The Dow, S&P 500, and Nasdaq Since Their 2000 Highs

Here are two overlays — one with the nominal price, excluding dividends, and the other with the price adjusted for inflation based on the consumer price index for urban consumers (which is usually just referred to as the CPI). As of May 31, the Dow 30 is down 3.5%, the S&P 500 is up 0.2%, and the Nasdaq is up 5.8% from the last day of April.

When adjusted for inflation, the real month-over-month changes for each index become -4.0% for the Dow 30, -0.3% for the S&P 500, and 0.5% for the Nasdaq.

The charts require little explanation. So far, the 21st century has not been especially kind to equity investors. Yes, markets do bounce back, but often in time frames that defy optimistic expectations.

The charts above are based on price only. But what about dividends? Would the inclusion of dividends make a significant difference? Let’s take a look at the return on $1,000 invested in the (SPY A) ETF at its March 2000 peak.

The total return certainly looks better over 20 years later, but the real (inflation-adjusted) purchasing power of that $1,000 is currently $2,230 above break-even, a real compounded annual return of 3.52%.

Now, let’s take a look at the return on $1,000 invested in the (DIA B+) ETF at its January 2000 peak.

Again, the total return looks better over 20 years later, but the real purchasing power of that $1,000 is currently $2,596 above break-even, a real compounded annual return of 4.16%.

Lastly, let’s look at the return on $1,000 invested in the (QQQ B+) ETF at its March 2000 peak.

The real purchasing power of that $1,000 is currently $1,988 above break-even, a real compounded annual return of 3.00%.

Originally published by Advisor Perspectives on June 6, 2023.

For more news, information, and analysis, visit the ETF Education Channel.