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Surprising resilience of the S&P 500

Through inflation, recessions, overseas tensions and other volatile market events, this decades-old index has continually reinvented itself, historically tracking solid returns. What’s the secret to its durability?


DURING TIMES OF MARKET TURBULENCE, a key piece of advice is often to lean toward stocks of large, high-quality companies. “Major firms with proven earnings and strong balance sheets have historically tended to provide stability, consistent returns and dividends,” says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. In the United States, the world’s largest equity market, Hyzy’s description could be captured in a single phrase: The companies listed on the S&P 500.


Marci McGregor headshot
“Even during the recent global pandemic, rising geopolitical tensions, natural disasters and the war in Ukraine, U.S. equities represented by the S&P 500 Index are higher by 226% over the last 10 years.”1

— Marci McGregor, head of CIO Portfolio Strategy, Chief Investment Office, Merrill and Bank of America Private Bank

Over time, this index of major U.S. companies has proven remarkably resilient. “Even during the recent global pandemic, rising geopolitical tensions, natural disasters and the war in Ukraine, U.S. equities represented by the S&P 500 Index are higher by 226% on a total return basis over the last 10 years,”1 says Marci McGregor, head of CIO Portfolio Strategy in the Chief Investment Office, Merrill and Bank of America Private Bank. While past performance doesn’t guarantee future results, “The returns of the companies on this index over this period of time are impressive from a historical perspective,” notes Kirsten Cabacungan, an investment strategist in the CIO for Merrill and Bank of America Private Bank.


A selective list

Though numerically just a small portion of the more than 4,200 publicly listed companies based in the United States,2 S&P 500 companies represent about 80% of total U.S. market capitalization. Thus the index, created in 1957, is widely regarded as a “proxy” for the broader U.S. equity market.3


To be selected for inclusion in this index, companies must have at least $12.7 billion in market capitalization (as of February 28, 2023), have positive earnings in the most recent quarter and year and meet a host of other standards.3 The list is continually updated by the Index Committee as companies expand or decline, and this regular refresh may help to explain the index’s historical resilience in the face of market pressures.


A benchmark for quality, yield, real returns and more

McGregor and Cabacungan point to some additional underlying qualities that make the S&P 500 such an important benchmark and share some points for investors to consider.


They include:


Quality. S&P 500 companies are often considered most representative of the key industries in the economy, and they tend to be large-cap stocks with relatively higher quality and stable businesses.


Yield. Companies in the S&P 500 that pay dividends to shareholders can offer an alternative form of income, in addition to any income investors receive from their bond holdings. “This can also provide an added form of diversification,” McGregor notes.


Access to secular growth. The U.S. is a global innovation juggernaut and home to world-leading technology firms, many of which are listed on the S&P 500. But innovation and efficiencies aren’t limited to tech companies or the tech sector. Many businesses listed on the S&P 500 now harness the power of technology and automation and are found across all sectors.


Kirsten Cabacungan Headshot

“Creative destruction, or the process of constant reinvention, has transformed the S&P 500 over time.”

— Kirsten Cabacungan, investment strategist, Chief Investment Office, Merrill and Bank of America Private Bank

Real returns. While inflation affects individual companies and industries differently, the S&P 500 over the long term has historically provided positive real returns — or the amount earned after accounting for taxes and inflation — as companies have become more productive and able to pass higher costs on to consumers.4 “Even during the Great Inflation decade from 1971 to 1980, consumer prices rose by a cumulative 117%, but the S&P 500’s total return was higher at 125%,”4 notes McGregor.


A foundation for consistent earnings. Because of the stringent requirements for inclusion in the S&P 500, the companies listed in the index tend to be those that have generally kept up with long-term structural changes in the economy, technology and consumer preferences, which typically contributes to a rise in corporate earnings — the foundation for long-term equity gains.


Durability during and after recessions. Considering the last four recessions, the S&P 500 tended to perform better on average in terms of price return, both during and 12 months after the start of the recession, compared with global peers and commodities.4


Ongoing reinvention. “Creative destruction, or the process of constant reinvention as emerging companies become eligible for inclusion and others drop off, has transformed the S&P 500 over time,” Cabacungan says5. In 1969, industrials represented a third of the index. Today, only 73 constituent firms are industrials, while information technology companies have risen from 16 to 666.


What the S&P 500 might mean for you

If you own individual large-cap stocks, you may likely be invested in one or more companies listed on the index. Many index-based mutual funds and exchange-traded funds invest with the intent of tracking or mimicking the S&P’s yearly performance and own all 500 of the index’s stocks. And because it has such broad exposure across sectors, the index is a useful benchmark, offering insights on the overall strength of the markets and the economy.


A reminder: S&P 500 companies don’t guarantee results, Hyzy cautions. All investments carry risk and are subject to challenging conditions, including periods of heightened market volatility, such as what we saw in 2022, he notes. Nor should investors focus solely on the S&P 500. Stocks of smaller, promising companies and international equities can offer important potential growth opportunities for investors, while bonds and other assets are essential for diversification.


Bottom line: While there will always be volatility and results may vary from year to year, McGregor believes S&P 500 companies will continue to offer important benefits for investors. “Given their improving productivity, proven durability, higher quality and consistency of earnings growth, we believe this group of companies should be considered as a core holding for long-term investors.”


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1 Bloomberg,. Data reflects total returns from December 31, 2012 to December 31, 2022.

2 World Bank

3 S&P Dow Jones Indices, S&P 500 Fact Sheet, as of Feb. 28, 2023.

4 Bloomberg. Data as of March 21.2023.

5 “2021 Corporate Longevity Forecast,” Innosight, May 2021

6 Bloomberg. Data as of March 21, 2023.




Opinions are as of the date of this article and are subject to change.


Investing involves risk including possible loss of principal. Past performance is no guarantee of future results.


Indices are used for illustrative purposes only, are unmanaged, include the reinvestment of dividends, do not reflect the impact of management or performance fees. Indices do not represent actual individual accounts. One cannot invest directly in an index.


Dividend payments are not guaranteed, and are paid only when declared by an issuer’s board of directors. The amount of a dividend payment, if any, can vary over time.


Companies may reduce or eliminate dividend payment to shareholders.


This information should not be construed as investment advice and is subject to change. It is provided for informational purposes only and is not intended to be either a specific offer by Bank of America, Merrill or any affiliate to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service that may be available.


The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).


Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets.


Investments have varying degrees of risk. Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. Stocks of small-cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. Bonds are subject to interest rate, inflation and credit risks. Treasury bills are less volatile than longer-term fixed income securities and are guaranteed as to timely payment of principal and interest by the U.S. government. Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.


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