What’s Next for the S&P 500?

December 05, 2013

This week’s chart illustrates the distribution of returns for the S&P 500 in the year following a return greater than 25%. Since 1926, the S&P 500 has produced a calendar year total return greater than 25% on 23 separate occasions. In the 12 months following, 15 observations or 65% of the time, the returns were positive (average return of +21.3%). Conversely, 8 observations or 35% of the time the results were negative (average return of -8.8%). Interestingly, since 1950 there have been 15 calendar years of +25% returns, yet only 3 (20%) of the following calendar years were negative. Many investors are calling for a market correction in 2014; however, a majority of the time returns have been positive and have averaged 10.9% following a calendar year return greater than 25% for the S&P 500.