Stocks vs Inflation: Does the Stock Market Beat Inflation? Avoid the Savings Trap
We test whether the stock market beats inflation once money printing counts, using the S&P 500's 468x rise since 1926 and savings that fell to 4.3 cents.
Topic
S&P 500 Returns Against 100 Years of Money Printing
The S&P 500 is the benchmark most people use, so we tested it hardest.
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In Part II it rose from an annual average of 13.40 in 1926 to over 6,276 in 2025, a 468-fold gain on price, but M2 grew 503-fold over the same window, so the index finished with an M2-adjusted value of 0.932.
That price-only view is half the story, and we think it is the half people quote most. With dividends reinvested from 1928 the index reached 11,570x, which Part III covers, and over 60 years from 1965 it turned $10,000 into roughly $3 million.
- 468x S&P 500 on price, 1926 to 2025 An M2-adjusted value of 0.932, about 6.8% behind M2.
- 11,570x S&P 500 total return since 1928 With every dividend reinvested, about 24 times what M2 did.
- 6.1x S&P 500 total return, 1965 to 2025 M2-adjusted at 10.0% a year over the same 60 years.
Articles on S&P 500
1 article from our research on this topic.
Plain-English definitions
Key terms for S&P 500
- Total return
- Price growth plus every dividend, rent payment or coupon put back into the investment, as opposed to price alone.
- M2-adjusted value 1.0 = break-even
- An asset’s growth divided by M2 growth over the same years. Above 1.0 it gained share of the money pool, below 1.0 it lost share.
- Dividend reinvestment
- Using each dividend to buy more of the same holding instead of spending it, so the income compounds alongside the price.
- Quantitative easing
- Central bank buying of bonds with newly created money, used heavily after 2008 and again in 2020. It adds directly to the money supply.
FAQ
Questions about S&P 500
Answers drawn from the figures in our research. Educational only, not financial advice.
Has the S&P 500 beaten inflation?
It depends which inflation you mean, and for this series we meant money printing. Using Macrotrends’ price history for Part II, the index rose 468x between 1926 and 2025 while the St. Louis Fed’s M2 series grew 503x, which left it roughly 6.8% behind on price alone.
Part III then used Aswath Damodaran’s NYU Stern data to put every dividend back in from 1928, and the total return came to 11,570x against 473x for M2, so an S&P 500 fund with the income left in sits on the winning side of our numbers.
What did the dot-com bubble look like after adjusting for M2?
We expected the late 1990s to stand out in the M2-adjusted chart for Part II the same way they do on an ordinary price chart, and they didn’t. Dividing the S&P 500 by the St. Louis Fed’s M2 series turned the dot-com peak into the only stretch in recent decades when the index caught up with the money supply at all. It touched the 1.0 break-even line around 2000 and then fell away, and we called that the Bubble Illusion.
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