Oil & gas market cap to GDP & meaningless averages

I love a mean reverting series.

It makes life simple for people like me.

Below is a nice mean reverting chart that divides the market cap of oil & gas stocks (using the CCEI index, HERE) by U.S. nominal GDP.

It has a long-term average of about 7.8% with a standard deviation of ~2.4%.

But like many mean reverting series, the average is meaningless.

It is just something you pass through when going from one extreme to the other.

But guess where we sit today?

7.6%, right on the cusp of that long-term average.

So what?!

Much like I did with the post on my SAPE ratio (HERE) I take the above and plot what the total returns (price + dividends) were after inflation for the subsequent 10 years.

And voila we get the chart below.