- A Fundamental Slowdown Is Now Priced In, It Isn’t Showing Up. Valuations have finally reset after years of market exuberance. The sharp pullback following the Liberation Day tariff announcement rattled investors and triggered a wave of short-term selling. It also restored balance to a market that had been priced for perfection. With equity allocations and correlations now in bearish to neutral territory, sentiment is no longer flashing red. The market is pricing an earnings slow down, now it will be important to watch for any signals it won’t happen.
- The market’s recent pullback hasn’t changed the bigger picture. While concerns over potential tariffs have triggered short-term volatility, S&P 500 next-12-month EPS estimates continue to rise, reinforcing the foundation for long-term equity strength. While sentiment remains a near-term risk, if valuations normalize further, the market could have even more room to run.
- Credit remains stable, keeping the backdrop for growth intact. While banks did slightly tighten their lending standards in the fourth quarter, most signs point to more credit creation in the coming quarters. Namely, C&I demand continues rising, the yield curve is smoothing, and corporate earnings projections are improving. If credit availability continues to improve, companies may shift from just refinancing debt maturities to borrowing for growth, fueling even stronger earnings growth in the next few years.
- Monthly inflections:
- Credit (55% of macro outlook): Neutral (no change – upgrade watch)
- Earnings Growth (30%): Neutral (no change – upgrade watch)
- Momentum/Sentiment (10%): Neutral (upgrade)
- Valuations (5%): Neutral (upgrade)
- Timetable Recommendation: 50% Equity/50 Bond Split for 5-10 Year Money and 8 Month Dollar Cost Averaging....
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April 21, 2025
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February 21, 2025
- We’re finally getting the rally we should’ve had in 2022. At the time, rampant inflation and volatility in the energy market followed by a surge in interest rates took all of the wind out of the market’s sails. Financial conditions have finally loosened back to levels last seen in late 2021, signaling room to run.
- A slight hiccup won’t stop the banks from opening the vault. While banks did slightly tighten their lending standards in the fourth quarter, most signs point to more credit creation in the coming quarters. Namely, C&I demand continue rising, the yield curve remains un-inverted, and overall financial conditions continue loosening. If credit availability continues to improve, companies may shift from just refinancing debt maturities to borrowing for growth, fueling even stronger earnings growth the next few years.
- Corporates Are Finally Investing In The Future. Analysts expect AI and a broader market recovery to fuel a slight recovery in growth this year. Investment trends show that is warranted. After seeing profits shrink 9% in 2023, investors are betting corporate margin expansion and growth can fuel an earnings recovery. Improving credit conditions could facilitate this. Also, data on hard asset investment, partly thanks to AI, suggests they may be putting money to work.
- Monthly inflections:
- Credit (55% of macro outlook): Neutral (no change – upgrade watch)
- Earnings Growth (30%): Neutral (no change – upgrade watch)
- Momentum/Sentiment (10%): Negative (downgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 50% Equity/50 Bond Split for 5-10 Year Money and 12 Month Dollar Cost Averaging....
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February 21, 2025
- We’re finally getting the rally we should’ve had in 2022. At the time, rampant inflation and volatility in the energy market followed by a surge in interest rates took all of the wind out of the market’s sails. Financial conditions have finally loosened back to levels last seen in late 2021, signaling room to run.
- A slight hiccup won’t stop the banks from opening the vault. While banks did slightly tighten their lending standards in the fourth quarter, most signs point to more credit creation in the coming quarters. Namely, C&I demand continue rising, the yield curve remains un-inverted, and overall financial conditions continue loosening. If credit availability continues to improve, companies may shift from just refinancing debt maturities to borrowing for growth, fueling even stronger earnings growth the next few years.
- Corporates Are Finally Investing In The Future. Analysts expect AI and a broader market recovery to fuel a slight recovery in growth this year. Investment trends show that is warranted. After seeing profits shrink 9% in 2023, investors are betting corporate margin expansion and growth can fuel an earnings recovery. Improving credit conditions could facilitate this. Also, data on hard asset investment, partly thanks to AI, suggests they may be putting money to work.
- Monthly inflections:
- Credit (55% of macro outlook): Neutral (no change – upgrade watch)
- Earnings Growth (30%): Neutral (no change – upgrade watch)
- Momentum/Sentiment (10%): Negative (downgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 50% Equity/50 Bond Split for 5-10 Year Money and 12 Month Dollar Cost Averaging....
