Analysis

The Latest from Macro News

  • July 21, 2022
    Valens Market Phase Cycle Monitor – July 2022 – Jesse Livermore Would Be Long This Market

    • Rising Cost to Borrow Isn’t Preventing Growth – Only Excessively High-Cost Will. Credit levels are at or slightly above peaks from the most recent bull market cycle. However, they haven’t reached levels that signal risk of markets closing. Healthy corporate and consumer borrowing growth and balance sheets point to no risk of a real recession in the foreseeable future.
    • Concerns about inflation and growth have created significant near-term volatility in the stock market, presenting an opportunity for investors.
    • U.S. corporates are remarkably profitable, and growth is starting to accelerate. U.S. corporate investment has finally been showing signs of growth. Ruddy profitability can help power that growth and the market higher as it accelerates.
    • Monthly inflections:
      • Credit (55% of macro outlook): Neutral (no change)
      • Earnings Growth (30%): Bullish (no change)
      • Momentum/Sentiment (10%): Positive (no change)
      • Valuations (5%): Positive (positive change)
    • Timetable Recommendation: 50/50 Split for 5-10 Year Money and 10 Month Dollar Cost Averaging....
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  • May 19, 2022
    Valens Market Phase Cycle Monitor – May 2022 – The Worst Is Likely Behind Us, A Positive Catalyst For H2 2022

    • The Worst Is Likely Behind Us, That’s A Positive Catalyst For H2 2022. Investors have become spooked about headline risk wherever they look. However, most of these headlines have peaked in terms of the risk they can create. Concerns about inflation and geopolitical risk have created significant near-term volatility in the stock market, presenting an opportunity for investors.
    • The market has also been spooked about the dramatic 200bps+ rise in the cost to borrow across U.S. corporate markets, with the Fed still raising rates. However headline rates are unlikely to continue to spike, and corporate credit remains very healthy.
    • U.S. corporates are remarkably profitable and growth is starting to accelerate.
    • Monthly inflections:
      • Credit (55% of macro outlook): Neutral (negative change)
      • Earnings Growth (30%): Bullish (no change)
      • Momentum/Sentiment (10%): Positive (no change)
      • Valuations (5%): Positive (positive change)
    • Timetable Recommendation: 50/50 Split for 5-10 Year Money and upgrade to 10 Month Dollar Cost Averaging....
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  • April 21, 2022
    Valens Market Phase Cycle Monitor – April 2022 – Management Bullish Signals Can Fuel 2022 Earnings Growth

    • Management Bullish Signals Can Fuel 2022 Earnings Growth. U.S. corporate profitability has recovered impressively since the pandemic. Now, investment growth appears to be accelerating to match strong profits based on credit growth and management sentiment indicators. U.S. corporates are remarkably profitable and growth is starting to accelerate.
    • Credit markets remain supportive of profitability and growth through the cycle, and the Fed raising rates won’t disrupt these signals. This facilitates the market rising and limiting any risk for a downside shock.
    • While inflation remains a headline issue, investor sentiment has moderated significantly, de-risking the market
    • Monthly inflections:
      • Credit (55% of macro outlook): Bullish (no change)
      • Earnings Growth (30%): Bullish (no change)
      • Momentum/Sentiment (10%): Positive (no change)
      • Valuations (5%): Negative (no change)
    • Timetable Recommendation: 60/40 Split for 5-10 Year Money and upgrade to 6 Month Dollar Cost Averaging....
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  • March 17, 2022
    Valens Market Phase Cycle Monitor – March 2022 – Geopolitical Risk Is (Still) For Reporters, Not Investors

    • Geopolitical Risk Is (Still) For Reporters, Not Investors. Most of last month’s themes still hold. Concerns about inflation and geopolitical risk have created near-term volatility in the stock market, presenting an opportunity for investors.
    • U.S. corporate profitability has recovered impressively since the pandemic. Now, investment growth appears to be accelerating to match strong profits based on credit growth and management sentiment indicators. U.S. corporates are remarkably profitable and growth is starting to accelerate.
    • Credit markets remain supportive of profitability and growth through the cycle, and the Fed raising rates won’t disrupt these signals. This facilitates the market rising and limiting any risk for a downside shock.
    • Monthly inflections:
    • Credit (55% of macro outlook): Bullish (no change)
    • Earnings Growth (30%): Bullish (no change)
    • Momentum/Sentiment (10%): Positive (no change)
    • Valuations (5%): Negative (no change)...
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  • February 17, 2022
    Valens Market Phase Cycle Monitor – February 2022 – Geopolitical Risk Is For Reporters, Not Investors

