This is not meant to be a very analytical post, just a thought I had earlier today when I read a case study posted here on the forum by a guy from Ukraine who can't invest in index funds like VTSAX because they are not available in his country.
There are many countries, particularly outside of North America and Western Europe, where investing in index funds or even individual stocks is very uncommon because they are either unavailable, offered with high management fees or just not yet part of the "investment culture".
The idea is that as developing countries become more integrated into the global economy, the number of people investing in securities and index funds will increase and result in higher stock prices, other things being equal.
For example, many wealthy people from China invest in real estate at home and abroad and contribute to higher property prices and price/rent ratios in cities like Vancouver, New York and Sydney among others. Anecdotally, China is one of many countries where investors tend to exhibit a property hoarding culture (as opposed to a stock market investment culture). I mention China specifically because its impact on the world is already very high and is likely to increase in the future. What happens when more individual investors in all these countries start investing in index funds? Similar to the current impact of international real estate investors on prices in big global cities, I think stock prices and P/E ratios in the future are likely to be supported by international investors as well, which is good news for buy and hold investors everywhere.
Of course, it's not likely that everybody in the world will start investing in the US stock market exclusively and give VTSAX a big boost. However, i think it is reasonable to expect a lot more individuals in the future to start investing at least in their own countries and probably in international indexes as well which should increase the value of VTWAX (Total World Stock Index Fund).
The last argument I'd like to make is the fact that in the US, higher popularity of index funds in recent 2-3 decades coincided with (or resulted in?) higher P/E ratios. As other countries in the world become more prosperous and index fund investing becomes more commonplace, the same trend is likely to occur internationally as well.
I tried to find stock ownership statistics by country to support my arguments, but unfortunately a google search didn't give any meaningful results. If anybody has any additional information, real life experience or just an opinion on this subject, please feel free to share.