Investors looking for direction shouldn't expect to receive good news on the earnings front, S&P Investment Advisory Services Chairman Mike Thompson said Friday.
"It's hard for me to think about this earnings season being too spectacular," he told CNBC's "Squawk Box."
His firm is forecasting a 5.1 percent decline in third-quarter earnings. If that projection bears out, it would be the first quarter of an overall earnings decline since the third quarter of 2009.
The drag is coming primarily from the energy sector, which is set to see a 66 percent earnings decline, according to S&P. Drillers came under renewed pressure in August as oil prices neared a 6½-year low.
S&P sees aggregate revenue for the S&P 500 falling 1 percent, compared with the 10-year average growth of 6.5 percent. Total S&P 500 revenue sank 3.1 percent last quarter.
"The real question is how do you justify 16.5 times next year's multiple" with earnings and revenue both negative, he said.
The S&P 500 is trading at 16.5 times forward earnings, slightly above the 15-year average of 16 times, according to S&P Investment Advisory Services.
For that reason the current rebound in U.S. stocks looks like a "wall of worry" rally, Thompson said.
Also propping up stock prices is the search for yield as the Federal Reserve maintains its zero interest rate policy, he said. Meanwhile, the S&P 500 is yielding a 2.2 percent dividend.
"As long as it's still being one of best places to get income, and fixed income instruments aren't going to compete with it, I think these valuations hold despite the fact that you don't have this earnings growth catalyst driving valuations," Thompson said.
He added that baby boomers are "completely misallocated," but will remain invested in anything that gives them greater than a 2 percent yield. He noted that a survey by a "well-respected" asset manager showed some boomers 53 years and over have 100 percent of their portfolios allocated to equities.
"How absurd is that? You literally have trillions of dollars appropriated to equities that belong somewhere else," he said.
— CNBC's Maneet Ahuja contributed reporting to this story.