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.
& Poor's introduced its first stock market index in 1923 and
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 1926-2014.