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December 19, 2024
- 2025 Is Set Up For Growth, With A Bumpy Start. Valuation levels remain elevated, and investor sentiment has continued rising to the point of excessive bullishness. That could lead to some near-term choppiness.
- Banks Are Finally Getting Ready To Open The Vault. Banks have finally stopped raising lending standards. Q3 was the first quarter since early 2022 banks didn’t tighten credit availability, signaling one of the last headwinds in the credit market is settling down. With banks ending their multi-year tightening cycle, we have upgraded our credit grade to neutral. If banks start easing credit standards, companies may shift from just refinancing debt maturities to borrowing for growth, fueling even stronger earnings growth the next few years.
- Corporates Are Finally Investing In The Future. Analysts expect AI and a broader market recovery to fuel a slight recovery in growth this year. Investment trends show that is warranted. After seeing profits shrink 9% in 2023, investors are betting corporations can resume margin expansion and growth to fuel an earnings recovery. Improving credit conditions could facilitate this. Also, data on hard asset investment, partly thanks to AI, highlights they may be starting to put money to work.
- Monthly inflections:
- Credit (55% of macro outlook): Neutral (no change)
- Earnings Growth (30%): Neutral (no change)
- Momentum/Sentiment (10%): Negative (downgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 50% Equity/50 Bond Split for 5-10 Year Money and 12 Month Dollar Cost Averaging....
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December 19, 2024
- 2025 Is Set Up For Growth, With A Bumpy Start. Valuation levels remain elevated, and investor sentiment has continued rising to the point of excessive bullishness. That could lead to some near-term choppiness.
- Banks Are Finally Getting Ready To Open The Vault. Banks have finally stopped raising lending standards. Q3 was the first quarter since early 2022 banks didn’t tighten credit availability, signaling one of the last headwinds in the credit market is settling down. With banks ending their multi-year tightening cycle, we have upgraded our credit grade to neutral. If banks start easing credit standards, companies may shift from just refinancing debt maturities to borrowing for growth, fueling even stronger earnings growth the next few years.
- Corporates Are Finally Investing In The Future. Analysts expect AI and a broader market recovery to fuel a slight recovery in growth this year. Investment trends show that is warranted. After seeing profits shrink 9% in 2023, investors are betting corporations can resume margin expansion and growth to fuel an earnings recovery. Improving credit conditions could facilitate this. Also, data on hard asset investment, partly thanks to AI, highlights they may be starting to put money to work.
- Monthly inflections:
- Credit (55% of macro outlook): Neutral (no change)
- Earnings Growth (30%): Neutral (no change)
- Momentum/Sentiment (10%): Negative (downgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 50% Equity/50 Bond Split for 5-10 Year Money and 12 Month Dollar Cost Averaging....
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November 21, 2024
- Banks Are Finally Getting Ready To Open The Vault. Banks have finally stopped raising lending standards. Q3 was the first quarter since early 2022 banks didn’t tighten credit availability, signaling one of the last headwinds in the credit market is settling down. With banks ending their multi-year tightening cycle, we are upgrading our credit grade to neutral. If banks start easing credit standards, companies may shift from just refinancing debt maturities to borrowing for growth, which could fuel even stronger earnings growth the next few years.
- Corporates Are Finally Investing In The Future. Analysts expect AI and a broader market recovery to fuel a slight recovery in growth this year. Investment trends show that is warranted. After seeing profits shrink 9% in 2023, investors are betting corporations can resume margin expansion and growth to fuel an earnings recovery. Improving credit conditions could facilitate this. Also, data on hard asset investment, partly thanks to AI, highlights they may be starting to put money to work.
- While valuation levels remain elevated, neutral investor sentiment levels point to limited reason for concerns of near-term choppiness rising.
- Monthly inflections:
- Credit (55% of macro outlook): Neutral (upgrade)
- Earnings Growth (30%): Neutral (no change)
- Momentum/Sentiment (10%): Neutral (no change)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 50% Equity/50% Bond Split for 5-10 Year Money and 12 Month Dollar Cost Averaging....
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September 19, 2024
- Will The Fed Be In Time To Maintain Corporate Growth. The second half of the year has kicked off with a mix of optimism as we may see growing access to credit for the first time in over two years thanks to Fed cuts on the horizon, and concerns the Fed will be too late and we’ll fall into a recession soon. A wave of refinancing removed the risk of a market collapse, and now the question is if the Fed’s cuts will be in time to stimulate growth or will just be arriving as we enter a recession.
