Markets are abuzz this morning as the DJIA is set to open higher for the eleventh day in the last twelve. As of yesterday's close, the index was just 2.4% below its all-time closing high of 14,164.53 reached on 10/9/07.
While the actual DJIA is close to its all-time highs, how has the market fared on an inflation adjusted basis? The chart below shows the performance of the DJIA in constant prices using 1947 as a starting point. For this chart, we discounted the actual level of the DJIA using the monthly readings in the CPI. Using this method, the DJIA has much further to climb before making an all-time high. Only the all-time high was not in October 2007, but more than seven years earlier in January 2000.
On an inflation adjusted basis, the 2002 - 2007 bull market came within 2.5% of making a new all-time high before it peaked. At current inflation adjusted levels, the DJIA is now trading 11.9% below its 2007 high, and 13.8% below its all-time high from January 2000.