Corporate profits are among the most mean-reverting of all statistics. And this makes sense unless capitalism is broke. High profits entice competitors to come in and take market share by selling for less.
If corporate profits went back (mean-reverted) to their longer-term average, P/E ratios would be close to 24 at today's prices. Corporations have some room to absorb some price increases, but at the expense of the bottom line.
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