    • Geopolitical Risk Is For Reporters, Not Investors. Concerns about inflation and geopolitical risk have created significant near-term volatility in the stock market, presenting an opportunity for investors.
    • U.S. corporate profitability has recovered impressively since the pandemic. Now, investment growth appears to be accelerating to match strong profits based on credit growth and management sentiment indicators. U.S. corporates are remarkably profitable and growth is starting to accelerate.
    • Credit markets remain supportive of profitability and growth through the cycle, and the Fed raising rates won’t disrupt these signals. This facilitates the market rising and limiting any risk for a downside shock.
    • Monthly inflections:
    • Credit (55% of macro outlook): Bullish (no change)
    • Earnings Growth (30%): Bullish (no change)
    • Momentum/Sentiment (10%): Neutral/Positive (upgrade)
    • Valuations (5%): Negative (no change)
    • Timetable Recommendation50/50 Split for 5-10 Year Money and upgrade to 7 Month Dollar Cost Averaging.

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  • January 20, 2022
    Valens Market Phase Cycle Monitor – January 2022 – Credit Demand Means Green Shoots of Growth Are Returning

    • Credit Demand Is Means Green Shoots of Growth Are Returning. U.S. corporate profitability has recovered impressively since the pandemic. Now investment growth appears to be accelerating to match strong profits based on credit growth and management team sentiment indicators. U.S. corporates are remarkably profitable and growth is starting to accelerate.
    • While inflation and valuations issues remain, sentiment indicators are removing a further overhang for the market rising in 2022.
    • Credit markets remain supportive of profitability and growth through the cycle, and the Fed raising rates won’t disrupt these signals. This facilitates the market rising and limiting any risk for a downside shock.
    • Monthly inflections:
      • Credit (55% of macro outlook): Bullish (no change)
      • Earnings Growth (30%): Bullish (no change)
      • Momentum/Sentiment (10%): Neutral/Positive (upgrade)
      • Valuations (5%): Negative (no change)
    • Timetable Recommendation: 50/50 Split for 5-10 Year Money and upgrade to 7 Month Dollar Cost Averaging....
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  • December 16, 2021
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for December 2021

    • Management Teams Are Primed to Deliver Strong Earnings Growth for 2022. U.S. corporate profitability has recovered impressively since the pandemic. An overhang for the last several months was if investment growth would accelerate to match strong profits. With management teams growing more bullish, it appears it has. U.S. corporates are remarkably profitable and investment signals are starting to point towards accelerating near-term growth.
    • While inflation and valuations issues remain, sentiment indicators are removing a further overhang for the market rising in 2022.
    • Credit markets remain supportive of profitability and growth through the cycle, facilitating the market rising and limiting any risk for a downside shock.
    • Monthly inflections:
      • Credit (55% of macro outlook): Bullish (no change)
      • Earnings Growth (30%): Bullish (improvement from neutral)
      • Momentum/Sentiment (10%): Neutral (improvement)
      • Valuations (5%): Negative (no change)
    • Timetable Recommendation: 50/50 Split for 5-10 Year Money and upgrade to 8 Month Dollar Cost Averaging....
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  • November 18, 2021
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for November 2021

    • The Market May Get Growth And Inflation Concerns For Christmas. While the market has rocketed higher in the past month and a half, datapoints about two key drivers of market valuations, inflation, and growth, have gotten worse. Inflation headlines, combined with growth headwinds and excessively bullish investor sentiment may pressure valuations.
    • U.S. corporate profitability has recovered impressively since the depths of the pandemic, powering the market to rebound. At current valuations, the market is expecting this to continue and for growth to be above average going forward. However, in the near-term, subdued management confidence limits growth, which limits equity upside.
    • However, near-term growth and valuation issues are not a reason for concern for long-term investors, thanks to the bedrock of any bull market, healthy credit. Credit metrics show healthy availability of credit from both credit markets and banks, and no risk of defaults. This means the risk of a pullback turning into a bear market is exceptionally low.
    • Timetable Recommendation: 50/50 Split for 5-10 Year Money and upgrade to 12 Month Dollar Cost Averaging....
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  • October 21, 2021
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for October 2021

