The Single Greatest Predictor of Future Stock Market Returns

The Single Greatest Predictor of Future Stock Market Returns by Philosophical Economics (some excerpts) Consider the following chart, which shows the average investor portfolio allocation to equities from January 1952 to December 2013: In this piece, I’m going to do five things.  First, I’m going to explain, in very simple terms, the accounting principles behind the metric.  The explanation will include instructions (with ready-made links) for how to graph the metric in FRED.  Second, I’m going to discuss the dynamics of asset supply, with a special focus on equities.  Third, I’m going to challenge the conventional framework for understanding the relationship…