Stock Market Is Doomed To Rise Only 3.5% Annually Over The Next Decade

Will the stock market rally continue? This is the most important question that is perplexing the minds of investors. Most investors are worried about the correction that can take place. This correction can even turn into a stock market rout. In nutshell stock market rally depends on corporate profits. For this stock market rally to continue, corporate profits need to soar. If this doesn’t happen, it means the end of the rally and start of a correction.

The stock market must jump over a very high hurdle if it’s to live up to historical averages in coming years: Sky-high corporate profit margins will have to expand even further.

This crucial point is being overlooked by the bulls, who this week are celebrating long-time bear Jeremy Grantham’s apparent retreat from his previous insistence that profit margins would soon contract. In his latest quarterly letter, Grantham, co-founder of money-management firm GMO, wrote that “profit margins in the U.S. seem to have stopped mean reverting in the old, normal way.”