As soon as the United States took a hit from the COVID-19 pandemic, so did the economy on a macro level. Businesses were, well, losing business, so unemployment was higher than ever. International travel and trade sank, causing gross domestic product (GDP) and inflation to take a dive. After experiencing these catastrophes, the Federal Reserve not only abundantly increased federal stimulus to businesses and individuals but also decreased interest rates, and thereby, the 10-year treasury yield.
At that same time, the S&P 500, a major index of the stock market, was giving investors a scare with a 9.5% drop on March 12, 2020, and an 11% drop 4 days after that. However, that was the worst of it as the low rates, stimulus pouring in and bond buying largely helped the stock market recover back to pre-pandemic levels in August 2021.
Read this edition of Benzinga Reports for an in-depth look at how the S&P 500 has been related to the economy on a macro level for the last 50 years. Discover how economic trends are reciprocated across all indicators, such as inflation and the 10-year treasury yield, in addition to whether S&P 500 returns and earnings are always related.
Inflation, Treasury Yield and S&P 500 Statistics Over the Last 5 Decades
- Average total annual S&P 500 earnings over the past 50 years: $66.94
- Number of years with above average total annual S&P 500 earnings: 19 years
- Number of years with below average total annual S&P 500 earnings: 33 years
- Average % change in earnings per year over past 50 years: 8.27%
- Average 10-year treasury yield over the past 50 years: 6.13%
- Number of years with above average 10-year treasury: 27 years
- Number of years with below average 10-year treasury: 25 years
- Average % change in yield rate per year over past 50 years: -1.22%
- Average inflation rate over the past 50 years: 3.97%
- Number of years with above average inflation rate: 18 years
- Number of years with below average inflation rate: 34 years
- Average % change in inflation rate per year over past 50 years: 15.41%
- Average S&P 500 annual return rate over the past 50 years: 12.23%
- Number of years with above average return rate: 29 years
- Number of years with below average return rate: 23 years
- Average % change in return rate per year over past 50 years: 18.00%
Diving Deeper: Correlations (or Lack of) Between Market and Economy
- 19 years with above average annual S&P 500 total earnings and below average 10-year yield
- 27 years with below average annual S&P 500 total earnings and above average 10-year yield
- 13 years with above average annual S&P 500 return and below average 10-year yield
- 11 years with below average annual S&P 500 return and above average 10-year yield
- 18 years with above average annual S&P 500 total earnings and below average annual inflation rate
- 17 years with below average annual S&P 500 total earnings and above average annual inflation rate
- 20 years with above average annual S&P 500 return and below average annual inflation rate
- 8 years with below average annual S&P 500 return and above average annual inflation rate
- 17 years with above average annual inflation rate and above average 10-year yield
- 24 years with below average annual inflation rate and below average 10-year yield
- 11 years with above average annual S&P 500 total earnings and above average annual S&P 500 return
- 18 years with below average annual S&P 500 total earnings and above average annual S&P 500 return
- 15 years with below average annual S&P 500 total earnings and below average annual S&P 500 return
Notable years with the highest and lowest number for each statistic and category:
- Highest and lowest inflation, respectively: 13.55% (1980), -0.36% (2009)
- Highest annual change in inflation: 950% (2016)
- Highest and lowest 10YR Treasury yield: 13.92% (1981), 0.89% (2020)
- Highest annual change in 10YR Treasury yield: 62.92% (2021)
- Highest and lowest S&P 500 total earnings: 147.46 (2019), 19.23 (2008)
- Highest annual change in S&P 500 total earnings: 233.49% (2009)
- Highest and lowest S&P 500 annual return: 38.46% (1975), -37.22% (2008)
- Highest annual change in S&P 500 annual return: 3,094.96% (1995)
Methodology:
To analyze a possible correlation between the S&P 500 and the economy, we examined the returns and earnings of the S&P 500 and various macroeconomic indicators over the past 50 years and analyzed relationships and trends.
Inflation & treasury data:
S&P 500 Data: