Some Perspective On The Performance Of The S&P 500
Supporting Image for Blog Post


View from the Observation Deck  

  1. The S&P 500 posted a total return of 13.69% in 2014. It was up 32.39%, on a total return basis, in 2013. The index's all-time closing high was posted on 12/29/14 at 2090.57. 
  2. The last bar in the chart (shaded gold) represents the average annual benchmark return for the index since 1926. It changes modestly every year.
  3. Bar #1 is simply extraordinary because it reflects an average annual total return that is way beyond the historical average. Performance was significantly boosted by the Internet Revolution (1995-1999).
  4. Bar #2 reflects the fallout after the Internet bubble burst late in Q1'00. This is your so-called "Lost Decade" in stocks. 
  5. Bar #3 shows the average annual total return for the two decades captured in Bar #1 and Bar #2. The 8.2% average gain is below the historical 10.1% benchmark return.
  6. Bar #4 (striped) extends the period measured in Bar #3 by another five calendar years through 2014. The 9.6% average annual total return for the period is closer to the 10.1% historical norm, but still falls short. 
  7. Bloomberg's consensus 2015 price-to-earnings (P/E) ratio estimate for the S&P 500 was 16.35, as of 1/15/15, in line with its 50-year average P/E of 16.50, according to Bloomberg.
  8. The S&P 500 does not look overvalued, in our opinion.

This chart is for illustrative purposes only and not indicative of any actual investment. Investors cannot invest directly in an index. The S&P 500 is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance.

To Download a PDF of this post, please click here.

Posted on Thursday, January 15, 2015 @ 2:02 PM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.