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Valuations are steep. Time to sell?

October 15, 2025

As equity markets continue to grind higher, valuations have once again begun to worry investors. Are they too frothy and ready to retreat? Jack Janasiewicz, Portfolio Manager, Natixis Investment Managers Solutions, points out that S&P 500® earnings estimates still appear robust and rising – and earnings are what matter. “When earnings start to fade, then the market will take notice. Earnings drive markets. Not multiples,” said Janasiewicz. 

 

S&P 500® quarterly earnings per share percentages, year-over-year 
S&P 500® quarterly earnings per share percentages, year-over-year *Source: FactSet

The S&P 500® Index is a widely recognized measure of U.S. stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors. It also measures the performance of the large-cap segment of the U.S. equities market

YoY = Year over year

  • Of course, this is not to say that the market won’t correct. This is normal over the course of market cycles. But Janasiewicz and his team are looking for a catalyst that drives a protracted drawdown.
  • “Protracted drawdowns occur when the sustainability of earnings come into question,” said Janasiewicz. 
  • Looking at the next twelve months earnings estimates for the major US indices – Nasdq, Dow Jones Industrial, and S&P 500®, he points out they are all trending higher.* 

This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Investors should fully understand the risks associated with any investment prior to investing.

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