    • We Are Waiting for Growth. The speed of the recovery in return on assets after the pandemic highlights the resiliency and strength of U.S. corporate profitability. At current valuations, the market is expecting this to continue and for growth to be above average going forward. However, in the near-term, subdued management confidence limits growth, which limits equity upside.
    • After the pullback of the last 2 months, investor sentiment has moderated. This reduces the risk of near-term volatility. However, valuation and growth concerns mean the market is not necessarily moving higher. While sentiment indicators reduce equity downside, valuation and growth indicators point to a sideways market.
    • However, near-term growth and valuation issues are not a reason for concern, thanks to the bedrock of any bull market, healthy credit. Credit metrics show healthy availability of credit from both credit markets and banks, and no risk of defaults. This means the risk of a pullback turning into a bear market is exceptionally low.
    • Timetable Recommendation: 50/50 Split for 5-10 Year Money and upgrade to 11 Month Dollar Cost Averaging....
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  • September 16, 2021
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for September 2021

    • You Can’t Have The Growth Stage Of A Bull Market Without Growth. The speed of the recovery in return on assets after the pandemic highlights the resiliency and strength of U.S. corporate profitability. At current valuations the market is expecting this to continue and for growth to be above average going forward. However, in the near-term, subdued management confidence limits growth, which limits equity upside and may even create more near-term volatility.
    • Even after the recent pullback, investor sentiment also remains excessively bullish. Combined with high inflation and lingering macro concerns (including Delta risks), this creates further risk to the market. This could further contribute to continued near-term volatility.
    • However, any dip due to near-term growth or sentiment issues is a dip to continue to buy, thanks to the bedrock of any bull market, healthy credit. Credit metrics show healthy availability of credit from both credit markets and banks, and no risk of defaults. That means the risk of a pullback turning into a bear market is exceptionally low.
    • Timetable Recommendation: 50/50 Split for 5-10 Year Money and upgrade to 12 Month Dollar Cost Averaging....
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  • August 19, 2021
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for August 2021

    • The Most Important Rule Of A Bull Market Is…Buy The Dips. After a healthy market rally the past two months, investor sentiment that had moderated is now starting to flash warning signs of a “hot” market. Combined with high inflation and continued lingering inflation concerns (and Delta risks), this points to one key risk to the market. There may be more volatility in the near-term. However, the fundamental backdrop means investors should buy any dip.
    • The biggest reason that investors should buy the dip is the bedrock of any bull market, healthy credit. Credit metrics show healthy availability of credit from both credit markets and banks, and no risk of defaults. That means the risk of a pullback turning into a bear market is exceptionally low.
    • Not only is credit a positive, corporate health points to reason for optimism too. As we have been highlighting, profitability has already recovered impressively from the pandemic, and there are now signs of management being open to investing again. Healthy corporate profitability and the potential acceleration of investment fuels the lifeblood of the market going higher…earnings growth
    • Timetable Recommendation: 50/50 Split for 5-10 Year Money and upgrade to 9 Month Dollar Cost Averaging....
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  • July 22, 2021
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for July 2021

    • This Market Appears Well Positioned to Climb the Wall of Worry. For the past several months, we have been highlighting a lack of management commitment to growth as an overhang for the market, and the market’s pause over the last several months has confirmed this. However, even as the market is uncertain about headlines around the Delta variant and inflation there are very early signs this might be lifting, and if they are confirmed, it is bullish for stocks. Concerns about an investment pause may be lifting, which could accelerate corporate earnings growth.
    • Credit markets remain supportive of growth and profitability, as all facets of the credit market are giving positive signals.
    • With investors no longer in an exceptionally overbought position, short-term downside risk for the market is much lower. At the same time, high valuations and rising inflation risks may offer headwinds for appreciation. Neutral sentiment removes overhangs for the market, and if growth is accelerating, the market can be positioned to rise even with elevated valuation risk.
    • Timetable Recommendation: 50/50 Split for 5-10 Year Money and upgrade to 8 Month Dollar Cost Averaging....
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  • June 17, 2021
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for June 2021

