If earnings and growth stall, a portfolio manager predicts a "healthy" correction.

• A market correction may occur if U.S. GDP growth slows and inflation rises, according to Brian Arcese, portfolio manager of Foord Asset Management in Singapore.
• Markets have been "expensive for quite a while," he added.
• If the expectation of stocks growing 11% in 2025 is not met, it could serve as another "catalyst for correction," according to Arcese.

A market correction could be triggered by one of two "catalysts" in a market with high valuations.

According to Brian Arcese, portfolio manager of Foord Asset Management, markets have been "expensive for quite a while" as the S&P 500 has increased by approximately 23% in the year to date. The index has a price-to-earnings ratio above 27, and some have characterized it as expensive by almost every measure.

"A correction is necessary, but you'll need a catalyst for it to occur. There are two possible options," he stated on CNBC's "Squawk Box Asia" this week.

The U.S. economy is experiencing slow growth, but it is still healthy, according to recent data.

If inflation continues to slow down and rises again, it could serve as a catalyst, according to Arcese.

A 'catalyst for correction'

If earnings growth slows down, it could lead to a correction, according to Arcese, in a climate of high expectations.

He stated that even if we exclude the IT and communication services sector, where growth is exceptionally high, the expected growth for next year is still 10 to 12%, which is relatively high compared to historical trends.

According to a note released last week, 's equity outlook predicts that earnings will increase by 11% in 2025.

If high expectations and high valuations coexist, a slowdown in earnings growth or decreased expectations could trigger a correction, according to Arcese.

Is it not uncommon for U.S. GDP growth, earnings growth, falling inflation, and interest rates to occur simultaneously?

Arcese stated that the increase in equities is beneficial and has led to higher highs, but a correction would be beneficial.

Opportunity in utilities

Utilities are not priced for growth, according to Arcese. "They're more expensive relative to where they were before, but ... they're still less expensive than the market," he said, naming Foord Asset Management as a stock owner.

Arcese stated that the growth of data centers and artificial intelligence necessitates more electricity, indicating a return of growth.

"Simultaneously, regulated utilities must invest a substantial amount of capital into the grid for transmission and distribution, and they receive a return on this investment," he stated.