Average Stock Market Return: A Historical Perspective and Future Outlook

Personal Finance

Chevron icon
It indicates an expandable section or menu, or sometimes previous / next navigation options.

Investing

Written by

Tessa Campbell and

Jake Safane; edited by
Sarah Silbert

Updated

2025-01-02T22:45:57Z

The S&P 500 has gained about 10.5% on average annually since it was introduced in 1957.

d3sign/Getty Images

JUMP TO
Section

Chevron icon
It indicates an expandable section or menu, or sometimes previous / next navigation options.

Historical average stock market return

Factors influencing stock market returns

The importance of diversified long-term investing

What to expect in 2025

FAQs

Historical average stock market return
Factors influencing stock market returns
The importance of diversified long-term investing
What to expect in 2025
FAQs

Paid non-client promotion: Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate investing products to write unbiased product reviews.

The S&P 500 has gained about 10.5% annually since its introduction in 1957.
The S&P 500’s annual average return in 2024 was 23.31%, a little less than 2023’s 26% jump.
Returns may fluctuate widely yearly, but holding onto investments over time can help.

It can be nerve-racking to watch the stock market fluctuate up and down, but short-term fluctuations are normal. The market generally trends up down the line, providing significant returns to patient, long-term investors.

The best way to track the stock market’s long-term performance is by looking at major market indexes. Your specific choice of benchmark may depend on your investing style, but the S&P 500 is used the most for general market analysis.

While it excludes smaller companies, the S&P 500 is often considered a good proxy for the market overall. It tracks the financial performance of large, well-known companies tied to broad economic trends like consumer spending and business investment.

That said, other indexes, like the Russell 2000, which contains around 2,000 small companies (by public company standards), or the Dow Jones Industrial Average, which includes 30 large companies, can still provide insights into the strength of the overall stock market.

Since it’s the most popular benchmark option, we analyzed the average annual stock market returns using the S&P 500 index. Here is how it has performed over the years.

Historical average stock market return

In some years, the stock market changes a lot, and in others, it hardly changes. It can feel like a big gamble if you only invest for a short period, such as one year or less.

Year-to-year gains vary widely. According to Berkshire Hathaway, here’s how the yearly returns from the S&P 500, including dividends, have looked over the past 10 years.

Year	S&P 500 annual return
2015	1.4%
2016	12%
2017	21.8%
2018	-4.4%
2019	31.5%
2020	18.4%
2021	28.7%
2022	-18.1%
2023	26.3%
2024	23.31%

For the 10 years ending in December 2024, the S&P 500 has outpaced the historical average a bit, returning an annual average of 13.3% with dividends.

This is similar to the 12.55% return of the Russell 3000 index, which represents almost the entire US equity market. The smaller Russell 2000 index hasn’t been quite as strong over the past decade but has still moved in the same direction, with a 7.82% annual gain, according to LSEG.

The market’s long-term returns are historically positive, so if you can stay in the market for several years — or even decades when investing for retirement, for instance — that’s when you see the most growth.

Long-term stock market average

According to DQYDJ, since the S&P 500 was introduced in 1957, its annual return, including dividends, has averaged over 10% through the end of 2024.

Going back even further to 1928, using data from other large-cap indexes to account for the period predating the S&P 500, the annual return averages 10.06%.

And if you had invested $100 in 1928, you’d have nearly $800,000 as of the end of 2023, according to data compiled by NYU Stern professor Aswath Damodaran.

Inflation-adjusted stock market return

While the S&P 500’s 10%+ average annual returns outperform many other investments — including Treasury bonds, corporate bonds, gold, and residential real estate, as Damodaran’s data shows — it’s important to consider the impact of inflation.

From 1957 to 2024, the S&P 500’s average inflation-adjusted return was 3.8%, according to DQYDJ, meaning it exceeded the inflation rate by 3.8% per year.

This does not necessarily mean that inflation makes other assets better long-term investments since all assets face the same underlying inflation rate.

Hypothetically, if gold returned 9% in a year with 3% inflation and stocks returned 10%, the real return would be 6% for gold and 7% for stocks.

That said, accounting for inflation may affect your investment decisions based on factors such as your risk tolerance and your conviction that certain assets might perform better than others during periods of high inflation.

However, because it’s very hard to predict economic conditions and investment returns — the only thing we really know is that stocks tend to outperform over the long term — you shouldn’t necessarily get too caught up in weighing inflation-adjusted returns.

