Must What Goes Up, Come Down?

Here's an interesting picture I generated this evening while working on some something for a presentation:



These after-tax profits are what the owners of corporate America have been able to enjoy from their ownership stakes in US companies. It reiterates the fact that we're all familiar with: that the last few years have been a good time to be an owner of a US company.

But it also suggests to me the old adage referred to in the title of this post, which in turn tells me that the best days of profit growth during this economic expansion are most likely well behind us. I would be quite surprised if we didn't start to see corporate profits soon begin to fall as a share of income. And for that to happen, of course, profits must grow more slowly than income, which is to say at a rate of less than about 3% in real terms.

The stock market may not be very happy about that...