Let’s consider the value of a piece of land, or a basket of goods over a year. The dollar or Euro number will fluctuate with inflation. What is more interesting is the value of a piece of land relative to the basket of goods you can buy with it – the consumer price index.
I have not yet seen a plot of stock price normalised by consumer price index. Wouldn’t it make sense that you would want all stock price charts over the years normalised to your consumer price index, to see if you are really gaining in value? Yet I have not seen this plotted before.
Here is a comparison, all normalised at 2010 in USD.
The consumer price indices are different for different countries. Here is the MSCI World value relative to what you could buy from it in that country:
This makes sense to me as a way of looking at an investment. On the other hand, inflation does not seem to be extremely important.
Data sources:
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