Rising corporate profits and falling wages signal an inevitable economic crisis is near

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Corporate profits reaching a record 15.7% of national income and employee compensation sinking to 62.1%—this is not something new when you look at historical context. These patterns have typically pointed to some tough times ahead. When profits rise, while wages stagnate, it sets the stage for a market correction.

Looking back at the late 1920s, corporate profits surged while worker compensation remained stagnant. That period of inequality led directly to the 1929 crash. Similarly, in the years leading up to the 2008 financial crisis, corporate profits and rising asset prices overshadowed the needs of workers, which ultimately sparked the collapse we all know.

Right now, we are seeing that same imbalance. When corporate profits soar while workers get less, the economy is in trouble. A system where corporations hold most of the wealth and workers get less creates an economy that is too fragile to stand long term. The people who drive demand—the workers—are the ones being left behind. And when demand drops, so does the entire economy.

As asset managers hold only 1.4% of their assets in cash, it shows an extreme confidence in the market. However, this confidence often leads to overexposure. History shows that when too much money is tied up in assets and not enough in cash, a market correction is inevitable. It’s just a matter of when, not if.

In short, these indicators suggest an economy that’s heading for a reckoning. The question isn’t whether it will happen, but when and how severe it will be. History has a way of repeating itself, and the signs are clear.