When market fear outweighs the math: Insights from Denise Chisholm - April 23, 2026
Elevated uncertainty remains a defining feature of today’s markets. While equity prices have been resilient, concerns around inflation, oil prices and policy continue to weigh on confidence. In this environment, Fidelity’s Director of Quantitative Market Strategy, Denise Chisholm, shared her insights on how uncertainty is appearing in market valuations and earnings and what similar conditions have tended to signal historically over longer‑term horizons.
Here are some of the key points from her commentary.
Valuations reflect a cautious market
Looking at the underlying math behind equities, Denise noted that markets still appear priced for a harder landing than many expected coming into the year, even in the absence of an economic recession to date. She pointed to a broad compression of valuations across the market over the past six months, spanning sectors and factors and showing up most clearly in technology, at a time when prices have largely moved sideways and earnings have continued to grow. From her perspective, this distinction matters because valuation compression driven by improving fundamentals rather than falling prices alters the market’s risk‑reward profile. Historically, she noted that similar periods have often been followed by equity market advances over a one‑year horizon. While outcomes are never guaranteed, markets have tended to move higher most of the time, including in cases when earnings later declined, suggesting a meaningful amount of risk may already be priced in.
Earnings trends have helped absorb uncertainty
Earnings growth has played a central role in supporting markets despite elevated caution. Denise noted that earnings strength has been evident across much of the market, with technology standing out as an area where valuation compression has been driven almost entirely by rising earnings rather than price expansion. She also pointed to improving conditions in other areas, including industrials, which have benefited from a recovering manufacturing environment, and parts of consumer discretionary tied to housing, which have shown resilience despite higher interest rates. In her assessment, these earnings trends have helped markets absorb a range of headwinds without sustaining prolonged downside pressure.
Balancing headwinds and offsets
Concerns around tariffs, oil prices and fiscal policy continue to influence expectations, but Denise framed the outlook around weighing headwinds against potential offsets. She noted that past tariff impacts represented a relatively small share of overall consumer income and were partially offset by lower energy prices. Today, higher oil prices represent a renewed headwind, while tax refunds and tariff roll‑backs may provide offsetting support to businesses and households. These offsets do not eliminate pressure or discomfort, but in her view, they suggest the current environment may be more absorbable than comparisons to historically inflationary periods, such as the 1970s, might imply.
Inflation, productivity and the role of growth
A key distinction in Denise’s framework is between inflationary growth and disinflationary growth. She noted that wage growth has been decelerating, with average increases below four percent, while productivity has been improving. Payroll employment has remained largely stable even as output has increased, a combination she described as consistent with productivity gains that historically have been more likely to support disinflationary outcomes than sustained inflation. She also emphasized that these improvements do not require assuming transformative gains from artificial intelligence, noting that productivity has already been rising based on current data. While inflation risks are not zero, she observed that recoveries have historically been more often disinflationary than inflationary.
Navigating markets through uncertainty
Periods of heightened uncertainty can make it tempting to wait for clarity, but Denise cautioned that markets have historically tended to bottom around periods of bad news rather than after uncertainty fades. From her perspective, waiting for an all‑clear signal risks missing a portion of a market recovery. While downside risks remain and outcomes are uncertain, valuation compression alongside resilient earnings has historically created more constructive conditions for those willing to extend their time horizon.
Sector positioning: Denise’s current views
Top sectors
- Technology: Technology remains the top sector, supported by strong earnings growth and compressed valuations. This combination continues to point to leadership from a risk‑reward perspective.
- Industrials: Industrials reflect a recovering manufacturing environment. Oil prices seen so far are not expected to be a sufficient headwind to derail that recovery, keeping the sector’s outlook constructive.
- Consumer discretionary (home builders): Within consumer discretionary, home builders remain of interest. From historically low relative valuation levels, the group has tended to perform even during periods of higher interest rates or elevated unemployment.
Bottom sectors
- Energy: Energy appears potentially priced for perfection following recent strength, making it less attractive from a valuation standpoint.
- Defensive sectors: Defensive areas such as consumer staples and utilities also appear less compelling in the current environment.
Conclusion: A measured perspective
The current market does not offer certainty, and risks have not disappeared. This framework focuses on understanding what markets have already discounted and how earnings, productivity and valuations interact over time. From that perspective, fear itself becomes an input rather than a signal to step aside. For those willing to remain disciplined and patient, the underlying math suggests today’s uncertainty may still offer opportunity rather than signal an end to the cycle.
