A November 16, 2007 note from David Frazier's column from newsmax included the graph above showing the correlation between company profits and the S&P 500. I was amazed to see how closely profits correlate with the stock market. You cannot see it from this graph, but the average earnings over the past 30+ years have been about 8% for company profits. The past 10 years or so has averaged double-digits though.
If dividends average just less than 2% then you can see where the long-term average stock return of about 10% comes from that is so often quoted. You can also see how divergent returns compared to company profits were during the 1999-2000 heyday of the stock market. A reversion to the mean surely was not unexpected based on historical performance.
Once again, history has lessons for us to heed.