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Comment by jaggederest | Hacker News Reader

Is that an inflation-adjusted return? Just curious, same thing applies whether you're comparing nominal return or real return, I just know there are "inflation-protected" bonds.

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And what are those inflation protected bonds returning?

1.4% in TIPS auction from today.

The Fed buys TIPS to suppress the yield (inflation expectations).

I know, that should be illegal, but when does that ever stop them.

Managing inflation expectations is the Feds main job.

And what are the inflation adjusted returns of Stocks over the last year or two?

3%. Still higher than inflation protected bonds.

How'd you figure?

Looking at the S&P 500[1] over the past two years relative to today's close:

  Aug 15, 2023 Close = $4,437.86
  Aug 15, 2022 Close = $4,297.14
  Aug 13, 2021 Close = $4,468.00
         1-yr Return = +3.3%
         2-yr Return = -0.7%

...and using the latest CPI-U data[2] over roughly the same period:

      Jul 2023 Index = 305.691
      Jul 2022 Index = 296.276
      Jul 2021 Index = 273.003
      1-yr Inflation = +3.2%
      2-yr Inflation = +12.0%

...I get real returns of +0.1% and -12.7% over 1- and 2-yr periods, respectively.

Same exercise looking at Vanguard VTI ETF[3]:

  Aug 15, 2023 Close = $220.37
  Aug 15, 2022 Close = $215.78
  Aug 13, 2021 Close = $230.05
         1-yr Return = +2.1%
         2-yr Return = -4.2%

...I get real returns of -1.1% and -16.2% over 1- and 2-yr periods, respectively.

[1] https://fred.stlouisfed.org/series/SP500

[2] https://fred.stlouisfed.org/series/CPIAUCNS

[3] https://advisors.vanguard.com/investments/products/vti/vangu...

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