The S&P 500 Failed to Beat Inflation Only 4 Times in 20 Years. Here's the Pattern.
The S&P 500 has gained 13.5% in 2026, outpacing US consumer prices, which rose 3.4% over the 12 months through July.
The trend also holds over the longer term. Historical data show that the index has outpaced US inflation in 16 of the past 20 calendar years.
How the S&P 500 Has Performed Against Inflation
The S&P 500 delivered a 14.76% real return in 2025 after accounting for 2.70% inflation, according to The Kobeissi Letter. The index also recorded strong real returns in the previous two years, gaining 21.47% in 2024 and 22.11% in 2023.
“Stocks have historically been one of the best hedges against inflation,” the post read.
The record is thinner than the count suggests. The four years when stocks failed to beat inflation were 2008, 2011, 2018, and 2022.
Three of those four years ended with inflation below 3%. Consumer prices rose just 0.1% in December 2008, yet the S&P 500 plunged 37% that year.
The 2022 result was different. The BLS reported a 6.5% year-over-year increase in consumer prices in December. The S&P 500 fell 18.11%. The real loss came to roughly 23%.
Only three years in the period ended with December inflation above 4%. The S&P 500 still outpaced inflation in 2007 and 2021 but fell short in 2022. The largest real return came in 2013, when the index gained 30.42%, and inflation stood at 1.5%.
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AI Earnings Are Carrying the Real Return
Earnings did most of the work in 2025. First Trust calculated that 13.5 of the index’s 17.9 percentage points came from higher earnings per share.
The strength of this market is unprecedented.
— The Kobeissi Letter (@KobeissiLetter) August 30, 2026
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… pic.twitter.com/MU6nKHopWO
According to FactSet, analysts project 28.2% year-over-year earnings growth for the third quarter of 2026. They expect 31.2% across the full year.
That growth is concentrated in a narrow group. Ben Snider of Goldman Sachs Research said in May that AI infrastructure beneficiaries should supply roughly half of index earnings growth this year. He also flagged narrowing market breadth as a risk signal.
Meanwhile, 9 of the decade’s 10 best S&P 500 performers trace to the same buildout. Nvidia leads that list by a wide margin, with gains above 13,000%.
Inflation has cooled since the spring. Consumer prices rose 4.25% in the year through May before easing to 3.4% in July.
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