Stockybara
LONG-TERM ALLOCATION · RELATIVE VALUATION

AIAE & Fed Model

Two ways to understand U.S. equity markets: investor allocation across asset classes and forward earnings yields relative to Treasury bond yields. Charts are independently generated from verified government data. No copyrighted research charts or proprietary consensus feeds are copied.

Aggregate Investor Allocation to Equities (AIAE)

The investor equity-allocation proxy originally described by Philosophical Economics; discussed by Allocate Smartly.

Latest verified quarterly AIAE—Awaiting Federal Reserve Z.1 data
Long-horizon forecasting10 yearsModel horizon, not a published current return forecast. No regression has been fitted by Stockybara.

Loading Federal Reserve quarterly financial-account data…

AIAE = Corporate Equity Liabilities / (Corporate Equity Liabilities + Nonfinancial Borrower Debt Liabilities) × 100%

Exact source basket: equities NCBEILQ027S + FBCELLQ027S; debt-and-cash proxy FGSDODNS + CMDEBT + BCNSDODNS + DODFFSWCMI + SLGSDODNS. All seven are quarterly level observations in millions of U.S. dollars. Each historical quarter requires all seven components; there is no fill-forward of missing quarters.

Interpretation: High aggregate equity allocations have historically been associated with lower subsequent long-horizon stock returns, but structural changes, revised data, overlapping 10-year windows, survivorship/look-ahead effects and model instability matter. These values are today's revised economic data, not an ALFRED point-in-time reconstruction. AIAE should not be used alone to time sharp downturns.

Federal Reserve Z.1 source ↗ FRED primary corporate equity series ↗ Allocate Smartly discussion ↗ Portfolio Optimizer methodology ↗

AIAE → Next 10-Year Equity Return Forecast

Research model for nominal, dividend-inclusive S&P 500 annualized returns. Forecast only appears when a full, independently calibrated history is validated.

AIAE sourceChanging AIAE tests model sensitivity; does not change Federal Reserve records.
Model horizon10 yearsAwaiting complete calibration
Expected 10-year nominal annualized total returnN/AOLS model point estimate; not a guaranteed future return
Historical forecast-error rangeUnavailable10th–90th percentiles of overlapping walk-forward errors; NOT a statistical 80% confidence interval
Hypothetical value after 10 years, starting at $100N/A10-year compounding at the assumed constant nominal annual rate
Walk-forward mean absolute errorN/APercentage points of annualized return; compared with expanding mean baseline

Calibrated forecast not available until the entire source data and history tests pass.

━━ Actual realized 10-year annualized total return   ┄┄ Expanding-window forecast. Each point is indexed by its original forecast year (not the year when the 10-year return became known).

No model coefficients until the historical sources pass validation.

Historical data validation pending.

Strict qualification: The calibration uses year-end (Q4) AIAE readings against subsequent calendar-year S&P 500 total returns for exactly 10 years. Applying these same coefficients to the latest Q2 data is an approximate mid-year extrapolation, not an exact daily or quarterly 10-year prediction. Training is current-vintage and may reflect revisions (ALFRED point-in-time backtesting is not yet supported). Ten-year target windows overlap heavily. The backtested error range is historical descriptive evidence, NOT an assured probability interval; an allocation level outside the historical training range is extrapolation. No trading or crash-timing signals.
Damodaran annual dividend-inclusive market returns ↗ Federal Reserve quarterly Z.1 ↗ Allocate Smartly's model discussion ↗

Fed Model · Forward E/P vs. 10Y Treasury

Compare the S&P 500 forward earnings yield with the official nominal 10-year Treasury yield.

Official dataDoes not update Forward P/E
Implied forward earnings yield—100 / Forward P/E
Fed Model spread—Forward earnings yield minus Treasury 10Y
Bond-yield implied fair P/E—100 / 10Y Treasury yield
P/E relative to fair P/E—Positive = higher P/E than this mechanical benchmark

Green: Treasury yield history; purple: constant illustrative earnings-yield assumption, not historical earnings data.

Enter valuation assumptions to compare.

Earnings Yield (%) = 100 / Forward P/E Fed Model Spread (bp) = [Earnings Yield (%) − Treasury 10Y Yield (%)] × 100

Important: the purple line is a constant user-input scenario. It is not historical S&P 500 analyst-consensus E/P. A real historical Fed Model requires a licensed time series of 12-month forward S&P 500 EPS or P/E matched to each yield date. This classic model also compares earnings yields with nominal bond yields, which has theoretical limitations.

Official Treasury par yields ↗Fed Model background ↗Valuation & Risk ↗

How the models differ

AIAE uses broad investor balance-sheet allocation levels and is studied against long-term equity returns. The classic Fed Model is a relative-yield comparison and does not account for earnings growth, equity risk premiums, inflation mismatches or the level of market risk. Neither should be treated as a statistically calibrated short-term trading signal.

Stockybara does not reproduce proprietary Allocate Smartly forecasts, copied research charts, or Yardeni/Refinitiv/FactSet forward earnings databases. The calculated spread and implied P/E depend on user-supplied Forward P/E and official daily Treasury data. Investment research only; no recommendation to buy or sell.