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The Patience Curve

For every month since January 1970, the starting Shiller Excess CAPE Yield plotted against the realized next-10-year real S&P 500 return. The price you pay sets the return you get. Today's reading sits at the low end of history; the regression implies a low real return over the next decade.

-2%+0%+2%+4%+6%+8%-4%+0%+4%+8%+12%+16%1982-08ECY +10.8%, +10.2%/yr next 10y2000-03ECY -1.1%, +-4.5%/yr next 10y2009-03ECY +7.3%, +12.0%/yr next 10yTodayECY +1.39%Regression: +2.8%/yrStarting Shiller Excess CAPE Yield (ECY)Realized next-10-year real S&P 500 return, %/yrTrend (1970-2016, n=557)y = 1.87 + 0.67·xR² = 13%Implied next 10y+2.8%/yrreal, from ECY 1.39% on 2026-05-01
How to read. Each navy dot is a single month from 1970 through 2016. Its x-coordinate is the Shiller Excess CAPE Yield (the earnings yield on the cyclically adjusted P/E minus the real 10-year Treasury yield) at that month, and its y-coordinate is the annualized real total return of the S&P 500 over the following ten years. The tan line is the least-squares fit. The dashed tan line marks today's ECY (1.39% on 2026-05-01); the open tan circle is where the regression places the implied next-10-year real return (+2.8%/yr). Three labeled points anchor the relationship: August 1982 (high ECY, +12.4%/yr followed); March 2000 (negative ECY, the worst forward decade in the series); March 2009 (high ECY again, +12%/yr followed). Forecast confidence is low at any one point; the trend is the signal.

Sources: Shiller monthly archive via Yale; 10-year Treasury and CPI from FRED. Real S&P 500 deflated to current dollars. Sample: 1970-01 through 2016-05 (557 months with 10-year forward observations).