ETF

Here is a look at real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq composite since their 2000 highs. We've updated this through the January 2025 close.

The S&P 500 real monthly averages of daily closes reached a new all-time high in December 2024 but fell slightly in January. Let's examine the past to broaden our understanding of the range of historical bull and bear market trends in market performance.

Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles. Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation? The purchasing power of your investment has increased to $16,444 for an annualized real return of 9.99%.

Our monthly market valuation updates have long had the same conclusion: US stock indexes are significantly overvalued, which suggests cautious expectations for investment returns. On August 4th, 2020, the 10-year Treasury yield hit its all-time low of 0.52%. As of January 31st, it was 4.54%.

With the Q4 GDP advance estimate and the January close data, we now have an updated look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The current reading is 205.1%, down slightly from the previous quarter.

The Census Bureau released its latest quarterly report for Q4 2024 showing the latest homeownership rate is at 65.7%, up from Q3 but practically unchanged from a year ago.

The Institute for Supply Management (ISM) released its January Services Purchasing Managers' Index (PMI), with the headline composite index at 52.8—below the forecast of 54.2. Despite the miss, the reading marks the seventh consecutive month of expansion.

The January U.S. Services Purchasing Managers' Index (PMI) from S&P Global came in at 52.9, slightly above the 52.8 forecast. The reading marks the 24th consecutive month of expansion but is the weakest since April.

Gas prices inched down this week. As of February 3rd, the price of regular and premium gas were each down 1 cent from the previous week. The WTIC end-of-day spot price for crude oil closed at $73.16, unchanged from last week.

Here is a summary of the four market valuation indicators we update on a monthly basis.

• The Crestmont Research P/E ratio
• The cyclical P/E ratio using the trailing 10-year earnings as the divisor
• The Q ratio, which is the total price of the market divided by its replacement cost
• The relationship of the S&P composite price to a regression trendline

Based on the January S&P 500 average of daily closes, the Crestmont P/E of 41.3 is 173% above its arithmetic mean, 198% above its geometric mean, and is at the 100th percentile of this 14-plus-decade series.

The Q Ratio is the total price of the market divided by the replacement cost of all its companies. The latest Q-ratio is at 1.84, up from 1.76 in December.

Here is the latest update of a popular market valuation method, Price-to-Earnings (P/E) ratio, using the most recent Standard & Poor's "as reported" earnings and earnings estimates, and the index monthly average of daily closes for the past month. The latest trailing twelve months (TTM) P/E ratio is 28.1 and the latest P/E10 ratio is 37.3.

At the end of January, the inflation-adjusted S&P 500 index was 179% above its long-term trend, down from a record high of 186% in December.

The moving average for vehicle sales per capita series peaked in August 1978. Fast forward more than 45 years, it is now down 36.9% from that peak.

The BEA's core Personal Consumption Expenditures (PCE) Price Index for December showed that core inflation continues to be above the Federal Reserve's 2% long-term target at 2.8%. The December core Consumer Price Index (CPI) release was higher, at 3.2%. The Fed is on record as using core PCE data as its primary inflation gauge.

As of January 31, 2025, the 10-year note was 406 basis points above its historic closing low of 0.52% reached on August 4, 2020.

The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI) came in at 50.9 in January, pushing the index into expansion territory for the first time since October 2022. The latest reading was better than the forecast of 49.3.

The manufacturing sector started the new year with renewed expansion, as the S&P Global US Manufacturing PMI™ rose to 51.2 in January from 49.4 in December.

The National Association of Realtors® (NAR)unexpectedly fell 5.5% in December to 74.2, the first monthly decline since July. Pending home sales were expected to be unchanged from the previous month. The index is down 5.0% from one year ago.

Consumer attitudes are measured by two monthly surveys: the University of Michigan’s Consumer Sentiment Index (MCSI) and the Conference Board’s Consumer Confidence Index (CCI). In January, the MCSI fell for the first time in six months to 71.1. Meanwhile, the CCI dropped for a second straight month to 104.1.

Fifth district manufacturing activity  remained soft in January, according to the most recent survey from the Federal Reserve Bank of Richmond. The composite manufacturing index rose to -4 this month from -10 in December. This month's reading was better than the forecast of -13 and is the highest reading since May.

The Conference Board's Consumer Confidence Index® fell further in January, dropping for a second straight month. The index decreased to 104.1 this month from December's upwardly revised 109.5. This month's reading was lower than the 105.7 forecast.

Home prices continued to trend upwards in November as the benchmark national index rose for the 22nd consecutive month to a new all-time high. The seasonally adjusted home prices for the national index saw a 0.4% increase MoM, and a 3.8% increase YoY. After adjusting for inflation, the MoM fell to 0.2% and YoY fell to -1.1%.

The Federal Housing Finance Agency (FHFA) house price index (HPI) rose to 433.4 in November, reaching a new all-time high. U.S. house prices were up 0.3 from the previous month and are up 4.2% from one year ago. After adjusting for inflation, the real index was flat month-over-month and up 2.6% year-over-year.