Analysis

The Latest from Macro News

  • 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
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  • 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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  • October 22, 2020
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for October 2020

    • Growth and Sentiment Signal We’re at the High End of a Range Bound Market. Profitability is likely to recover quickly from the recession, and key indicators point to reason for optimism for longer-term growth. However, management sentiment indicators are shifting more negatively around growth, which could hold down valuations in the near-term. Fundamentals should bounce back rapidly, but growing management pessimism about growth may disappoint investors in Q3
    • 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 likely cap near-term upside, though any drop due to valuations, growth, and sentiment signals is capped by a lack of credit overhangs
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  • September 24, 2020
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for September 2020

    • We Warned A Pullback Was Coming – Don’t Panic, Just Watch The Growth Signals. Profitability is likely to recover quickly from the recession, and key indicators point to a reason for optimism for longer-term growth. However, management sentiment indicators may be shifting more negatively around growth, which could hold down valuations in the near-term. Fundamentals should bounce back rapidly, but growing management pessimism about growth may disappoint investors in Q3
    • 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 have moderated. After the recent pullback, investors are no longer ignoring risks in the near term. Valuations are expensive, though continued earnings growth would justify them. Valuations may cap near-term upside, though any drop due to valuations, growth, and sentiment signals is capped by a lack of credit overhangs
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  • August 20, 2020
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for August 2020

    • The Market Continues to Climb the Wall of Worry – With Limited Long-term Worries. Earnings growth and investment are likely to recover quickly from the recession, due to a need to invest, and management teams’ growing confidence and lack of concern about structural issues. Fundamentals should bounce back rapidly, but after the recent rally, equity markets are pricing in a well-executed recovery, capping upside
    • 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 have become excessively positive. After the impressive rally since March, investors have become overly reward-focused, and are not prepared for any negative news in the near term. Q2 earnings have not offered a trigger for this to occur, while growing uncertainty from Washington could offer a trigger. Valuations are expensive, though continued earnings growth justifies them, near term sentiment-driven downside may be probable, though the drop is capped by a lack of credit overhangs
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  • July 23, 2020
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for July 2020

    • With The Market Re-testing June Highs, Last Month’s Playbook Remains Unchanged. Earnings growth and investment are likely to recover quickly from the recession, due to a need to invest, and management teams’ growing confidence and lack of concern about structural issues. Fundamentals should bounce back rapidly, but after the recent rally, equity markets are pricing in a well-executed recovery, capping upside
    • 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 have become excessively positive. After the impressive rally since March, investors have become overly reward-focused, and are not prepared for any negative news in the near term. Investors should remain patient as Q2 earnings and negative headlines are offering reason for investors to become more risk-focused. With valuations capping upside but elevated headline risk, near term market downside may be probable, though the drop is capped by a lack of credit overhangs
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  • June 18, 2020
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for June 2020

    • There are signs the U.S. recovery could be quick, but markets are already expecting it. Earnings growth and investment are likely to recover quickly from the recession, due to a need to invest, and management teams’ growing confidence and lack of concern about structural issues. Fundamentals should bounce back rapidly, but after the recent rally, equity markets are pricing in a well executed recovery, capping upside
    • The coronavirus pandemic has pushed the world into a short-term recession – but that does not mean a protracted deep recession or long recovery thanks to credit fundamentals. Favorable bank, corporate, and consumer credit fundamentals heading into this disruption still point to optimism for a strong recovery
    • Sentiment indicators have become excessively positive. After the impressive rally since March, investors have become overly reward focused, and are not prepared for any negative news in the near-term. Investors should remain patient as Q2 earnings in July are likely to offer reason for investors to be reminded of risks to the recovery. With valuations capping upside but elevated headline risk, near-term market downside may be probable, though the drop is capped by a lack of credit overhangs
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  • May 21, 2020
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for May 2020

    • The data says expect a retest of the lows, but it says don’t panic during it, buy. The coronavirus pandemic has pushed the world into a short-term recession and credit spreads point to near-term disruptions – but that does not need to mean a protracted deep recession or long recovery thanks to credit fundamentals. Favorable bank, corporate, and consumer credit fundamentals heading into this disruption still point to optimism for a strong recovery, but credit spreads point to near-term volatility
    • Corporate fundamentals and valuations warrant optimism for equity upside if the recession is not protracted. Strong corporate profitability and fundamental factors driving a need to invest point to fundamental reasons for market upside after this overhang is removed
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  • April 23, 2020
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for April 2020

    • A month further in the crisis, the long-term fundamental picture remains positive. The coronavirus pandemic has pushed the world into an almost certain short-term recession – but that does not need to mean a protracted deep recession or long recovery thanks to credit fundamentals. Favorable bank, corporate, and consumer credit fundamentals heading into this disruption still point to optimism for a strong recovery
    • Corporate fundamentals and valuations warrant optimism for equity upside if the recession is not protracted. Strong corporate profitability, management optimism about growth before the pandemic surprise, and very pessimistic investor sentiment based on current valuations point to fundamental reasons for market upside after this short-term overhang is removed

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

    • Weathering a storm requires a strong foundation, which this economy has. The coronavirus pandemic has pushed the world into an almost certain short-term recession – but that does not need to mean a protracted deep recession or long recovery thanks to credit fundamentals. Favorable bank, corporate, and consumer credit fundamentals heading into this disruption give reason for optimism for a strong recovery
    • Corporate fundamentals and valuations warrant optimism for equity upside if the recession is not protracted. Strong corporate profitability, management optimism about growth before the pandemic surprise, and very pessimistic investor sentiment based on current valuations point to fundamental reasons for market upside after this short-term overhang is removed

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  • February 20, 2020
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for February 2020

