Corporate Profits as a Percentage of GDP Hits All-Time High

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 is 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?

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.