The colors correspond to the CAPE value. Green is a starting CAPE value of 0-10. So, the left-most cluster of bars represent the expected return one year later. For example, if the CAPE is currently at 0-10, one year later it averages a ~7% – 8% return. If the CAPE is currently at 10-15, the average return is slightly less. If the CAPE is currently at 15-20, the average return is expected to be around 4%-5% one year later. If CAPE is currently at 20-25, the average return is expected to be around 1%-2%. And if the CAPE is currently at 25+, the average return is expected to be around 3%-4% one year later.
Now, take those same time starting CAPE values, but extend the time frame from one year to five years later. What kind of average returns would the average investor expect to see? According to the chart, if the investor started investing when the CAPE was between 0-10, we could expect to see an approx 50% return–five years later. If the investor started investing when the CAPE was between 10
15 or 15-20, the average investor could expect to see average returns of around 10%, and a return of approx 0% if he started investing when the CAPE was between 20-25. And, not surprisingly, if the investor put money to work in equities when the CAPE was 25 or higher, then his expected average return would be a whopping negative return of almost 20%!