By Mark Hulbert
CHAPEL HILL, N.C. – The S&P 500 will produce an inflation-adjusted total return of minus 3.4% annualized over the next decade.
That is the latest forecast of an indicator that its creator has called, with some justification, the “single greatest predictor of stock-market returns.” The brainchild of the anonymous author of the Philosophical Economics blog , the indicator represents the average investor’s portfolio allocation to equities.
This average currently stands at 49.5%, according to the latest data for the end of the first quarter, which were recently released. It is a contrarian indicator, with higher allocations associated with lower stock-market returns over the subsequent decade. The current reading is higher than 98% of the historical values back to 1953.