- Analysts expect AI and a broader market recovery to fuel a slight recovery in growth this year. However, that optimism appears to be slowing. After seeing profits shrink 9% in 2023, investors are betting corporations can resume margin expansion and growth to fuel an earnings recovery. Improving credit conditions could facilitate this. Also, data on hard asset investment, partly thanks to AI, highlights they may be starting to put money to work. However, forecasts for growth are starting to stagnate, and the next step for the Fed and corporates will be important to see if that can resume.
- After recent volatility sentiment moderating leading up to the most recent Fed meeting, some near-term pressure has been taken off.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Neutral (no change)
- Momentum/Sentiment (10%): Neutral (upgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 40% Equity/60% Bond Split for 5-10 Year Money and 16 Month Dollar Cost Averaging....
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August 15, 2024
- Corporates Are Getting Better, The Consumer Is Getting Worse. The first half of 2024 was a story of AI and massive debt refinancing removing any existential crisis for companies. The second half of the year has kicked off with a mix of optimism as we may see growing access to credit for the first time in over two years thanks to Fed cuts on the horizon, and concerns the Fed will be too late and we’ll fall into a recession soon. A wave of refinancing removed the risk of a market collapse, and now the question is if the Fed’s cuts will be in time to stimulate growth or will just be arriving as we enter a recession.
- Analysts expect AI and a broader market recovery to fuel a slight recovery in growth this year, and that may be starting to show up in the data. After seeing profits shrink 9% in 2023, investors are betting corporations can resume margin expansion and growth to fuel an earnings recovery. Improving credit conditions could facilitate this. And while corporate leadership is showing stress about the macro outlook, data on hard asset investment highlights they may be starting to put money to work, which could justify expectations for future growth.
- Even after recent volatility, valuations reflect a bet on growth resuming, and investor sentiment remains overly bullish, increasing the risk of volatility.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Neutral (no change)
- Momentum/Sentiment (10%): Negative (no change)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 40% Equity/60% Bond Split for 5-10 Year Money and 18 Month Dollar Cost Averaging.
- ...
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July 18, 2024Valens Market Phase Cycle Monitor – July 2024 – The Market Is Betting The Calvary Is About To Arrive
- The Market Is Betting The Calvary Is About To Arrive. The first half of 2024 was a story of AI and massive debt refinancing removing any existential crisis for companies. The second half of the year has kicked off with optimism as we may see growing access to credit for the first time in over two years. The Fed is signaling slowing inflation and growing consumer issues give it enough reasons to cut interest rates, opening up credit markets. A wave of refinancing removed the risk of a market collapse, and now the potential for the Fed to start to ease financial conditions can start to fuel the next phase of the economy and market.
- Analysts expect AI and a broader market recovery to fuel a slight recovery in growth this year, contrary to management’s actions and indications. After seeing profits shrink 9% in 2023, investors are betting corporations can resume margin expansion and growth to fuel an earnings recovery. Improving credit conditions could facilitate this. However, growing corporate leadership stress about the macro outlook and stress to consumer balance sheets may limit how explosive growth can be.
- After the recent strong rally, valuations reflect a bet on growth resuming, and the market is now at euphoric sentiment levels, increasing the risk of volatility.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change – on upgrade watch)
- Earnings Growth (30%): Neutral (no change)
- Momentum/Sentiment (10%): Negative (downgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 40% Equity/60% Bond Split for 5-10 Year Money and 18 Month Dollar Cost Averaging.
- ...
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June 20, 2024
- AI Alone Can’t Solve The Two-Thirds Equation. Analysts expect AI and a broader market recovery to fuel a slight recovery in growth this year, contrary to management’s actions and indications. After seeing profits shrink 9% in 2023, investors are betting corporations can resume margin expansion and growth to fuel an earnings recovery. In recent months, management’s growing willingness to invest based on sentiment analysis may fuel that growth as credit overhangs are removed. However, growing stress to consumer balance sheets may limit how explosive growth can be.
- The potential debt default risk has been significantly reduced. Credit availability is still lacking, and corporations and individual consumers are starting to show pressure from credit tightening, but they are not stretched to the point of threatening a wave of defaults. Without significant refinancing risk, the current tight credit environment is likely to be a tax on growth, as opposed to a potential catalyst for a recession.
