While this is a chart that hardly anyone looks at bc it is a given that stocks only go up. You should pay attention to it. Inflation-adjusted SPX is now breaking a channel that has not broken since the Bretton Woods Agreement.
The price of SPX has to really explode higher to overcome inflation or inflation has to crack rapidly or both. In a world of trillions upon trillions of S in negative interest rates, this may seem acceptable on the surface thx to lower and lower interest rates but not in a world of rising interest rates. That is uncharted territory with so much debt created over so many decades of credit expansion. In other words, this is not the 80's where private and public debt was lower and US was an exporter.
In my view, we are entering a phase with unknown problems that can have huge implications as to how investment capital shifts if this continues to break down and cause a SANP!
Remember money chases yield in real terms.
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I got 15 ikes for this Chart when no one had a clue of what was to come back On Jan 3rd.
Now everyone is an expert. LOL!
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Despite the recent rise the SP500 inflation-adjusted is still very much broken below the 50-year channel.
A key area, no doubt. But it has some similarities with 2009.
RealMacro
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@wahlwest, It had and still has no similarities to 2009. As you can see.
Vibranium_Capital
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ty for this
AF_D
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Very interesting!
snowfev2021
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SANP? what is it?
gdleibow
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Interesting chart. Notice the recent drop below is trying to recover. I believe Tuesday/Wednesday will be decisive moves one way or other. mini-crash is possible this week! 10 year note yield should start to spike. Crypto in same boat, at critical levels. I bet this week gets real interesting.
BlkGold
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"Remember money chases yield in real terms." Sure, but where does one find a yield that exceeds current CPI? Bonds are yielding subzero inflation adjusted returns and still there is no massive selling of bonds. It's going to take awhile before bond yields reach the point where bonds become attractive investments. Until that happens, money will continue to flow into equities.
gdleibow
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@BlkGold, Is that how 1929 happened? NOPE! You don't need bond yields to be high just accelerating higher. 10 year note absurdly valued today. A double this year would still be low.
RealMacro
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@gdleibow, Exactly rate of change is all that is needed.
RealMacro
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@BlkGold, Precisely. there is no yield hence a massively overvalued market.