    • Early Management Buying Signals May Give Reason for Growing Growth Optimism. For the past several months, we have been highlighting a lack of management commitment to growth as an overhang for the market, and the market’s pause the last several months has confirmed this. However there are very early signs this might be lifting, and if they are confirmed, it is bullish for stocks. Concerns about an investment pause may be lifting, which could accelerate corporate earnings growth.
    • Credit markets remain supportive of growth and profitability, as all facets of the credit market are giving positive signals.
    • After recent volatility, investor sentiment levels have moderated. With investors no longer in an exceptionally over-bought position, short-term downside risk for the market is much lower. At the same time, high valuations and rising inflation risks may offer headwinds for appreciation. Neutral sentiment removes overhangs for the market, and if growth is accelerating, the market can be positioned to rise even with elevated valuation risk.
    • Timetable Recommendation: 50/50 Split for 5-10 Year Money and upgrade to 8 Month Dollar Cost Averaging....
    Read More

  • May 20, 2021
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for May 2021

    • A Sideways Market Is Not The End Of The World, And A Reasonable Outlook. Coming out of Q1 earnings season, management continued to show more reservation about their outlook, which may slow earnings growth the market is already pricing in. Corporate fundamentals signal a strong recovery in profitability, but the market is not pricing in a potential impending pause in growth.
    • That doesn’t mean the market has to collapse, because credit signals remain incredibly healthy. There can be no bear market or return to recession even if growth slows, without credit overhangs. Favorable bank, corporate, and consumer credit fundamentals coming out of this disruption still point to optimism for an ongoing recovery.
    • After the recent pullback we highlighted as a risk in April, investor sentiment levels have moderated. With investors no longer in an exceptionally overbought position, the short-term downside risk for the market is much lower. Neutral sentiment but more negative growth and valuation factors point to reasons for a sideways market at best until growth re-engages.
    • Timetable Recommendation: 50/50 Split for 5-10 Year Money and 10 Month Dollar Cost Averaging....
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  • April 22, 2021
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for April 2021

    • Investors Would Be Wise to Sell In May and Go Away This Year. As highlighted last month, heading into Q1 earnings season, management are showing more reservation about their outlook, which may slow earnings growth the market is already pricing in. Corporate fundamentals signal a strong recovery in profitability, but the market is not pricing in a potential impending pause in growth
    • It is not just valuations and growth that are flashing warning signals. After a sharp rally through the first half of April, sentiment metrics are extended too. Exceptionally bullish sentiment indicators combined may position the market for a short-term pull-back, and point to reasons for a sideways market at best until growth re-engages
    • Any pullback or stagnation in the market is not cause for panic for long-term investors because credit signals remain incredibly healthy. There can be no bear market or return to recession even if growth slows, without credit overhangs. Favorable bank, corporate, and consumer credit fundamentals coming out of this disruption still point to optimism for an ongoing recovery
    • Timetable Recommendation: 50/50 Split for 5-10 Year Money and 12 Month Dollar Cost Averaging...
    Read More

  • March 18, 2021
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for March 2021

    • Credit Spreads Levels Are As Important As Their Rate of Change… They Remain Low. There has been a great deal of discussion about rising rates recently. What is far more important than that they are rising is that even after the recent rise in the risk-free rate, the cost for U.S. corporates to borrow remains near historically low levels. Favorable bank, corporate, and consumer credit fundamentals coming out of this disruption still point to optimism for an ongoing recovery
    • Through Q2 and Q3 2020, management sentiment pointed to a rapid re-acceleration of investment after the pandemic, thanks to optimism on growth. As highlighted last month, in Q4 and particularly in the January and February earnings season, management is showing more reservation, which may slow earnings growth which the market is already pricing in. Corporate fundamentals signal a strong recovery in profitability, but a pause in growth
    • After having flashed warning signs the past 2 months, sentiment indicators are finally moderating after the recent sell-off. More neutral sentiment indicators mean less positive news doesn’t need to point to a sell-off in the near-term, it’s more likely to just mean a more sideways and volatile market, until growth can re-engage...
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  • February 18, 2021
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for February 2021

