Sunday, January 17, 2010

Historical Annual Returns for the S&P 500 Index - Updated Through 2009

Last year I wrote a post about the annual returns of the S&P 500 Index and its precursor S&P 90 Index from 1926-2008. Some people have been emailing me to write a new post and update chars with full year returns for 2008. Updated charts are shown in the two images below (click on each image for a larger view).

As shown below, 2009 was one of the better years for the S&P 500 Index. This should come as no surprise, as the returns in 2008 were the second worst since 1926, so the Index was likely due for a rebound. The S&P 500 Index bottomed out on March 9, 2009 at a value of 676.53 and rallied about 67.8%, including reinvested dividends, at close at a value of 1115.10 on December 31, 2009, as shown in the chart below. This was a furious rally and one of the strongest 9-10 rallies in the history of the S&P 500 Index.

The annualized return for the S&P 500 Index from 1926-2009 was 9.81% and the 5-year annualized return through the end of 2009 was 0.41%, an improvement over the negative value for the 5-year period that ended in 2008. The 10-year annualized return through 2009 was a pathetic -0.95%, the second-worst 10-year annualized return based on all of the annual return data I have going back to 1926. In fact, the only worse 10-year annualized return was achieved at the end of 2008, when the 10-year annualized return was -1.39%. Luckily, however, 10-year annualized returns should improve over the next few years because S&P 500 Index returns were negative during 2000-2002 when the markets recovered from the bursting of the tech stock bubble.

I have posted an updated chart for the returns of the S&P 500 Index during the period between 1926-2015.


Steve Buck said...

Jim, this is great. I cannot tell you how often I show these charts to people 35 or younger to help show them how to save/invest for retirement. I know all the big financial companies don't want to show how this works because they make so much money from transactions/fees, however it is important that the story of the S&P500 and index-based investing is told. I'm thinking of combining your data with a few different scenarios to show how people who use S&P500 index funds could retire.

Jim said...

Steve, thanks for the support. One of the reasons why I created my blog was because of the great difficulty I had in locating historical returns for various indices on the Internet. I often look at the chart of returns between 1980 and 2009 shown at the end of this post:

I would have included data from prior to 1980, but the older historical for certain indices is very hard to find.