- After the recent strong rally, valuations reflect a bet on growth resuming, and the market is now at extended sentiment levels, increasing the risk of volatility.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Neutral (no change)
- Momentum/Sentiment (10%): Negative (downgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 40% Equity/60% Bond Split for 5-10 Year Money and 18 Month Dollar Cost Averaging....
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May 16, 2024
- The Market Follows Earnings Growth. Analysts expect AI and a broader market recovery to fuel a slight recovery in growth this year, contrary to management’s actions and indications. After seeing profits shrink 9% in 2023, investors are betting corporations can resume margin expansion and growth to fuel an earnings recovery. In recent months, management’s growing willingness to invest based on sentiment analysis may fuel that growth as credit overhangs are removed.
- The potential debt default risk has been significantly reduced. Credit availability is still lacking, and corporations and individual consumers are starting to show pressure from credit tightening, but they are not stretched to the point of threatening a wave of defaults. Without significant refinancing risk, the current tight credit environment is likely to be a tax on growth as opposed to a potential catalyst for a recession.
- After the recent strong rally, valuations reflect a bet on growth resuming, and the market is now at extended sentiment levels, increasing the risk of volatility.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Neutral (no change)
- Momentum/Sentiment (10%): Negative (downgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 40% Equity/60 Bond Split for 5-10 Year Money and 18 Month Dollar Cost Averaging....
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April 18, 2024Valens Market Phase Cycle Monitor – April 2024 – A Shrunken Refinancing Headwall De-risks The Market
- A Shrunken Refinancing Headwall De-risks The Market. The potential debt default risk has been significantly reduced. Credit availability is still lacking, and corporations and individual consumers are starting to show pressure from credit tightening, but they are not stretched to the point of threatening a wave of defaults. Without significant refinancing risk, the current tight credit environment is likely to be a tax on growth, as opposed to a potential catalyst for a recession.
- Analysts expect AI and a broader market recovery to fuel a slight recovery in growth this year, contrary to management’s actions and indications. After seeing profits shrink 9% in 2023, investors are betting corporations can resume margin expansion and growth to fuel an earnings recovery. However, management’s lack of willingness to invest calls that recovery into question.
- After the recent strong rally, valuations reflect a bet on growth resuming, and the market is now at extended sentiment levels, increasing the risk of volatility.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Neutral (upgrade)
- Momentum/Sentiment (10%): Negative (downgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 40% Equity/60% Bond Split for 5-10 Year Money and 18 Month Dollar Cost Averaging....
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March 21, 2024
- Follow Management’s Money, It Tells A Story. Management teams continue to be cautious about investing. Uniform earnings growth continues to decelerate. Profits are forecasted to decline, and multiple signals for investment show decelerating management confidence.
- Corporate credit metrics are showing signs of growing stress. Credit availability is lacking, and corporations and individual consumers are starting to show pressure from credit tightening. Credit issues highlight the risk of a recession growing.
- After the recent strong rally, the market is now at extended sentiment levels.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Negative (no change)
- Momentum/Sentiment (10%): Negative (downgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 40% Equity/60% Bond Split for 5-10 Year Money and 24 Month Dollar Cost Averaging....
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February 15, 2024
- Banks Still Aren’t Lending And That Caps Real Growth. Corporate Credit Metrics Are Showing Signs Of Growing Stress. Credit availability is lacking, and corporations and individual consumers are starting to show pressure from credit tightening. Credit issues highlight the risk of a recession growing.
- Slowing lending continues to push management teams to be more cautious. Uniform earnings growth continues to decelerate. Profits are forecasted to decline, and multiple signals for investment show decelerating management confidence.
- After the recent strong bounce-back rally, the market is back towards neutral sentiment levels.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Negative (no change)
- Momentum/Sentiment (10%): Neutral (no change)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 40% Equity / 60% Bond Split for 5-10 Year Money and 22 Month Dollar Cost Averaging....
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January 18, 2024
- The Market’s Expectations Don’t Line Up With Predictive Economic Indicators. Corporate Credit Metrics Are Showing Signs Of Growing Stress. Credit availability is lacking, and corporations and individual consumers are starting to show pressure from credit tightening. Credit issues highlight the risk of a recession growing.
- Slowing lending continues to push management teams to be more cautious. Uniform earnings growth continues to decelerate. Profits are forecasted to decline, and multiple signals for investment show decelerating management confidence.
