Saturday, February 08, 2014

Historical Annual Returns for the S&P 500 Index - Updated Through 2013

2013 was a huge year for across the board for practically all equities with the notable exception of Emerging Markets.  The S&P 500 Index, one of the most widely-followed U.S. equity indexes, had a total return of about 32.39%, its largest calendar year return since 1997 and the 13th largest calendar year return of the 88 calendar year returns shown in the charts below.   The market was largely driven higher as a result of  slight improved economic growth as well as well as the Federal Reserve's continued QE3 U.S. Dollar pumping

Standard & Poor's introduced its first stock market index in 1923 and created the S&P 500 Index in 1957.  The charts below (click on individual charts for a larger view) show annual total returns for the S&P 500 Index (and its predecessor S&P 90 Index) between 1926 and 2013.  The annualized return for the S&P 500 Index (and its predecessor S&P 90 Index) between 1926 and 2013 was about 10.08%.  The 5-year annualized return through the end of 2013 was about 17.94%, one of the best 5-year annualized returns shown on the charts below.  The 10-year annualized return through 2013 was about 7.40%, the highest 10-year annualized return since 2006.

According to the Wall Street Journal, as of February 7, 2014, the P/E ratio of the S&P 500 Index based on estimated earnings over the next 12 months is approximately 15.10. As I have previously discussed, the average P/E ratio of the S&P 500 Index and other large caps stocks has been around 16 based on data dating back to the 1800s, so the S&P 500 Index may be slightly undervalued relative to its historical average P/E ratio.  As of February 7, 2014 the total return of the S&P 500 Index (including reinvested dividends) is about -2.59% as a result of recent stock market mini-correction.

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


ImperatorMachinarum said...

Hi Jim. This is excellent work. Are your S&P500 annual average returns computed with reinvested dividends?


Jim said...

^^^ Yes, these are total returns which account for reinvested dividends.

ImperatorMachinarum said...

I am trying to get a better grip on the relationship between dividend payout and the S&P500 annual gains. In order for the S&P500 to sustain a 9% annual average return, must the dividend be a certain %? What dividend yield(s) did you use in your calculations?

Thanks Jim.

Jim said...

The total returns are based on index data which accounts for the actual dividend payouts. Standard & Poors tracks this information itself.

The dividend yield differs from year to year based on how much the index has been increasing relative to how much the dividend payouts have been increasing. Look at my other post where I show the actual dividend payouts during the calendar years between 1977 and 2013 here:

Anonymous said...

Hi Jim,

I love your chart. Is it possible for you to upload a PDF version of it? I like to bring this with me during high school presentations to show the power the S&P500.

Anonymous said...

Hi Jim,

I would like a list of historical annual returns for long term (20+ years) treasury bonds. Would you have this list available or know where I can find this?

Joseph De Luca said...

"As of February 7, 2014 the total return of the S&P 500 Index (including reinvested dividends) is about -2.59% as a result of recent stock market mini-correction. "
I am confused by this statement; can you explain further? Are you talking about the YTD return of the S&P 500?

Jim said...

Joseph, you are correct. As of the date that this article was posted, the YTD total return of the S&P 500 Index was -2.59%.

Steve said...

So the annual returns is the increase in the value of the stocks combined with the reinvested dividends?.. Also, what does this look like if the dividends aren't reinvested?

Jim said...

Steve, you are correct. If the dividends were not reinvested, the total return would be lower each year by an amount which is dependent upon the dividend yield that year.

Mathew Fok said...

Thank you for providing data from 1926 onward

Chad Gordon said...

This is excellent Jim. Thank you for this blog. Where did you get the data for the S&P 500 going back pre-1950. Yahoo Finance (and others) have daily price data going back to 1950, but I haven't been able to find anything before then. Schiller has monthly data, which is fine for longer periods of return, but I was hoping to use it to analyze it more comprehensively.

Also, could you please help me understand something. As the S&P 500 reports it's price number (or when you look at historical price numbers), do this include the dividend? For example, let's say for easy math that the S&P 500 starts one year at 1,000 and ends at 1,100 and has a 2% dividend. Does this mean that those 100 points (i.e. 10%) gain are actually 8% price growth + 2% dividends or is it 10% price growth and the 2% dividend is either in my pocket or reinvested, but not reflected in the price?

Thank you again so much.

Anonymous said...

Hi Jim,

really excellent work. Thank you for this blog.
Im from germany, and searching about Statistik from SP500.