Feedback from the previous post suggests that many readers are skeptical that S&P500 corporate earnings can be taken at face value because of currency manipulation and the general condition of our fiat money system. So it’s time to revisit past illustrations where I’ve compared earnings in US Dollars with other commodities such as gold, silver, or oil.
In the below chart, S&P500 corporate earnings (TTM) are expressed in both US Dollars and Ounces of Silver. Note that they generally track each other; however, in 2005 prior to the Great Recession, “real” earnings as expressed in ounces of silver began to fall before earnings in dollars which didn’t decline until 2007. And after the recession, dollar denominated earnings increased at a much faster “inflated” rate.
In the second chart, the S&P500 is plotted alongside earnings in Ounces of Silver…illustrating how the Market lagged the decline of “real” earnings before the Great Recession and also how it lead “real” earnings afterwards.
Combining these charts with those from the previous article, I believe that the S&P500 correlates best with Earnings expressed in US Dollars; however, I also like using the comparison with commodities (Oil, Gold, Silver, etc) because they act as an early warning device.
FINAL NOTE- “real” earnings expressed in ounces of silver are back at 2005 levels…perhaps suggesting that the S&P500 is headed below 1500.
Listen to the Wealthsteading Podcast to receive updated market commentary:
The 10 Wealth Building Principles can be heard at:
Subscribe to the Wealthsteading Podcast:
Building Wealth, Investing, Retirement, Stock Trading, Money, Freedom