Below is a chart that tracks two simple numbers over the years, each with their own vertical scale (click to enlarge):
- The average household’s equity ownership share, as a percentage of total equity and credit (bond) assets. (Left-axis)
- The subsequent 10-year average annual return of the S&P 500 index. (Right-axis)
Kind of eery, right? As the relative demand for stocks goes up, their future return goes down. This is the most up-to-date version of the chart that I’ve seen – credit
Since then, this
(I’m not sure the x-axis labels on this last chart are correct, as it doesn’t agree with the first chart that tops out at 55% household equity share.)
This will be an interesting chart to track over time. Overall, it is yet another indicator that points to the average return of US stocks for the next 10 years to be rather muted (in the low single digits!). But again, anything could happen – both higher or lower – in the short-term.
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