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