Analysis

The Latest from Macro News


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
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
June 21, 2019
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for June 2019

Summary Headlines – Inside This Month

  • Investors may find pause in buying a market approaching all highs, but improving credit signals provides confidence in buying the Bull market. 
  • Business credit has been flashing early warning signs for 2020 or 2021, providing a market overhang . Recent signals give reasons to think this overhang has been removed, potentially confirming an all clear sign for the next year and beyond
  • Profits and profitability continue to rise to all time highs across US corporations (UAFRS adjusted, accurate calculations)
May 23, 2019
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for May 2019

Summary Headlines – Inside This Month

  • The recent pull-back in the market provides buying opportunities. While headlines may be causing investor concern, fundamentals remain healthy
  • Profits and profitability continue to rise to all-time highs across US corporations (UAFRS-adjusted, accurate calculations)
  • US firms likely to use profits to increase capital investments in 2019
April 23, 2019
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for April 2019

Summary Headlines – Inside This Month

  • As covered in this month’s Litman Letter, the market’s sentiment (aka “the voting machine”) continues to provide buying opportunities where fundamentals tip the scales toward more upside (aka the “weighing machine”)
  • Profits and profitability continue to rise to all-time highs across US corporations (UAFRS-adjusted, accurate calculations)
  • US firms likely to use profits to increase capital investments in 2019
March 15, 2019
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for March 2019
Summary Headlines – Inside This Month
  • We are in the seventh inning of this bull market, and there is still a lot of “baseball” left to play
  • Profits and profitability continue to rise to alltime highs across US corporations (UAFRSadjusted, accurate calculations)
  • US firms likely to use profits to increase capital investments in 2019
February 22, 2019
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for February 2019
Bull markets die on euphoria, no one looks euphoric for this market Bull Markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.  - John Templeton John Templeton was likely the first, and unsurprisingly one of the best, at summarizing what really drives market cycles. It is likely that Templeton would look at today’s market and not yet see the euphoria he referenced in the above quote.
January 17, 2019
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for January 2019
A RECESSION IS COMING … in 1.5-2 years if trends do not change before then The yield curve has flattened dramatically in the past quarter. CDS and bond yields are trending negatively. China and Europe appear to have growth issues, and the Fed may be too hawkish. Cash levels relative to debt maturities are at levels not seen since 2007 and companies will have debt maturity headwalls in 2021 that could be a concern. A recession is coming! Run for the hills!
December 20, 2018
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for December 2018
A deep bear market does not occur without credit risk – we do not see any The basis for the Market Phase Cycle, and what 150+ years of market cycle research shows, is that credit market cycles drive economic cycles and equity market cycles. When access to credit is easy, economic cycles trend positively as do equity markets. When credit markets tighten, and credit destruction happens, equity markets and the economy react similarly.
November 21, 2018
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for November 2018

In the middle of a retest is the hardest, and best, time to trust the (right) data

Tell me if you’ve heard this before:

“Any time the market falls 6%+ in 2 days, investors justifiably ask whether something has changed that should impact their investment thesis.  This is when a consistent framework like the Market Phase Cycle is most valuable.”

October 18, 2018
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for October 2018
Halloween may be around the corner, but don’t be spooked by the market’s moves Any time the market falls 6%+ in 2 days, investors justifiably ask whether something has changed that should impact their investment thesis. This is when a consistent framework like the Market Phase Cycle is most valuable.
October 11, 2018
US Equities Market Alert 2018 10 11: One more BTD in a year of buying opportunities
BTD = Buy The Dip. Yes, yet again we are being given the gift of a US Equities market entry point. Patience is a profitable virtue when deploying capital into any market sell-off. This pullback in US equities is no reason to panic.
September 20, 2018
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for September 2018
Higher highs and higher lows, fundamentally and technically Market technicians have many metrics they look at when observing the charts. One trusty tool that many come back to is looking for charts with consistent higher highs and higher lows in stock price. This indicates positive momentum and is a favorable set-up.
August 16, 2018
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for August 2018

The signal and the noise

The title of Nate Silver’s 2012 best selling book about predictive models, The Signal and The Noise, is referencing identifying real signals from statistical data, versus identifying false noise and relationships, and the risk of conflating the two.

July 19, 2018
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for July 2018
A Goldilocks environment as earnings season enters full swing? The term goldilocks often gets overused in financial markets. There just are not many other adjectives that explain an environment where things are positive, but not so positive that the market gets overheated, the “not too hot, nor too cold” phenomenon, quite as succinctly.
June 21, 2018
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for June 2018
Bullish sentiment and headline risk creates buying opportunities – use them Equity markets rallied 6% from early-May to mid-June. Concerns about inflation, interest rates, geopolitical problems, and trade issues dropped to the background in the face of an earnings season that produced strong earnings and management confidence about corporate outlooks.
May 17, 2018
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for May 2018
“I’ve got a really good feeling about this” – Young Han Solo on today’s market In the new Star Wars movie coming out on Memorial Day weekend, a young Han Solo flips his classic line “I’ve got a bad feeling about this” at what appears to be a tense moment for the crew. His rare optimism seems appropriate as we exit Q1 2018 earnings season.
April 19, 2018
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for April 2018
Management teams are voting with their wallets, investors are likely to follow In general, management teams tend to be value buyers, buying when their stocks dip and withdrawing when their equity rallies. If they don’t, it can be a sign of their concern about fundamentals. Watching this statistic can be helpful in confirming other signals about the fundamental outlook.
March 22, 2018
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for March 2018
The fundamentals, not the headlines, will end up dictating the market direction Over the last several months, there has been increased volatility in the market. The volatility has been driven by headlines about inflation, trade, and the management at the Fed, to name a few examples.
February 22, 2018
Valens Market Phase Cycle Monitor & Corporate Credit Macro View for February 2018
Inflation will be a headwind to multiples, but earnings growth can be a tailwind In the last month’s Market Phase Cycle, we highlighted inflation as a key risk that investors would be focused on as we moved through 2018.