Back to all insights

The Correction: Just Valuations, or Earnings Too?

Jurrien Timmer, Director of Global Macro, explores valuations, earnings estimates and inflation expectations to understand the latest market correction.


  • Serious bear markets get hit by a double whammy: lower valuations and falling earnings.
  • So far in this correction, stock-market valuations have come down considerably due to tighter financial conditions, but earnings estimates have held up.
  • Inflation expectations have declined, but headline inflation data has remained very high, forcing the Federal Reserve (Fed) into a more hawkish stance.
  • This liquidity cycle has been a moving target of ever changing perceptions of how restrictive the Fed will get, leaving the stock and bond markets in limbo.