The Market That Survived Everything
Since 1871, the S&P 500 and its predecessor indices have lived through two world wars, the Great Depression, oil shocks, the dot-com collapse, a global financial crisis, and a pandemic. Yet the index, in nominal terms, has climbed from under 5 points to well over 4,000. That is not a typo. The scale of that rise is one of the most striking facts in all of financial history, and it raises an immediate question: how much of that growth is real wealth creation, and how much is simply the dollar losing value over time?
Nominal vs. Real: Inflation Changes Everything
When you adjust the S&P 500 for inflation using Robert Shiller's long-run dataset, the picture shifts considerably. The nominal price chart looks like a hockey stick tilted sharply upward, especially from the 1980s onward. The real price chart, expressed in constant dollars, is far more humbling. It shows that investors in the late 1960s, for example, waited nearly two decades before seeing genuine inflation-adjusted gains. The 1970s were not just a bad decade for stocks on paper; in real purchasing-power terms, they were quietly devastating.
This distinction matters enormously for anyone planning for retirement or financial independence. A portfolio that doubles in nominal terms over ten years while inflation runs at 7% per year has actually lost ground. The chart below makes this gap visceral in a way that raw numbers rarely do.
The CAPE Ratio: A Long Warning Signal
One of the most valuable features of Shiller's dataset is the cyclically adjusted price-to-earnings ratio, commonly called CAPE or PE10. Unlike the standard P/E ratio, which uses just one year of earnings, CAPE averages the past ten years of real earnings to smooth out business cycle noise. The result is a measure of market valuation that has proven remarkably predictive over long horizons.
The historical average CAPE sits around 16 to 17. In the run-up to the 1929 crash, it spiked above 30. At the peak of the dot-com bubble in 2000, it hit nearly 44, the highest reading in the entire dataset. What the chart reveals is not just those famous peaks but also the long valleys: during the Great Depression and again in the early 1980s, CAPE fell below 10, signaling that stocks were genuinely cheap by any historical standard. Investors who bought during those troughs were rewarded handsomely over the following decade.
The uncomfortable implication is that for much of the past thirty years, CAPE has been elevated by historical standards. That does not mean a crash is imminent, but it does suggest that future long-run returns may be more modest than the 20th century average would imply.
Reading the Price Level Alone
Stripping away the inflation adjustments and valuation ratios, the raw nominal price of the index still tells its own story. It clearly marks the major turning points: the post-war boom, the stagnation of the 1970s, the explosive bull market of the 1980s and 1990s, the twin crashes of 2000 to 2002 and 2008 to 2009, and the remarkable recovery and expansion that followed. For traders and market observers focused on recent decades, this view is often the most intuitive starting point.
Why This Dataset Matters for Long-Term Investors
Most financial data available to retail investors covers only a few decades at best. Shiller's dataset, which underpins this DataHub.io resource, stretches back to 1871, giving us enough history to observe multiple full economic cycles, inflationary episodes, and secular bull and bear markets. That length is not just academic: it is the difference between drawing conclusions from one or two market environments and having genuine statistical depth.
For anyone on the path to financial independence, the lessons embedded in this data are practical. Real returns, not nominal ones, determine what you can actually buy in retirement. Valuations at the time of purchase matter a great deal for the returns you will see over the next ten to fifteen years. And patience, measured in decades rather than quarters, has historically been rewarded. The full dataset, including monthly price, dividend, earnings, and CPI data, is freely available at https://datahub.io/core/s-and-p-500.