Still, Wall Street pros keep touting the bull case, and it’s all about earnings. It goes like this: Sure, we’ll see lots of wild swings, they say, but keep your eye on the basics. As the economy grows stronger, profits will continue their upward march. And since stocks aren’t expensive, prices should rise in line with earnings. If price-to-earnings multiples remain at their modest, reasonable levels, that’s what has to happen. It all sounds perfectly logical, even comforting.

Except it won’t happen.

Earnings growth won’t rescue stocks. We’ve already experienced one of the great profit booms in the history of equities. It peaked in the third quarter of 2014, when S&P net profits over the trailing four quarters hit $105.95 per share. That figure was 25% higher than the previous summit of $84.92 in June 2007, the finale of the goldilocks economy of the mid-2000s. As sales rose gradually, costs remained flat or declined as carmakers, airlines, and sundry industries kept a tight rein on payrolls and wages. With rising revenues and flat to falling costs, margins exploded, and so did corporate profits.

It couldn’t last, and it didn’t. In 2013, Fortune 500 profits reached a record 8.8% of sales, and though the ratio fell to 7.5% last year, it’s still far above the historic norm of roughly 5.5%. Earnings soared to all-time highs as a share of GDP, by percentage of shareholders’ equity, and by just about every other measure. The inevitable reversal has begun. For the first half of 2015, S&P earnings per share (based on the trailing four quarters) were $44.50, a drop of 14.4% from the January to June period of 2014. It’s likely that economic gravity will continue to drag down profits from unsustainable heights as companies hire more workers, raise wages, and plough cash into the new plants and fresh R&D needed to grow.

The lesson of the last few years is a basic one: The classic measure of valuations, the P/E ratio, can be highly misleading, and misleading doesn’t bother Wall Street if the myth gets people to buy more stock. In late 2014, the market featured a combination of incredibly high earnings and, relative to those numbers, pretty high prices. Those two factors combined should have scared investors, but they didn’t. At the earnings peak in the fall of 2014, the S&P price-to-earnings multiple stood at 18.6, not a bad number—in a normal environment for earnings. But the P/E only appeared reasonable because profits, the denominator, were so inflated. So Wall Street honchos touted the “attractive valuations” that only looked attractive. The earnings bubble masked reality that stocks were really, really expensive.

Since September 2014, the S&P has risen just over 3%, and profits have fallen by double-digits. Hence, the P/E for the index has risen to 21.5, a jump of almost 3 points over the reasonable-looking ratio in the fall of last year. In other words, the inevitable decline in profits is finally showing valuations as they really are, as anything but a bargain.

The best measure of whether stocks are pricey or cheap is economist Robert Shiller’s CAPE, or cyclically-adjusted price-earnings ratio, a yardstick that smoothes the peaks and valleys that can distort P/Es by using a 10-year average of inflation-adjusted profits. The CAPE currently stands at over 26. That’s 10 points above the average over more than a century, and 7 points higher than the period since the early 1990s, when stocks routinely had much higher valuations than those prevailing in prior decades.

So how can we make stocks alluring again? For now, profits have hit a ceiling. A surge in earnings won’t arrive to drive stocks higher.

There are two possibilities. The first is that investors will be satisfied with mid-single digit returns. That means PEs can stay high, and a huge correction isn’t needed. Not exciting, but far from a rout.

The second is that investors want far more, and the only way for equities to deliver big returns is to fall sharply first. That trend might have begun on August 20, although that’s far from certain. What’s clear is that investors are scared—and at these prices, with earnings going the wrong way, they should be.