Corporate Profits As A Percentage Of GDP Hits All-Time High

by: Cullen Roche

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?