    •  Party like it’s early 1999 the markets are set up to. Fundamental and management sentiment data point to accelerating earnings growth, at the same time that creditm lending standards are starting to flash signs of tightening. This is a classic set up for the beginning of the late stage of a bull market, where growth takes over, driving a market higher. A set up like early 1999. Signs of strong 2020 earnings growth and growing management confidence on this issue point to continued reason for fundamental acceleration
    • Credit lending standards point to early reasons for monitoring credit, as does the recent re inversion of the yield curve even after the Fed’s lowering of rates in late However, these are often 18 month to 2 year leading indicators, and there are still no signals of an impending credit crisis. Low cost to borrow, favorable credit fundamentals, and a recent wave of refinancing gives room for corporate growth. A low to no credit risk environment suggests limited risk to US equities in 2020
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  • January 23, 2020
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for January 2020

    •After a 15% rally since October, the market may be set up to pause don’t panic. After the recent near pause less rally, sentiment indicators have grown overly bullish. This is generally a signal that near term volatility is likely to return, as investors are not focused on risks. This increases the possibility of a negative shock. However, when a dip occurs, it should be viewed as a buying opportunity based on positive corporate and credit fundamentals

    • Fundamental and management sentiment data point to accelerating earnings growth, at the same time that credit lending standards are starting to flash signs of tightening.This is a classic set up for the beginning of the late stage of a bull market, where growth takes over, driving a market higher. Signs of strong 2020 earnings growth and growing management confidence on this issue point to continued reason for fundamental acceleration

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  • December 19, 2019
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for December 2019

    • Santa’s job may be done soon, but his rally has more room to run into 2020. After a challenging few months, we have seen renewed fundamental tailwinds coming out of the Q3 2019 earnings season into Q4 2019. Fundamental and management sentiment data point to accelerating earnings growth, at the same time that credit lending standards are starting to flash signs of tightening. This is a classic set up for the beginning of the late stage of a bull market, where growth takes over, driving a market higher. Signs of strong 2020 earnings growth and growing management confidence on this issue point to continued reason for fundamental acceleration
    • While credit lending standards point to early reasons for monitoring credit, there are still no signals of an impending credit crisis. Low cost to borrow, favorable credit fundamentals, and a recent wave of refinancing gives room for corporates. A low to no credit risk environment suggests limited risk to US equities in 2019 and into 2020
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  • November 21, 2019
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for November 2019

    Summary Headlines – Inside This Month

    • Early credit warning signs and accelerating growth sounds like a late stage Bull. The last few Market Phase Cycle reports read like a mid cycle Bull report for a sideways market digesting earnings growth. However, fundamental and management sentiment data coming out of Q3 earnings season point to accelerating earnings growth, at the same time that credit lending standards are starting to flash signs of tightening. This is a classic set up for the beginning of the late stage of a bull market, where growth takes over, driving a market higher. Signs of strong 2020 earnings growth and growing management confidence on this issue point to continued reason for fundamental acceleration
    • While credit lending standards point to early reasons for monitoring credit, there are still no signals of an impending credit crisis. Low cost to borrow, favorable credit fundamentals, and a recent wave of refinancing gives room for corporates. A low to no credit risk environment suggests limited risk to US equities in 2019 and into 2020
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  • October 17, 2019
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for October 2019

    Summary Headlines – Inside This Month

    • It’s steady as she goes in a choppy sea, but no storm clouds on the horizon. For those who have read the last two Market Phase Cycle reports, this month’s report will read as more of a confirmation of prior signals. Signals around investment and earnings growth, valuations, credit, and sentiment are all signaling a sideways market, with limited growth opportunities in the near-term, but limited real downside risk catalysts. Weaker earnings growth and neutral technical signals point to a likely range-bound market in the near-term, until earnings can re-engage
    • While headlines abound about recession, it is important to note that recessions are not caused by weak earnings growth, rather they are caused by credit destruction. There are no signals of this coming. A low-to-no credit risk environment suggests limited risk to US equities in 2019
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  • September 19, 2019
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for September 2019

    Summary Headlines – Inside This Month

    • Stalled earnings growth and sentiment point to a range bound market. Recent signals around corporate investment growth and management concerns about cost pressures from trade and macro overhangs point to slower earnings growth going forward. Also, while sentiment indicators have come off elevated levels in late July, they never reached capitulatory levels that would imply a floor in the recent market correction. Weaker earnings growth and neutral technical signals point to a likely range bound market in the near term, until earnings can re engage
    • While headlines abound about recession, recessions are not caused by weak earnings growth, they are caused by credit destruction. There are no signals of this coming. A low to no credit risk environment suggests limited risk to US equities in 2019
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  • August 22, 2019
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for August 2019

    Summary Headlines – Inside This Month

    • Weak earnings growth and a recession are two different things, focus on the former.  Recent signals around corporate investment growth and management concerns about cost pressures from trade and macro overhangs point to slower earnings growth going forward.
    • Profits and profitability are growing at a slower rate, though profitability remains at all-time highs across US corporations (UAFRS-adjusted, accurate calculations)
    • The combination of profitability and low-to-no credit risk suggests limited risk to US equities in 2019
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  • July 18, 2019
    Valens Market Phase Cycle Monitor & Corporate Credit Macro View for July 2019

    Summary Headlines – Inside This Month

    • The Fed makes the trend, and the (upward) trend is your friend. The Fed is set to cut interest rates in July. This, combined with overall lower corporate borrowing costs may allow companies to refinance debt maturity headwalls that have been a potential market overhang. This gives a confirming all clear signal for the next year and beyond
    • Profits and profitability continue to rise to all time highs across US corporations (UAFRS adjusted, accurate calculations)
    • US firms are likely to use profits to increase capital investments in 2019
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