Bond yield stabilization could help halt the recent decline in equity valuation multiples and support a year-end market recovery, JPMorgan strategist Mislav Matejka said on October 19, 2026. His outlook is conditional: steadier yields could remove one source of pressure on stocks, rather than guarantee a rebound.
Key Takeaways
- Matejka sees steadier global bond yields as a potential support for equity valuations.
- The S&P 500’s forward earnings multiple has fallen as 10-year U.S. Treasury yields moved above 5%.
- Early third-quarter earnings beats offer support, but do not establish the outcome for the full reporting season.
Table of Contents
- Bond yield stabilization is the key condition
- Early earnings provide a separate source of support
- Conclusion
Bond yield stabilization is the key condition
Matejka’s argument centers on whether the upward move in bond yields pauses. The recent increase has coincided with a contraction in the price investors are willing to pay for expected corporate earnings, leaving equity valuations under pressure.
JPMorgan’s October 19 global bond market update described government bond yields at multi-decade highs. It linked the repricing to higher-for-longer policy expectations, elevated energy prices and geopolitical uncertainty. That backdrop explains the pressure facing equities; it does not establish that yields have already stabilized.
The distinction matters for the recovery outlook. A halt in valuation compression would remove a headwind, but would not by itself mean that earnings expectations or share prices must rise.
| Item | Details |
|---|---|
| 10-year U.S. Treasury yield | Moved above 5% during the recent increase. |
| S&P 500 forward P/E | Compressed from 21.7 times to 19.1 times expected earnings. |
| Early U.S. third-quarter results | 78% of reporting companies beat EPS expectations. |
| Early European third-quarter results | 60% of reporting firms beat EPS expectations. |
Early earnings provide a separate source of support
Early third-quarter results showed that a majority of reporting companies in both the United States and Europe exceeded earnings-per-share expectations. Those results offer a counterweight to pressure from higher yields, although they cover only the opening part of the reporting season.
For holders of the State Street SPDR S&P 500 ETF Trust, traded as SPY, the relevant connection is its exposure to large-cap U.S. stocks through the S&P 500. Changes in the index’s earnings outlook and valuation multiples affect the companies the fund tracks.
The S&P 500’s forward price-to-earnings ratio measures prices against expected earnings. Its decline should not be read as proof that corporate profits fell by the same proportion, nor should it be confused with a separate trailing earnings multiple for SPY.
Conclusion
The year-end recovery case rests on yields becoming steadier while earnings remain supportive. The next third-quarter results and the direction of government bond yields will test those conditions; neither a yield plateau nor an equity rebound was established by Matejka’s outlook.
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