The Bigger Picture: S&P 500 Rolling 10-Year Annual Returns
It’s useful to expand our horizons on a regular basis and take a look at the longer-term picture when it comes to the equities markets. It helps put recent events in perspective. Exhibit 1 shows the rolling 10-year average annual total return and the rolling 10-year average annual income return of the S&P 500 from 1926 through the end of 2011. As we can see, recent returns have been downright dismal and most closely resemble the period following the Great Depression in the 1930s. The recent rolling 10-year low was reached in February 2009.
Exhibit 1 also shows the importance of dividends. Although the S&P 500 yield is near it’s all-time low, in the current environment it supplies the lion’s share of total return.
The picture changes a bit when we look at real returns – total returns adjusted for inflation. Exhibit 2 shows the rolling 10-year average annual inflation adjusted total return for the S&P 500 from 1926 through the end of 2011. On a real basis, we can see that the recent market lows are the worst on record since, and including, the Great Depression – bottoming at –5.86% in February 2009. S&P 500 rolling real returns then remained negative until February 2011.