Corporate profits are the market’s foundation, shaping a new America

Summary: Corporate profits have rising to an amazingly large share of our national income, powering the stock market while GDP and household income lag far behind. This has played a large role in shaping the New America of the 21st C. What caused this rise? What might reverse it? See my column at Wolf Street for answers.

Corporate Profits Are the Stock Market’s Foundation.
What Will Break Them?
The hidden Key to Regime Change in the Stock Market.

The daily flow of economic statistics misleads even sophisticated analysts into watching the short-term trends while forgetting the long-term basics that often determine events – as we see today, with analysts chattering about beats of quarterly earnings and expectations for Friday’s employment report.

The first plays a pointless manipulated game. The second concerns an impossible-to-accurately-predict, heavily revised, slow-changing metric (non-farm payroll growth has been 1.7% – 2.2% year-over-year for the past 15 months).

Larger factors drive the stock market, creating the macroeconomic foundation for bull and bear markets. One of the most dramatic trends of the past generation has been the rise in corporate profits. It has helped reshape America, powering a three decade long bull market. What created it? What will end it?

Read the rest at Wolf Street!