Today was the all time high closing price for the dividend reinvested, inflation adjusted S&P 500.
I know that much of the financial world has been rambling about the continual new highs in the stock market. You haven’t been, though… you read my post earlier this year (or read my Tweet this morning) where I originally pointed out the right adjustments to make, but this time it’s official:
The S&P 500, factoring in CPI-U seasonally adjusted inflation and reinvesting dividends just closed at a new peak. The previous peak was on March 24, 2000.
Graphing this Century’s S&P 500 Roller Coaster
So, you bought some stock in the S&P 500 when your son or daughter was born, way back in March of 2000? And you’re selling today? Check out this crazy ride (both as reported, and inflation adjusted):
Too bad you didn’t buy the Dow, eh?
I’m using OpenOffice to crunch all the numbers, but here’s the rough setup if you want to reproduce my work (pay attention, Harvard):
- Take the CPI-U, Seasonally Adjusted from the St. Louis Fed’s awesome FRED site.
- Find S&P 500 Total Return Data. I grabbed this from Daily Finance.
- Interpolate to find DAILY inflation numbers. If you want a shortcut, I built a daily inflation calculator.
- For the days since the last inflation report, extrapolate (again, the inflation calculator does this automatically, and updates itself once a month) to get the daily inflation numbers. I’m using the last 3 months to figure out the slope for this month – this might later get revised away (yes, I recognize that – consider it accurate as of today!).
- Adjust the closing prices.
For TODAY, 5/28/2013 I have a S&P 500 closing price of 2886.35. On 3/24/2000, the S&P TR closed at 2107.277. Respectively, I (using inter/extrapolate in OpenOffice) have daily inflation indices of 234.0343141982 and 170.9258064516. Put them together and you get 2886.35 for today, and 2885.3169556953 for 3/24/2000. There you go – that’s a pretty horrible return for 13 years, but at least it’s positive!
Too much work? Well, if you’re okay with a lower resolution, we do have a great tool for that… the dividend reinvestment calculator for the S&P 500 is found on this very site! Don’t you love us?
Taxes, Transaction Fees, and All That Jazz
Yeah, I know. How far do you want me to take this analysis?
The irony, of course, is that income taxes are inflation adjusted, but capital gains are not. So if you held on for 13 years and sold today, you’d owe taxes on a 36.97% gain, not the actual 0% gain in purchasing power you just recognized.
Plus you’d have to pay a transaction fee. For shame!
Anyway, there you have it – this is a day that will live in
Meet the new inflation adjusted dividend reinvested closing price boss, same as the old inflation adjusted dividend reinvested closing price boss!