Saturday, January 10, 2015

Historical Annual Returns for the S&P 500 Index - Updated Through 2014

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.

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 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.

Friday, January 09, 2015

Historical Returns for the Nasdaq-100 (1986-2014)

The Nasdaq-100 Index is one of the most widely-followed indexes of primarily technology and biotech stocks.  The Nasdaq-100 includes 100 of the largest domestic and international non-financial securities listed on the Nasdaq Stock Market based on market capitalization. The weightings of companies in the index are based on their market capitalizations, with rules capping the influence of the largest components. As of January 8, 2015, the three largest components of the index are Apple (comprising about 13.59% of the index), Microsoft (comprises about 8.33% of the index), and Intel (comprises 3.67% of the index).  Google would have been the third largest component if it had not been split into two different equities, Goog and Googl, a split which occurred on August 19, 2014.

The Nasdaq-100 was initiated on January 31, 1985 and, as I have previously discussed, has since become one of the most widely-followed technology indexes during the dot.com bubble. The chart below (click on the chart for a larger view) illustrates historical annual returns for the Nasdaq-100 index between the calendar years 1986 and 2014.  The Nasdaq-100 Index does not account for dividend payouts, but the Nasdaq-100 Total Return Index, which was initiated on March 4, 1999, does account for dividends.  The chart below calculated based on returns for (a) the Nasdaq-100 Index from January 1, 1986 - March 3, 1999; and (b) the Nasdaq-100 Total Return Index from March 4, 1999 - December 31, 2014.

As shown below, the Nasdaq-100 recorded a solid year in 2014, rising 19.40%, and has risen some about 272.5% during the calendar years between 2009 and 2013, an annualized return of about 24.5%!  

I still believe that the Nasdaq-100 is in the beginning stages of a multi-year secular bull market run as investors reconsider the potential of high tech companies.  The Nasdaq-100 returned a total of about 3403.97% between 1986 and 2014, an annualized return of about 13.05%.  This greatly outperforms the total return of  about 1804.75%, or about 10.70% of the the S&P 500 Index during the same period of time.