Although corporate profits have fallen off a cliff in recent quarters, the market has remained rather bullish. The red line is a measure of non-financial profits. Profits are the mothers milk of future stock prices. Profits always lead stock performance. The stock market is either pricing in a sharp recovery in corporate profits or the market is underestimating the future weakness of profits. Based on the slowing global growth and the stagnant US economy I would venture to guess that the market currently has this one dead wrong and is likely to see lower levels in the coming months.
![Cullen Roche](https://pragcap.com/wp-content/uploads/2022/01/Headshot2022-1-144x144.png)
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.