TRCAPE and S&P Price

What do we see if we model TRCAPE’s effect on future inflation-adjusted S&P prices?

Data

Each point on the black line represents the expected real S&P price at the conclusion of that term. The slider updates the chart for different values of TRCAPE at purchase time.

• Maturity appears on the x-axis. This is the number of years an S&P investment is held.

• Real S&P Price appears on the y-axis. This is the expected todays-dollar value of the S&P index, given a Term and TRCAPE.

• TRCAPE is adjusted with the slider.

Interpretation

• The chart is initially displayed for today’s TRCAPE.
  • If you bought the S&P today and held it for a particular term, look on the y-axis to find your expected inflation-adjusted S&P index at the end of your term.
• Move the slider to the left to explore the historical effect of low TRCAPE values.
  • In the short term, low values of TRCAPE historically are associated with a steady increase in the S&P index.
• Move the slider to the right to explore the historical effect of high TRCAPE values (like recent ones).
  • The index is flat for the first few years, indicating an S&P that just keeps up with inflation.

Background

The data displayed on this page is modeled based on data sourced from U.S. Stock Markets 1871-Present and CAPE Ratio.