Inflation Just Spooked the Market -- But There's Still Good News for Patient Investors

The Bureau of Labor Statistics released another gloomy inflation report last week. The overall Consumer Price Index (CPI) rose 0.6% in September and 3.7% year-over-year, up from 0.4% and 3.4% in last month's report.

This was market-moving news. The odds for Federal Reserve interest rate hikes ticked up, discouraging debt-fueled investments and pressuring the margins in corporate earnings reports. The S&P 500 (SNPINDEX: ^GSPC) fell 1.1% that day while the volatile Nasdaq Composite (NASDAQINDEX: ^IXIC) took a 1.8% hit.

That's the bad news. I should have asked you to take a seat before reading that bit. But I can make up for the nerve-rattling inflation data and Fed rate predictions.

You see, it's still a good idea to start investing (or to keep investing) in October 2026. There may be some dark days ahead, but the stock market still tends to deliver inflation-beating returns in the long run. That's true even if you pick absolutely terrible times to put money in the market.

Image source: Getty Images.

Market noise is louder than it looks

The stock market is not a smooth ride to the stars. Every day is a new squiggle on the long-term charts. Future investors may remember the September CPI report as a fairly significant blip.

Then again, maybe they won't. Oct. 14 was far from a record-breaking downtick. According to my spreadsheets, it was the 18th time the S&P 500 fell more than 1% in 2026. It also gained more than 1% on 19 occasions so far this year.

One uncomfortable economic report quickly blends into the daily noise. You're more likely to remember week-long price drops when looking at a full-year chart, or longer downturns on long-term time scales.

Meet the unluckiest index investor of 2006

Imagine starting a simple $10,000 investment in October 2006. This isn't about trying to beat the market with hand-picked stocks -- just a simple index fund that tracks the S&P 500. The SPDR S&P 500 ETF (NYSEMKT: SPY) has been around since 1993, so that ETF would have been a real option 20 years ago.

Wall Street had recovered from the dot-com crash and the 9/11 attack. Tech stocks soared, and the American housing market was red-hot. On Oct. 18, 2007, the S&P 500 had gained 74% in five years.

But you know what came next. The subprime mortgage bubble popped, credit markets froze, and the stock market plunged. By March 2009, the SPDR S&P 500 fund had fallen more than 50% from your starting price.

Many investors bailed out of their stock holdings during this market meltdown. Who could blame them? The sky was falling, and everything felt wrong.

But in this example, you held on to your ETF shares.

Patience beat inflation by a mile

And that was a good choice. Despite a 50% market drop in the first couple of years, another plunge in the early COVID-19 panic, and the inflation crisis of 2022, your hypothetical 2006 investment has done a stellar job of building wealth over the years:

SPY data by YCharts

In terms of basic share prices, the ETF has turned $10,000 into $56,170. If you also enabled dividend reinvestments right away, the position would be worth $80,970 today.

That's way ahead of the inflation curve. According to inflation calculators, $10,000 in October 2006 has the same purchasing power as $16,697 today. $80,970, against an inflation-adjusted $16,697, amounts to roughly 4.8 times the original purchasing power.

The lesson for today's nervous investors

It wasn't a smooth ride at all, but positive market trends keep overcoming speed bumps, staving off the inflation effect.

So yes, September's inflation report stung. But if a 2006 investor could sit through a financial crisis, a pandemic crash, and a 40-year inflation peak and still end up with more than eight times the starting stake, one hot CPI report shouldn't chase you out of the market.

Keep investing, and let time do the heavy lifting.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.