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 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.