This 'single greatest predictor of future stock-market returns' has fallen sharply --- and that's a bullish sign

This 'single greatest predictor of future stock-market returns' has fallen sharply --- and that's a bullish sign

CHAPEL HILL, N.C. – A good chunk of the bull market’s excesses have been worked off, according to the “Single Greatest Predictor of Future Stock Market Returns.” And that’s good news. I’m referring to the indicator, first proposed by the Philosophical Economics blog in 2013, that is based on the average household’s portfolio allocation to equities. It is a contrarian indicator, with higher equity allocations associated with lower subsequent market returns, and vice versa. According to econometric tests to which …