The S&P 500 has gained 13.5% in 2026, successfully outpacing US consumer prices which rose 3.4% over the 12 months through July, according to reports from The Kobeissi Letter. This performance continues a strong trend where the index has historically delivered real returns despite inflationary pressures. The index also recorded strong real returns in the previous two years, gaining 21.47% in 2024 and 22.11% in 2023, as reported by The Kobeissi Letter.
Historical data shows that the S&P 500 has outpaced US inflation in 16 of the past 20 calendar years, as reported by The Kobeissi Letter. The record shows the index delivered a 14.76% real return in 2025 after accounting for 2.70% inflation, with the largest real return coming in 2013 when the index gained 30.42% while inflation stood at 1.5%. The four years when stocks failed to beat inflation were 2008, 2011, 2018, and 2022, with three of those four years ending with inflation below 3%. Notably, the 2022 result was different as the BLS reported a 6.5% year-over-year increase in consumer prices in December, while the S&P 500 fell 18.11%, resulting in a real loss of roughly 23%.
According to First Trust, 13.5 of the index's 17.9 percentage points came from higher earnings per share in 2025. Looking ahead, analysts project 28.2% year-over-year earnings growth for the third quarter of 2026 and 31.2% across the full year, as reported by FactSet. Ben Snider of Goldman Sachs Research noted in May that AI infrastructure beneficiaries should supply roughly half of index earnings growth this year, with Nvidia leading the list by a wide margin, gaining above 13,000%. The analysis reveals that 9 of the decade's 10 best S&P 500 performers trace to the same AI buildout, highlighting the concentration of growth in this sector.
Inflation has shown cooling trends since the spring, with consumer prices rising 4.25% in the year through May before easing to 3.4% in July, according to reports from The Kobeissi Letter. The analysis suggests that stocks have historically been one of the best hedges against inflation, with the trend holding over both short and long-term periods. However, the report notes that narrowing market breadth represents a risk signal for future performance, with only three years in the period ending with December inflation above 4%. The trend also holds over longer periods, with stocks beating inflation 16 of 20 years despite facing above-4% CPI just three times during this period.
