[sgbuffett]

This chart is from a stock market researcher who kept track of the data for decades.

It shows the % investors allocate to stocks (red line)
The blue line shows the average annual returns of next 10yrs. The last point for the blue graph is in 2011 as that point if for avg returns from 2011-2021.

It shows the correlation is almost perfect
1. When investors allocate a larger % of the wealth to stocks, the future average returns for stocks is lower and can go negative.

2. We are almost at all time high for allocation to stocks, I means that the nominal returns for US stocks is average -÷3% a year for next 10yrs.

3. If this correlation continues to hold, it tells us that we can get positive returns only if stocks fall much lower

The chart tells is when many people buy and are making you tube videos espousing the virtues of owning stocks it js a bad time to buy as the allocation would be very high.

I roughly knew this principle and have avoided buying US stocks jn a big way.  But still the strong correlation in the chart surprises me