Valens Market Phase Cycle Monitor – April 2023 – Don’t Be Fooled By Charts – Constricting Credit Means We’re Not Yet In A New Bull

April 20, 2023

  • Don’t Be Fooled By Charts – Constricting Credit Means We’re Not Yet In A New Bull. 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.
  • While credit availability is lacking, healthy corporate and consumer balance sheets signal any recession does not need to be a deep recession. Healthy corporate and consumer balance sheets limit the risk that ongoing tightening leads to a credit rout and waves of defaults.
  • 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 (downgrade)
    • Momentum/Sentiment (10%): Negative (downgrade)
    • 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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