Interesting bit of big picture perspective here from Mark Thoma's blog. The chart shows after-tax corporate profits as a percentage of GDP.
Depending on your perspective, you might be inclined to come to extremely different conclusions about this situation:
- Some might be inclined to believe that this means the stock market is extremely undervalued.
- Some others might be inclined to believe that this is an entirely unstable and unsustainable environment that's likely ripe for a bit of mean reversion, which would bring us back down to something closer to the 6%-7% range.
What do you think?