    • The Market Continues To Rise, While Growth and Inflation Signals Give Us Pause. Through Q2 and Q3 2020, management sentiment pointed to a rapid re-acceleration of investment after the pandemic, thanks to optimism on growth. In Q4 and in particular in the January 2021 earnings season, management are showing more reservation, which may slow earnings growth which the market is already pricing in. Corporate fundamentals signal a strong recovery in profitability, but a pause in growth
    • The recent rally has pushed investors to exuberant levels, they are not focused on near-term risks. Valuations are expensive, and with rising inflation signals, they may need to be adjusted down. Sentiment indicators continue to flash warning signs, and inflation and growth driven pressures on valuation could point to a correction or prolonged sideways market
    • That being said, a pause in the stock market doesn’t mean another bear market is imminent. Thanks to healthy credit fundamentals going into the pandemic and coming out of it, it’s unlikely the economy or the market is going to come under pressure. Favorable bank, corporate, and consumer credit fundamentals coming out of this disruption still point to optimism for an ongoing recovery...
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  • January 21, 2021
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for January 2021

    • The Market Rally Has Fundamental Backing, But Short-Term Risk-Reward is Skewed. The recent rally has pushed investors to exuberant levels, they are not focused on near-term risks. Valuations are expensive, and continued earnings growth is needed to justify them. Valuations and sentiment may cap near-term upside, as investors may have gotten ahead of the 2021 story. This may limit stock appreciation potential for the remainder of Q1 2021
    • That being said, a pause in the stock market doesn’t mean another bear market is imminent. Thanks to healthy credit fundamentals going into the pandemic and coming out of it, it’s unlikely the economy or the market is going to come under pressure. Favorable bank, corporate, and consumer credit fundamentals coming out of this disruption still point to optimism for a strong recovery
    • Late last year we highlighted how growth signals had gotten more positive, giving us reason to abandon concerns we were in a range-bound market. Even before the election, management teams started to show more confidence in their outlook, and with the vaccine providing visibility, investment plans may resume sooner, helping drive earnings growth. While there could be near-term market uncertainty, fundamentals should bounce back rapidly...
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  • December 17, 2020
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for December 2020

    • Excessively Positive Sentiment Points to Early 2021 Returns Being Pulled Forward. The recent rally has pushed investors to exuberant levels, they are not focused on near-term risks. Valuations are expensive, and continued earnings growth is needed to justify them. Valuations and sentiment may cap near-term upside, as investors may have gotten ahead of the 2021 story. This may limit stock appreciation potential in Q1 2021
    • That being said, a pause in the stock market doesn’t mean another bear market is imminent. Thanks to healthy credit fundamentals going into the pandemic and coming out of it, it’s unlikely the economy or the market is going to come under pressure. Favorable bank, corporate, and consumer credit fundamentals coming out of this disruption still point to optimism for a strong recovery...
    Read More

  • November 19, 2020
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for November 2020

    • Managements Showed Growth Bullishness in October, And the Vaccine Helps. Last month we highlighted the potential we’d be in a range bound market if growth signals couldn’t inflect more positively. Even before the election, management teams started to show more confidence in their outlook, and with the vaccine providing visibility, investment plans may resume sooner, helping drive earnings growth and stock market appreciation. Fundamentals should bounce back rapidly
    • The coronavirus pandemic has pushed the world into a short-term recession, but thanks to credit fundamentals, it’s likely not to be a protracted deep recession or long recovery. Favorable bank, corporate, and consumer credit fundamentals heading into this disruption still point to optimism for a strong recovery
    • Sentiment indicators are again excessively bullish. The recent rally has pushed investors to exuberant levels, they are not focused on near-term risks. Valuations are expensive, and continued earnings growth is needed to justify them. Valuations and sentiment may cap near-term upside, though any drop due to valuations and sentiment signals is capped by a lack of credit overhangs and a potential acceleration in growth...
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