I'd love to see a multi-currency valuation of the S&P 500 over the next few years.
Part of the issue of saying the Market is "up" is that we keep changing the size of the unit.
Is the market worth more now in Yen, Indian Rupees etc? Or are people just willing to part with more USD (that asset specifically) for the underlying asset (the stock)?
> Is the market worth more now in Yen, Indian Rupees etc? Or are people just willing to part with more USD (that asset specifically) for the underlying asset (the stock)?
Those are...pretty easy questions to answer. The dollar is down about 10% since its March high compared to a basket of other major currencies: https://www.marketwatch.com/investing/index/dxy
Can you help me figure out the maths on that. So how much of the stock gain is from currency devaluation (against other currencies) and how much is due to appreciation (of investors willing to pay more real value) ?
Say .INX was 3250 in Jan and is 3500 now. -> 7.7% increase.
But currency has lost about 10% of its underlying value.
If something loses 1/10th of it's value we expect people to pay 11% (1/.9) more of that currency. So the 7.7% increase in stock market is actually a 3.3% decrease in a mixed currency basket?
Currency devaluation doesn't just happen against other currencies. It also happens against particular goods/assets (another currency is just another good/asset).
If I have $10 and 10 goods, and suddenly have $1000 and still 10 goods, each good should come to cost 100x more. Or to say it backwards, the $ becomes worth 100x less...
To bring CPI into this, the reason we don't see common inflation metrics such as food/gasoline spike, whereas assets suck as stocks do, is more a matter of supply/demand for the corresponding goods than anything else.
Said differently: if food was the only good there was, and we suddenly doubled the money supply, food would in time come to cost double.
However the market consists of many more things than what CPI looks at (which is why it's a bad measure of inflation). Stocks being one of such things. Real estate another. Right now, demand for stocks is higher than demand for food, and given the more money available, naturally we see stock prices rise, but food/gas prices staying relatively the same...
Part of the issue of saying the Market is "up" is that we keep changing the size of the unit.
Is the market worth more now in Yen, Indian Rupees etc? Or are people just willing to part with more USD (that asset specifically) for the underlying asset (the stock)?