The graph that shows the percentage of corporate profits versus GDP seems like it shows nothing. GDP goes up, profit goes up at the same rate, so profit as a percentage remains static.
The comparison to the S&P500 is confusing. Why would GDP be linked to the S&P500? GDP is a static measure of what the economy is producing, where the S&P500 is a measure of expected future profits. You wouldn't expect them to track the same.
> The graph that shows the percentage of corporate profits versus GDP seems like it shows nothing. GDP goes up, profit goes up at the same rate, so profit as a percentage remains static.
Assume you're referring to the second graph. That graph starts in July 2009, which is just the very-rightmost section of the first graph, which starts all the way back in ~1947. And while corp profits as a percentage of GDP hasn't changed much since 2009, this percentage is much higher than post-war average right up until the Great Recession.
Regarding S&P not tracking to the GDP, while yes you would except them not to line up 1-1, long term equity valuations can't grow faster than GDP without some other fundamental economic change,e.g. a permanent reduction in the risk-free rate (and rates over the past ~30 years are significantly lower - remains to be seen how permanent this ends up being). For more info google Buffett ratio.
The comparison to the S&P500 is confusing. Why would GDP be linked to the S&P500? GDP is a static measure of what the economy is producing, where the S&P500 is a measure of expected future profits. You wouldn't expect them to track the same.