Variability of stock market returns

Despite the strong annual average of the S&P 500 and many other indexes, it’s important to realize that returns can vary significantly yearly. Some years have double-digit positive returns, while others have double-digit negatives.

For example, in 1928, the equivalent of the S&P 500 gained 43.81%, but the Great Depression followed, with annual returns of -8.30%, -25.12%, -43.84%, and -8.64% from 1929 to 1932.

Then, in 1933, the market bounced back with a 49.98% gain, only to fall again slightly in 1934 with -1.19%. But if you had pulled your money out, you would have missed out on the 46.74% gains in 1935.

This same dynamic has played out throughout history, such as during the Great Recession and even as recently as 2021 to 2023, when the market bounced up and down.

These trends exemplify how short-term investing can be risky, yet if you stay invested long-term, you can still potentially navigate difficult periods like the Great Depression.

When many years of returns are put together, the ups and downs of the S&P 500 annual returns start to smooth out because the long-term gains have been around 10% per year.

Factors influencing stock market returns

While the stock market fairly reliably trends upward over the long run, that doesn’t happen in a vacuum. At their core, stocks reflect a company’s future value that investors are willing to pay today. Some of the underlying factors that affect these valuations include:

Economic growth

When the economy overall is strong, that tends to lead to higher stock market returns.

For example, if unemployment is low, that contributes to consumers having money to spend compared with periods of high unemployment where individuals may pull back from spending, thereby affecting corporate profits.

Other factors, like GDP growth, also indicate whether the economy is expanding, which is a good sign for businesses that they can earn more revenue.

Interest rates

Typically, low interest rates boost stock prices, while high interest rates hurt them. That occurs for a few reasons, such as the fact that in a low-interest-rate environment, there can be more demand for stocks over other assets like bonds since bonds aren’t paying much interest. That demand can drive up stock prices.

Also, low interest rates can help companies’ bottom lines, such as by making it less expensive to borrow money for investing in business expansion activities.

Corporate earnings

Publicly traded companies in the US must report their earnings every quarter, which reveals information like total revenue and profit. This data directly shows how companies have been doing financially, and these reports also tend to include future guidance.

Investors can use that data to determine whether the stock price accurately reflects the company’s value.

Investor sentiment

Markets aren’t always rational. There can be a psychological component with investor sentiment moving markets up or down, even if the financials don’t necessarily support that.

For example, if investors start worrying about a possible recession, even if there’s not much indicating that’s likely, they might begin selling stocks. As that selling drives down prices, it might cause more investors to panic and sell, driving down the market further.

Geopolitical events

What’s happening globally can also affect the U.S. stock market. Wars in the Middle East, for example, can affect oil prices, which then affects companies’ energy costs and consumers’ budgets, so that might cause investors to sell stocks if they fear that geopolitical events could affect companies’ bottom lines.

Importance of average stock market returns

Regardless of your chosen benchmark, examining average stock market returns can help you set realistic expectations for the future.

Although past performance is never a guarantee of future results, it can help to understand that if the future does resemble the past, then stock market returns may be similar.

The S&P 500 has returned over 10% per year on average. This gives investors confidence in investing in the stock market rather than more conservative investments like bonds or fixed-income assets.

“Investing can be a good way to grow wealth over the long term and offers the potential for higher returns compared to a typical checking or savings account,” says Jordan Gilberti, CFP and senior lead planner at Facet.

The importance of diversified long-term investing

As yearly returns demonstrate, there’s a lot of variability in stock market returns. And because many factors influence stock prices, it’s important to realize that even if conditions seem positive, such as if the economy is humming, unexpected events like foreign wars could make the market tumble.

Moreover, looking at the returns of specific stocks rather than broad indexes, you might see even more variability. The largest companies now might seem like sure bets, for example, but if you look back in time, you’ll see that many of those at the top eventually lose their status.

The S&P 500 continuously rebalances to reflect companies that are growing or shrinking, so the 500 companies in there now might not be the same as what will be there in five, 10, or 50 years.

“Investing carries risks — you may be subject to losses and may even lose all the money you put into an investment,” Gilberti notes.

That’s why many experts suggest diversifying your investments, such as putting money into an index fund that reflects a broad range of stocks, not just one company. Investing experts, including Warren Buffett and investing author and economist Benjamin Graham, also say the best way to build wealth is to keep investments for the long term, a strategy called buy-and-hold investing.

There’s a simple reason why this generally works. While investments will likely go up and down with time, keeping them long-term helps even out these swings. Like the S&P 500’s changes noted above, maintaining investments for the long term could help investments and their returns get closer to that average.

