As an economic slowdown weighs on earnings, corporations are reviving the "trust the process" slogan made popular by the Philadelphia 76ers in the post-Iverson era.

Markets, for their part, have already started pricing in risks of a recession, with the S&P 500 and Nasdaq falling into bear markets this year — down 20% and 32% year to date, respectively — while the Dow has fallen more than 9%.

"The market goes first, so the market has cracked this year," Liz Young, head of investment strategy at SoFi, told Yahoo finance Live (video above). "The market has shown us its pessimism. It's shown us its reaction to the microenvironment."

The market decline is largely contingent on the Federal Reserve's aggressive raising of interest rates, and thereby slowing the economy, in the fact of decades-high inflation: Fed Chair Powell recently acknowledged the risk of tipping the economy into a recession but said that thinking about pausing interest rate hikes at this juncture would be "very premature."

"Until we see consecutive months of inflation coming down in a meaningful way, I expect them to continue hiking and continue tightening," Young said. "I think that they are quite comfortable with tightening maybe a bit too far, and then trying to sort of ask for forgiveness from markets later with the tools that they have to stimulate."

In the meantime, Young suggested that investors watch for two other signs that the business cycle may be turning over.

Earnings contraction

A sweeping earnings contraction may be the next shoe to drop, according to Young. The market has not seen a wave of downward revisions in its earnings estimates since the onset of the coronavirus pandemic.

"I think the piece of it that hasn’t quite been priced in entirely is that earnings contraction,” she said.

In a Nov. 4 note, Goldman Sachs shrunk its earnings target for the S&P 500 for the rest of the year as well as through 2024. The bank now sees earnings for 2022 coming in at $224, down from $226. Furthermore, strategists at the firm revised their earnings expectations for 2023 down to $224 ($234 previously) and to $237 in 2024 (from $243).