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The first substantial global sell-off in two years hasn't exactly made stocks cheap again, but it's certainly made them a whole lot cheaper than they were.

For stock pickers, who are not best-suited to an era when everything seems to go up with little deviation, a meaningful correction was a long time coming.

"If we're back to a more normal volatility regime, then it's a godsend for active management," said Brandon Snow, chief investment officer at Cambridge Global Asset Management. "I haven't been this excited in years."

Though brief, the emphatic return of volatility has already lopped off big chunks from stock valuations in the United States and Canada. And while the market has regained its composure over the past few trading days, few are writing off the possibility that the turmoil is not over.

There are two ways to tame an overvalued market, which is characterized by unusually high price-to-earnings ratios.

The first is to have stock prices fall. The second is to have earnings rise. "Since late December, we have been doing both of these," Ian de Verteuil, head of portfolio strategy at CIBC World Markets, said in a recent note.

Equity investors are by now acutely aware of the recent precipitous price action. In late January, an explosive run in U.S. equity prices crested and went into a nosedive, entering correction territory in just nine trading days.

The U.S. sell-off quickly went global, dragging down Canadian, European and Asian stocks indiscriminately. The MSCI All-Country World Index stopped just short of a correction, with losses of 9 per cent.

On the earnings side, meanwhile, the major reduction in corporate taxes included as part of U.S. tax reform has unleashed a torrent of upward revisions to corporate profits. S&P 500 earnings estimates for this year and next have increased by 7 to 8 per cent in the past six weeks alone.

Diverging prices and earnings have combined to bring forward P/E ratios in the United States down to their lowest levels in well over a year. At 16.5 times as of the end of last week, that represents a material correction from the multiple of 18.5 just two weeks before.

"That's a big move, especially because it's not triggered by growth fears," said Vincent Delisle, a portfolio strategist at Scotia Capital. "I think it's just the market resetting after an almost uninterrupted run."

And though Canadian equities were nowhere near as hot as in the United States over the last year, domestic valuations were hit just as hard.

"We saw an across-the-board liquidation with all kinds of different companies getting hit," Mr. Snow said. "This is when it gets fun, when you get index flows affecting all securities in the same way."

Having sat on a large cash weighting for well over a year, Mr. Snow took the opportunity to pick up shares in a number of companies that suddenly looked a lot more attractively valued.

He would still like to see prices drop by another 4 per cent to 7 per cent before he starts to dip more heavily into his cash reserves.

If the sell-off resumes and converges on historical averages, he could get his chance.

In a typical correction, valuation multiples contract by about 3.5 points, David Rosenberg, chief economist at Gluskin Sheff + Associates Inc., said in a recent note.

"The market usually cheapens up a lot during these corrections," Mr. Rosenberg said, referring in this case to the U.S. market. "The problem is that it hasn't cheapened up enough."

The same can't be said for the Canadian market, where the average multiple for the S&P/TSX Composite Index fell from around 16.5 to 14.5, which is close to, if not slightly below, its long-term average.

"You look around the world, there are not too many places where the forward and trailing multiples are trading below their historical norms," Mr. Rosenberg said.

Even if the sell-off is over, and market bulls have reasserted their control, Canadian valuations could prove alluring to value investors, CIBC economist Nick Exarhos said in a note.

"With the discount placed on the TSX widening, we think bargain hunting might be profitable this side of the border."

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