By Park Soo-nam
The American equity market is entering a moment of reckoning—not just because of heightened volatility or the aggressive tariff shockwaves sent from Washington, but due to a more foundational challenge: the disconnect between perceived valuations and actual earnings power in a reshaped global trade regime.
For nearly 18 months, U.S. equities, led by the S&P 500, have traded at elevated valuations, propped up by investor optimism, monetary tailwinds, and a resilient consumer. Yet the air is quickly thinning. Recent selloffs have pushed the S&P 500’s forward price-to-earnings ratio to 18.01—technically below the 10-year average but still far from signaling a classic “buy-the-dip” opportunity. The problem isn’t simply the valuation multiple. It’s what lies beneath it: a fundamental earnings picture that is now being thrown into question.
President Trump’s abrupt tariff regime—culminating in a 10% blanket levy and as high as 145% on Chinese imports—has effectively rewritten the rules of global commerce. Supply chains are in flux, input costs are surging, and corporate CFOs are flying blind in projecting margins. For investors hoping to find clarity in the upcoming earnings season, reality may fall short.
Indeed, Wall Street analysts have only begun to adjust their models. The consensus EPS for the S&P 500 has nudged down to around $267.60 from $271.05 just a month ago. But these revisions may prove too mild. According to BofA Securities, operating income could slide as much as 15% for S&P constituents if current tariff frictions escalate. Accounting maneuvers and pricing strategies may cushion the blow temporarily—but not indefinitely.
In this context, traditional valuation tools like forward P/E ratios or the equity-risk premium become blurred instruments. With the 10-year Treasury yield jumping to 4.43% amid a bond market selloff, the equity-risk premium—once seen as a margin of safety—has plummeted to under 0.7%, its lowest since mid-2023. In simpler terms, investors are getting paid less to hold equities over government bonds, just as risks are rising.
The real danger, however, may lie in the disappearance of corporate visibility. Companies that historically issued earnings guidance are now increasingly silent. If the pattern seen during the COVID-19 pandemic repeats—when only 10% of firms issued annual guidance—the market may face a deeper crisis: not one of fundamentals, but of confidence.
The looming earnings season will test more than financial models. It will test investor trust in corporate foresight, in government stability, and in the predictability of global trade. Amid political brinkmanship and economic uncertainty, buying stocks simply because they look “cheap” on historical metrics could be a costly illusion.
Markets crave narrative clarity. Right now, they’re getting noise.
Copyright ⓒ CEONEWS 무단 전재 및 재배포 금지
본 콘텐츠는 뉴스픽 파트너스에서 공유된 콘텐츠입니다.
