Inflation And Dividend-Adjusted S&P 500 Returns In 2014

Includes: SPY
by: Don't Quit Your Day Job

We wanted to do this math once a quarter, but… well, we forgot. So, apologies for that – but today we present the S&P 500's ride for the year and the first quarter, once you take into account dividend reinvestment (you are reinvesting, aren't you?) and inflation.

Data is from the S&P 500 Total return index, from Standard and Poor's. We also have a calculator to approximate these results which uses Robert Shiller's data, please find that here.

S&P 500 Returns, First Quarter

Better late than never, right?

Anyway, our computed value at the S&P 500′s open on 1/2/2014 was 3311.58, with an interpolated CPI (using FORECAST in OpenOffice) of 234.9406129. Our computed value on the close of 3/31/2014 was 3360.5844949, with an extrapolated (using TREND in OpenOffice starting with CPI from October, 2013) CPI of 235.98406452.

Do that annoying math for a return of 1.48% through the first quarter of 2014.

(Remember, the index level comes from the S&P 500 Total Return index, linked above.)

S&P 500 Returns, to Date (4/25/2014 Close)

And, since we were late on the first quarter returns, here's a preview of the second quarter – at least through the close on 4/25.

The numbers on 1/2 don't change from the last section, and on 4/25 we've got a computer close of 3343.69528 on an extrapolated CPI of 236.2935219.

That return? 0.97%.

Doing Nothing: Better than the Alternative (So Far)!

We wrote a well-received six piece article (starts here) last year detailing our fence-sitting approach this year: in essence, we think the stock market is mildly overvalued, and our conclusion was we wouldn't be surprised to see (geometric) average returns around 1-5% on the stock market from the decade starting November 2013. Note that the median, non inflation adjusted return after dividend reinvestment is 8.61% for a decade in the S&P 500.

Whatever that means.

So, on a personal level, we're not selling anything – I disagree with any pundits that say the market is wildly overvalued. And, at least so far in 2014, doing nothing was the right move – I challenge you to post inflation adjusted returns for your savings account… or the cash you've got hidden under your mattress.

Of course, that might change – watch the 10-Year Treasury with a wary eye this year, and let us know your thoughts in the comments! Are you selling? Sitting tight? Are you on the fence with us?