Nick Nasad
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Why is S&P at Record Highs? This Chart of Corporate Profits is One Reason

Judging by my Twitter stream there are many out there that believe the US stock market is ready for a crash. Not sure if that's because I follow a bunch of pessimists (I try not to) or if bears are more vocal (while equity bulls are busy counting their winnings). In any case, seeing that sentiment, I am always looking for clues as to what justifies these highs and if stocks can head higher.

Therefore, the recent Buttonwood article in The Economist was quite interesting as it touched on the subject and presented the chart above which shows US corporate profits as a % of GDP. Now, the article goes into details about some of the causes (we are at the top of a business cycle, the weaker USD has helped exports, and companies are buying back shares and therefore spending less on investment which shows up as higher profits). The point though, is this is at the core of why in fact - while there may be frothy areas - in general the recent highs are warranted.

Here's a link to the article: Margin for error - American corporate profits seem to have defied gravity

Let me know if you guys buy it by leaving your comments below.