S&P 500 Beat Inflation in 16 of Past 20 Calendar Years

The S&P 500 posted a 13.5% gain in 2026, exceeding the 3.4% increase in US consumer prices over the year through July.

The pattern extends over longer periods. Figures indicate the benchmark has beaten US inflation in 16 out of the last 20 calendar years.

How the S&P 500 Has Performed Against Inflation

In 2025, the S&P 500 generated a 14.76% real return once 2.70% inflation was factored in, per The Kobeissi Letter. The benchmark also posted hefty real gains in the two prior years, rising 21.47% in 2024 and 22.11% in 2023.

“Stocks have historically been one of the best hedges against inflation,” the Kobeissi Letter said in a post.

The track record is not as strong as it appears. The S&P 500 underperformed inflation in 2008, 2011, 2018, and 2022.

In three of those four instances, annual inflation finished under 3%. In December 2008, consumer prices were up only 0.1% from a year earlier, but the S&P 500 fell 37% in 2008.

The 2022 case stood apart. The Bureau of Labor Statistics recorded a 6.5% annual rise in consumer prices as of December. The S&P 500 declined 18.11%, producing a real loss of about 23%.

Just three years in the 20-year span had December inflation exceeding 4%. The S&P 500 beat inflation in 2007 and 2021, but not in 2022. The top real return was in 2013, when the index rose 30.42% and inflation was 1.5%.

AI Earnings Are Carrying the Real Return

Earnings drove the majority of the 2025 gain. According to First Trust, 13.5 percentage points of the S&P 500's 17.9% total return were attributable to increased earnings per share.

The strength of this market is unprecedented.

The S&P 500 has traded for 22 consecutive sessions without a decline of at least -1.0%.

Furthermore, the Volatility Index, $VIX, has closed at or below 16 points for 18 straight trading days.

On Friday, the $VIX finished at 14.4…

— The Kobeissi Letter (@KobeissiLetter) August 30, 2026

FactSet reports that analysts forecast 28.2% year-over-year earnings expansion for Q3 2026, with 31.2% growth projected for the full year.

The expansion is limited to a select set of companies. In May, Ben Snider from Goldman Sachs Research noted that AI infrastructure beneficiaries are expected to contribute about half of the index's earnings growth this year. He also pointed to shrinking market breadth as a warning indicator.

Nine of the ten top S&P 500 stocks of the decade are tied to the same AI infrastructure buildout. Nvidia tops the list with gains exceeding 13,000%.

Inflation has moderated since spring. Consumer prices increased 4.25% year-over-year in May, then dropped to 3.4% by July.