Similarly, profits of the Standard & Poor's 500 attributable to the finance sector peaked at more than 21 percent during this cycle, 5-1/2 percentage points greater than a decade ago. As the financial sector continues to delever and many financial products disappear altogether, the sector's shares of GDP and profits will shrink further.
This reduction could involve many firms shrinking largely in tandem or, more likely, the orderly unwinding or sale of inefficient or unwise firms. 7 The markets are fearful, in part I suspect, because of the swiftness of the reallocation of resources in the financial sector.