Due to volatility tax [1], there’s an upper limit on how much leverage you can assume. This amount is a function of forecasted returns and variance: r/var(r). The larger this ratio is, the more leverage you can take on. In general, just investing in the broad equity market with anything above 3-5x leverage over the long-term is probably unadvisable. So groups like hedge funds first reduce their volatility by going long and short, and then leveraging up afterwards. Even with market neutral funds (0 market exposure), the leverage applied rarely goes past 6x nowadays.

Banks are a little different and while the rules are complicated, big banks need to have around 3% of their total book at hand. Or in otherwords, they have around 33x leverage. Because of the leverage, banks need a very diversified uncorrelated portfolio in order to reduce volatility. No bank would stuff all of their money into equities, the risk of ruin is too high.

Also, there’s another perspective to look at your question: the efficient market hypothesis. In short, EMH states that in general, all investments have the same or trend toward the same risk/reward profile. That is, the ratio or slope of the returns vs volatility should be the same. With debt/credit, there are two primary options: you get paid back with interest or you don’t (let’s ignore bankruptcy). With equities you are assuming a lot more risk, the stock could go up or down or whatever. Since you are assuming more risk with equities than credit, it would violate EMH if you weren’t compensated for the extra risk.

This however, doesn’t explain why equities perform so much better than everything else. This is called the equity premium puzzle [2].

So maybe you’re right? No one really knows. Maybe the jig will eventually be up? Or maybe not, no one really knows.

[1] https://en.m.wikipedia.org/wiki/Volatility_tax

[2] https://en.m.wikipedia.org/wiki/Equity_premium_puzzle