The 'Real' Mega Bears: Periodic Update

 |  Includes: SPY
by: Doug Short

Note from dshort: In response to a special request and in light of the strong market performance in the S&P 500 and meteoric rise in the Nikkei 225, I've updated my Mega-Bear weekly chart series through Friday's close.

It's time again for an update of our "Real" Mega-Bears, an inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.

The chart below is consistent with my preference for real (inflation-adjusted) analysis of long-term market behavior. The nominal all-time high in the index occurred in October 2007, but when we adjust for inflation, the "real" all-time high for the S&P 500 occurred in March 2000.

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Here is the nominal version to help clarify the impact of inflation and deflation, which varied significantly across these three markets.

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See also my alternate version, which charts the comparison from the 2007 nominal all-time high in the S&P 500. This series also includes the Nasdaq from the 2000 Tech Bubble peak.

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As these charts illustrate, the S&P 500 index of U.S. large cap stocks has fared much better than the other indexes in this comparison.