- After the recent strong bounce-back rally, the market is back towards neutral sentiment levels.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Negative (no change)
- Momentum/Sentiment (10%): Neutral (no change)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 40% Equity/ 60% Bond Split for 5-10 Year Money and 22-Month Dollar-Cost Averaging....
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November 16, 2023
- More And More Signals Point Towards A Slowdown. The Fed’s efforts to slow lending continue to push management teams to be more cautious. Uniform earnings growth continues to decelerate. Profits are forecast to decline, and multiple signals for investment show decelerating management confidence.
- Corporate Credit Metrics Are Showing Signs Of Growing Stress. Credit availability is lacking, and corporations and individual consumers are starting to show pressure from credit tightening. Credit issues highlight the risk of a recession growing.
- After the recent strong bounce-back rally, the market is back towards neutral sentiment levels.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Negative (no change)
- Momentum/Sentiment (10%): Neutral (no change)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 40% Equity/60% Bond Split for 5-10 Year Money and 22 Month Dollar Cost Averaging....
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November 16, 2023
- Be Cautious Putting Your Hope In The Fed’s Pivot Maintaining This Rally. Corporate Credit Metrics Are Showing Signs Of Growing Stress. Credit availability is lacking, and corporations and individual consumers are starting to show pressure from credit tightening. Credit issues highlight the risk of a recession growing.
- Slowing lending continues to push management teams to be more cautious. Uniform earnings growth continues to decelerate. Profits are forecasted to decline, and multiple signals for investment show decelerating management confidence.
- After the recent strong bounce-back rally, the market is back towards neutral sentiment levels.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Negative (no change)
- Momentum/Sentiment (10%): Neutral (no change)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 40% Equity/60% Bond Split for 5-10 Year Money and 22-Month Dollar Cost Averaging....
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October 19, 2023
- Even A Dead Cat Will Bounce If You Drop It From High Enough. After the recent pull-back, investor sentiment has dropped from excessively bearish levels. This increases
the likelihood of a pause in the sell-off, or even a short bounce. - Corporate Credit Metrics Are Showing Signs Of Growing Stress. Credit availability is lacking, and corporates and individual consumers are starting to show pressure from credit tightening. Credit issues highlight the risk of a recession growing.
- The Fed’s efforts to slow lending continue to push management teams to be more cautious. Uniform earnings growth continues to decelerate. In late 2022, data showed management teams holding off on capex, and in early 2023, management teams slowed overall borrowing as well.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Negative (no change)
- Momentum/Sentiment (10%): Neutral (upgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 40% Equity/60% Bond Split for 5-10 Year Money and 22 Month Dollar Cost Averaging....
- Even A Dead Cat Will Bounce If You Drop It From High Enough. After the recent pull-back, investor sentiment has dropped from excessively bearish levels. This increases
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September 21, 2023
- Corporate Credit Metrics Are Showing Signs Of Growing Stress. Credit availability is lacking, and corporates and individual consumers are starting to show pressure from credit tightening. Credit issues highlight the risk of a recession is growing.
- The Fed’s efforts to slow lending continue to push management teams to be more cautious. Uniform earnings growth continues to decelerate. In late 2022, data showed management teams holding off on capex, and in early 2023, management teams slowed overall borrowing as well.
- Investors’ Blinders To Risk Continue To Point To A Potential Pullback. After the recent rally, investor sentiment is once again elevated. More bullish sentiment is likely to increase market volatility in the short-term.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Negative (no change)
- Momentum/Sentiment (10%): Negative (no change)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 50/50 Split for 5-10 Year Money and 24 Month Dollar Cost Averaging.
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August 17, 2023
- Investors’ Blinders To Risk Are Increasing The Risk Of A Correction. After the recent rally, investor sentiment is once again elevated. More bullish sentiment is likely to increase market volatility in the short-term.
- Credit availability is lacking, and corporates and individual consumers are starting to show pressure from credit tightening. A better debt maturity schedule for borrowers than in prior cycles reduces the risk of a severe recession, but credit issues highlight the risk of a recession is growing.
- The Fed’s efforts to slow lending have pushed management teams to be more cautious. Uniform earnings growth continues to decelerate. In late 2022, data showed management teams holding off on capex, and in early 2023, management teams slowed overall borrowing as well.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Negative (no change)
- Momentum/Sentiment (10%): Negative (no change)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 50/50 Split for 5-10 Year Money and 24 Month Dollar Cost Averaging....
