 is still below its inflation-adjusted high from March 2000, but it’s closing in. Including dividends, the market has made an inflation-adjusted profit, but the straight index still has not.

Thanks to the latest CPI data, we can say that the S&P 500 would have to have been at 2,122.74 on October 31 to match its inflation-adjusted high. The problem is that there’s at least a three-week lag with inflation data, so it’s impossible to say exactly where the inflation-adjusted high is in real time.

But we can make some estimates. With an inflation rate of 1.7%, that means it nicks 0.1 points off the S&P 500 each calendar day. That would bring the current inflation-adjusted high to 2,124.75. Let’s say 2,125 to be safe. That means the stock market is about 3.5% away from a new inflation-adjusted high. This could happen soon.

Posted by on November 20th, 2014 at 12:02 pm


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