2014 was another solid year for most U.S. stock market indexes, particularly so for indexes of large cap stocks, such as the S&P 500 Index. The S&P 500 Index experienced a total return of about 13.69%. The market was largely driven higher as a result of improving economic conditions in the United States, the Federal Reserve's continued QE3 U.S. Dollar pumping, and a strengthening U.S. Dollar.
& 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
2014. The annualized return for the S&P 500
Index (and its predecessor S&P 90 Index) between 1926 and 2014
was about 10.12%. The 5-year annualized return through the end of 2014
was about 15.45%. The 10-year annualized return through 2014 was
about 7.67%, the highest 10-year annualized return since 2006.
According to the
Wall Street Journal, as of January 9, 2014, the P/E ratio of the S&P 500 Index based on
estimated earnings over the next 12 months is approximately 16.75. 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 appears to be reasonably valued relative to
its historical average P/E ratio.
I have posted an updated chart for the returns of the S&P 500 Index during the period between 1926-2015.