US Market and the Fundamentals

Notable Events

Key turning points and crises in the index's history (green/red/orange markers). Consumer Sentiment Index peaks and troughs from the University of Michigan Surveys of Consumers. Peaks require the next 3+ reports to be lower; troughs require the next 3+ to be higher.

Consumer Sentiment — Full History

All 672 monthly readings of the University of Michigan Consumer Sentiment Index since November 1952. The index measures how households feel about their finances and the economy. Since the survey began, it has ranged from a record 112.0 (January 2000) to an all-time low of 49.8 (April 2026). Peak months (next 3+ reports lower) are highlighted in purple; trough months (next 3+ reports higher) in magenta. Source: Surveys of Consumers · University of Michigan

Core Retail Sales (Ex Autos) — Full History

US Retail Sales excluding Motor Vehicle and Parts Dealers, seasonally adjusted, in billions of dollars. Data from the U.S. Census Bureau (FRED series MRTSSM4400AUSS). Sales grew from $110B to $501B per month over 34 years. Notable MoM drops are annotated: COVID lockdowns (-11.7% in April 2020) and the financial crisis (-4.6% in November 2008).

Fed Funds Rate — Full History

Effective Federal Funds Rate, monthly average. Set by the FOMC, this is the primary tool for US monetary policy. Data from the Federal Reserve Bank of St. Louis (FRED series FEDFUNDS). Rate ranged from 0.05% (2020 pandemic) to 19.1% (1981 Volcker tightening).

Core CPI — Full History

Consumer Price Index for All Urban Consumers: All Items Less Food and Energy. This is the standard measure of underlying inflation, excluding volatile food and energy prices. Data from the Bureau of Labor Statistics via FRED (series CPILFESL). Index base period is 1982–1984 = 100.

What Drives the Index?

At its core, the S&P 500 tracks the market capitalization of 500 large US companies. The index level is a function of two things: earnings (corporate profits) and the multiple investors assign to those earnings (the P/E ratio). When both expand, returns compound rapidly. When either contracts, the index can fall even if the other holds steady.

Earnings Growth

Over the long run, S&P 500 earnings per share have grown at roughly 6–7% per year, closely tracking nominal GDP. This is the fundamental engine: companies reinvest retained earnings, buy back shares, and grow their real output. That compounding accounts for most of the index's long-term appreciation.

Multiple Expansion and Contraction

The P/E multiple is the market's mood ring. In the 1970s, the index went nowhere for a decade despite growing earnings — the P/E compressed from the low 20s into single digits as inflation and interest rates soared. In the 1980s and 1990s, falling rates pushed the multiple from 7 to over 30, adding a powerful tailwind. The dot-com bust was a multiple collapse: earnings held up initially, but the P/E crashed from 30+ back to 15.

Dividends and Total Return

The S&P 500 price index (what this chart shows) does not include reinvested dividends. The total return index has compounded at roughly 10% per year since 1957, compared to about 7% for the price index alone. That 3-percentage-point gap comes from dividends. For an investor who held through all the crashes, the dividend stream softened every drawdown.

Bear Markets and Recoveries

The index has experienced 14 bear markets (declines of 20% or more) since 1929. Every one eventually recovered, though the time to recovery varied enormously:

• 1929 crash: took 25 years to break even (not shown — the S&P 500 in its current form didn't exist)
• 1973–74 oil crisis: 7.5 years to recover
• 2000 dot-com crash: 7 years to recover nominal highs
• 2008 financial crisis: 5.5 years to recover
• 2020 COVID crash: 5 months to recover — the fastest in history
• 2022 rate-hike bear: 14 months to recover

The pattern is consistent: crashes are sharp and terrifying, recoveries are patient and grinding — but the long-term trend remains upward as long as the underlying economy grows.

Concentration Risk

As of early 2026, the top 10 stocks in the S&P 500 represent roughly 35% of the index's total market cap — the highest concentration since the early 1970s "Nifty Fifty" era. This means the index's performance increasingly depends on a handful of mega-cap technology companies. When they rally, the index soars; when they correct, the index falls more than the median stock.

This concentration is itself a risk factor. The last time the index was this top-heavy — 1972 — the subsequent bear market saw the Nifty Fifty lose 50–80% of their value. Diversification within the index is not what it used to be.

Data Notes

Monthly data from Yahoo Finance (^GSPC), resampled from daily closes. The S&P 500 as a 500-stock index was launched on March 4, 1957; prior monthly values use the S&P 90-stock composite index. Values are nominal (not inflation-adjusted). Price index only, excluding dividends. Interactive chart uses Lightweight Charts by TradingView.