S&P 500 Total Return Components since 1960

S&P 500 Total Return Components since 1960

A couple of interesting things pop out of the graph and table below:

  • On a long term basis all of your returns come from earnings growth and dividend yield.
  • On a short term basis there can be large returns from changes in sentiment as expressed through changes in the market PE ratio. But on a long term basis, PE ratios are mean reverting and average out at no return.
  • 2013 has seen a large increase in PE ratio with below average earnings and dividend yield. But it wasn’t out of the range of historical precedence.
Metric Dividend Yield Earnings Growth PE Growth Total Return
Average Return 3.08 7.91 0.17 11.15
Median Return 3.09 8.52 0.31 14.62
Min Return 1.14 -30.79 -47.18 -35.38
Max Return 5.57 50.37 49.09 36.41
Current 1.97 5.58 21.23 28.57

By Jon Eickmeier | December 2, 2013 | chart economics markets returns

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