Also, it’s worth noting that annual returns are calculated in a way that may not represent actual investing habits. The figures are based on data from the year’s first trading day compared with the year’s end.

But the typical investor doesn’t buy on the first of the year and sell on the last. While they indicate the investment’s growth over the year, they’re not necessarily representative of an actual investor’s return, even in one year.

Also, indexes are not directly investable. Investors often turn to index funds that invest in the companies that comprise the indexes, but these funds charge fees that cut into returns. The fees are usually low for index funds, but the higher they are, the more you generally lag the index.

In other words, your personal rate of return might not exactly match broader stock market indexes like the S&P 500, depending on factors like when you invest and what funds you invest in. Still, buy-and-hold investors tend to experience significant gains over the long term.

Note: Wealthfront is one of the best robo-advisor investing options for low-cost automated or self-managed portfolios. Read our Wealthfront investing review.

What to expect in 2025 and beyond

Recent turbulence in August and September 2024 might sour your view of the stock market, but again, zooming out shows a better picture, with the S&P 500 approaching 20% gains for the year. But will this trend continue into 2025 and beyond?

You can find plenty of expert predictions for specific years or even shorter periods of time, but remember, long-term investing tends to win out. So, rather than trying to figure out whether the stock market will go up or down in just 2025, it’s worth considering that most experts view the historical trend of the stock market gaining value as likely continuing for the foreseeable future.

That said, 10% may be a little on the high end. Many experts are a bit more conservative with their projections. For example, for 2024-2033, Charles Schwab projects that U.S. large-cap stocks will average 6.2% compounding returns, U.S. small company stocks will return 6.3%, and international large caps will average 7.6%. In comparison, Schwab forecasts annual returns of 5.7% for U.S. investment-grade bonds and 3.6% for cash equivalents.

Other long-term forecasts, compiled by Morningstar, show U.S. equities returning between 4-7% on average over the next 10-15 years, with higher expectations for international stocks. In most cases, these predictions still see U.S. stocks outperforming U.S. corporate bonds.

Much depends on what happens with factors like inflation, interest rates, economic policy, and how current geopolitical conflicts play out. But as history has shown, even when the stock market has some struggles, it tends to provide positive returns over the long term.

Stock market return FAQs

Is the average return guaranteed every year?

Chevron icon
It indicates an expandable section or menu, or sometimes previous / next navigation options.

No, the average stock market return is not guaranteed by any means. The average return simply reflects what has happened in the past and how, over the long term, downturns tend to be outweighed by positive gains.

What is the best way to invest in the stock market?

Chevron icon
It indicates an expandable section or menu, or sometimes previous / next navigation options.

The best way to invest in the stock market depends on factors like your age and risk tolerance, but in general, investing in low-cost, diversified funds, such as index funds or ETFs, is considered a best practice. Consider contacting a financial advisor or using an online robo-advisor for more guidance.

How can I protect my investments during market downturns?

Chevron icon
It indicates an expandable section or menu, or sometimes previous / next navigation options.

To protect your investments during market downturns, use strategies like diversification — including within asset classes like stocks but also across other asset classes — along with taking a long-term approach can potentially help you navigate market downturns.

Tessa Campbell

Investing and Retirement Reporter

Tessa Campbell is an investing and retirement reporter on Business Insider’s personal finance desk. Over two years of personal finance reporting, Tessa has built expertise on a range of financial topics, from the best credit cards to the best retirement savings accounts.ExperienceTessa currently reports on all things investing — deep-diving into complex financial topics, shedding light on lesser-known investment avenues, and uncovering ways readers can work the system to their advantage.As a personal finance expert in her 20s, Tessa is acutely aware of the impacts time and uncertainty have on your investment decisions. While she curates Business Insider’s guide on the best investment apps, she believes that your financial portfolio does not have to be perfect, it just has to exist. A small investment is better than nothing, and the mistakes you make along the way are a necessary part of the learning process.Expertise: Tessa’s expertise includes:

Credit cards
Investing apps
Retirement savings
Cryptocurrency
The stock market
Retail investing

Education: Tessa graduated from Susquehanna University with a creative writing degree and a psychology minor.When she’s not digging into a financial topic, you’ll find Tessa waist-deep in her second cup of coffee. She currently drinks Kitty Town coffee, which blends her love of coffee with her love for her two cats: Keekee and Dumpling. It was a targeted advertisement, and it worked.

Average Stock Market Return: A Historical Perspective and Future Outlook – Business Insider

Average Stock Market Return: A Historical Perspective and Future Outlook