Cash yields 0.5 point above inflation, down from 0.9, while stocks beat prices by 8 points

Over the 12 months to late October, US stocks rose about three times as fast as consumer prices while cash and Treasury bills earned only 0.5 percentage point more than inflation, according to data from FRED, the database of the Federal Reserve Bank of St. Louis. A year earlier, cash had earned about 0.9 percentage point more than inflation (computed).

This analysis lines up four things that usually appear in separate stories: what stocks returned, what cash and bonds yield, how fast prices rose, and what the Federal Reserve is doing. All figures are from FRED unless stated, and all stock figures are price-index levels that exclude dividends.

Stocks beat inflation by a wide margin

The S&P 500 closed at 6,890.89 on October 28, 2025 and at 7,743.98 on October 28, 2026, a gain of 12.4% (computed). The Nasdaq Composite went from 23,827.49 to 26,549.85 over the same dates, a gain of 11.4% (computed). October 28 is the last day on which FRED had both indexes for 2026 at the time of writing.

Consumer prices rose 3.7% over the 12 months to September, measured on FRED's seasonally adjusted CPI index, which stood at 336.298 in September 2026 against 324.245 a year earlier (computed). Adjusted for that, the S&P 500's price gain was 8.4% and the Nasdaq's 7.4% (both computed, price only).

Cash earned less above inflation than a year ago

The yield on 3-month Treasury bills was 4.18% on October 29, 2026, against 3.93% on October 29, 2025. Inflation over the same span moved up faster: the CPI index rose 3.0% in the 12 months to September 2025 (computed from 314.732 in September 2024 and 324.245 in September 2025) and 3.7% in the 12 months to September 2026.

Subtracting the latest inflation rate from the bill yield leaves 0.5 percentage point (computed); a year earlier, the same arithmetic leaves 0.9 percentage point (computed). This is a rough measure that compares a forward-looking yield with a backward-looking inflation rate, and it ignores taxes.

The Fed's policy rate did not drive the change. The effective federal funds rate was 4.12% on October 29, 2025 and 3.88% on October 29, 2026. On October 28 the Fed's policy committee kept the target range at 3-3/4 to 4 percent, and two members, Lisa D. Cook and Beth M. Hammack, voted to raise it by 1/4 percentage point. The data used here do not show why bill yields rose while the policy rate was lower.

Measure	Late October 2025	Late October 2026	Change
3-month Treasury bill yield	3.93%	4.18%	+0.25 percentage point
2-year Treasury yield	3.59%	4.61%	+1.02 percentage points
10-year Treasury yield	4.08%	4.98%	+0.90 percentage point
Effective federal funds rate	4.12%	3.88%	-0.24 percentage point

Source: FRED, October 29 of each year; changes computed.

Longer bonds repriced more than bills

The 2-year Treasury yield rose to 4.61% from 3.59%, and the 10-year yield to 4.98% from 4.08%. The 10-year yield minus the latest inflation rate is 1.3 percentage points (computed), against 1.1 percentage points a year earlier (computed, using the then-latest 3.0%).

A rising yield means the market price of an existing bond has fallen, so a holder who bought a 10-year note a year ago and sold now would have a lower price to set against the coupon. The FRED data used here do not include bond prices or total-return indexes, so they do not show the net result for any fund. FinanceInTime's coverage of bank deposit rates shows how little deposit rates moved while Treasury yields climbed.

The sell-off narrowed the stock gain

Both indexes peaked on October 6, 2026, at 7,818.93 for the S&P 500 and 27,599.89 for the Nasdaq Composite, according to FRED. At the close on Friday, October 30, according to Yahoo Finance data, they stood at 7,580.07 and 25,437.00, which is 3.1% and 7.8% below those peaks (both computed). We reported on the Nasdaq's October loss.

Measured to that Friday, rather than to October 28, the 12-month gain would be smaller than the 12.4% and 11.4% above. FRED had not published October 29 and 30 closes for the S&P 500 when this was written, so the comparison in the first section uses October 28.

What the data do not show

Four limits apply. Price indexes leave out dividends, which would add to the stock figures. The bill yield is a rate at one date, not what a saver actually earned over the year, which depends on when the money was invested and renewed. Taxes differ by investor and are not included. And one year, from one starting day, says little about what any asset class returns over longer periods.

We would measure cash against inflation, and stocks against their own concentration

We think the finding that matters for a long-horizon portfolio is the shrinking margin on cash. A bill yield of 4.18% looks high, but with consumer prices up 3.7% it leaves 0.5 percentage point, and that margin fell from 0.9 over the year. Stocks beat inflation by 8.4 percentage points in price terms, yet the October sell-off shows that the gain can narrow in days.

The threat is inflation eroding fixed returns if the 3.7% rate persists or rises; the opportunity is that the 10-year yield, at 4.98%, sits about 1.3 percentage points above inflation, a higher starting point than a year ago. We expect the real margin on cash to stay thin through 2027 if inflation stays above 3.5%, and we would change that view if bill yields rose well above inflation or the CPI rate fell toward 3%. A range of outcomes is more honest than a single figure: a year of 12% stock gains is one result among many.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.