hello /smg/
I spent the day updating an interesting macro indicator from a blogpost 10 years ago
https://www.philosophicaleconomics.com/2013/12/the-single-greatest-predictor-of-future-stock-market-returns/this uses available FRED data to effectively look at what proportion of investor allocations in the broader economy are put towards equities
https://fred.stlouisfed.org/graph/?g=qisplot this vs. the subsequent annualized 10yr returns and you get a surprisingly good correlation, especially considering it was posted in 2013
in my recreation I adjusted slightly by accounting for the broader trend of increased weight in equities over time from 401ks, etc.
the simple observation is that when entities are heavy in equities, subsequent returns are poor (overbought)
when everyone is low in equities (oversold), expect better future returns
data suggests entities are overweight in stocks right now (top 9% all time)
and thus it's predicting annualized nominal returns of -0.77% over the next decade
grim
