Capital’s Share Of Profits ‘Dangerously Elevated’: Research Affiliates

Income inequality is usually a purely political topic, but EPS growth is extremely high by historical standards and some people are becoming worried that we could be in the middle of a profit bubble.

Profits are high by historical standards

“Profits are dangerously elevated by all reason­able measures,” writes Research Affiliates analyst Chris Brightman. “Industry profit margins are at or near all-time highs. Corporate profits, both as a per­centage of GDP and relative to labor income, are at or near record levels. The dramatic rise in income inequality is a direct consequence of this spectacular reallocation of income to capital and away from labor.”

Brightman argues that, contrary to the experience of the current generation of finance professionals, it is possible...