Valens Market Phase Cycle Monitor – April 2025 – A Fundamental Slowdown Is Now Priced In, It Isn’t Showing Up
April 21, 2025
- 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.
