I haven't heard this discussed and I'm curious if my interpretation is correct and what that means for equities. Inflation is high right now, and the USD has inflated around 11% since 2020. In other words, $1 from 2020 could get you $1.11 today. This means that even if a stock stays flat for a year, its inherent value actually went down.
With that in mind, you could say that the SPY at its $405 low was trading at around $365 in 2020 dollars. Only slightly more than it was at the peak before the COVID crash, about 7% higher (16% unadjusted for inflation).
Is it fair to assess prices in this manner or is there something I'm not considering? Because I'm not sure I've ever heard a trader factor this in, even in this very high inflationary environment. People look at stock prices from the '90s and it seems incredible how far up we are, but the USD is worth half of what it was back then so stock prices back then vs. now is only a fair comparison if you half the current prices.
Thoughts?
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