RE: The stock market’s extended topping process from 1966 through early 1973
Even including dividends during these years of sideways price performance, the so-called total return of the Dow was 36.4% from 1966 to 1973. However, inflation averaged 4.25% per year during this period; thus, the after-inflation return, inclusive of dividends, was a meager 0.4% annually. The S&P 500 fared better with a real dividend plus price appreciation rate of 21% or 2.75% per year in real terms. (Interestingly, the 4.23% average inflation rate from 1966 to early 1972 occurred while the U.S. was still on the gold standard almost the entire time.) As noted in Chapter 5, the next two years were catastrophic. Even after multiple rallies off of the 1974 low, which created one of the most undervalued stock markets ever, the Dow essentially flatlined from 1966 to 1982 on a price-only basis.