S&P 500 Average Returns and Historical Performance

The S&P 500's average annual return over the long term is approximately 10%, but there are significant fluctuations from year to year. Here are key insights:

1. **Historical Performance**: The S&P 500 has delivered an average annual return of over 10% since 1957, indicating strong long-term growth. However, returns have varied significantly from year to year, with highs of over 37% in 1995 and lows of -37% in 2008.
2. **Inflation Adjusted Returns**: When adjusted for inflation, the real return drops to about 6.69%, highlighting the importance of considering inflation when evaluating investment returns.
3. **Recent Performance**: In the past decade, the S&P 500 has returned over 200%, reflecting the broader market's growth. However, 22 stocks within the index have negative returns over the same period, such as Walgreens Boots Alliance, which has a -14.2% return.
4. **Sector Performance**: The index's performance has been driven by the overall market's growth, with sectors like technology and healthcare contributing significantly to the index's resilience.
5. **Index Inclusion and Outperformance**: The S&P 500's market-cap-weighted structure means that newly added constituents often experience increased liquidity and investor demand, as seen with Interactive Brokers' inclusion in 2025. This can lead to a 2-3% outperformance in the short term, reflecting re-rated fintech valuations.

In conclusion, while the S&P 500 has shown strong long-term growth, investors should be aware of the index's volatility and the impact of inflation on returns. Recent developments, such as the inclusion of Interactive Brokers, suggest that the index's composition and sector weighting can influence both performance and investor sentiment.