How Indexes Mislead: Performance of the S&P 500 Relative to Other Benchmarks

Barnett and Company

As of last Friday, the Standard & Poors Index, the basis for index funds under the same banner, had recorded a year-to-date appreciation of 11.29 percent. While this is a commendable number, it was attained entirely (and then some) on Price/Earnings multiple expansion. A year ago, the index had an average P/E ratio of 20.34. […]