Valens Market Phase Cycle Monitor & Corporate Credit Macro View for December 2021

December 16, 2021

  • Management Teams Are Primed to Deliver Strong Earnings Growth for 2022. U.S. corporate profitability has recovered impressively since the pandemic. An overhang for the last several months was if investment growth would accelerate to match strong profits. With management teams growing more bullish, it appears it has. U.S. corporates are remarkably profitable and investment signals are starting to point towards accelerating near-term growth.
  • While inflation and valuations issues remain, sentiment indicators are removing a further overhang for the market rising in 2022.
  • Credit markets remain supportive of profitability and growth through the cycle, facilitating the market rising and limiting any risk for a downside shock.
  • Monthly inflections:
    • Credit (55% of macro outlook): Bullish (no change)
    • Earnings Growth (30%): Bullish (improvement from neutral)
    • Momentum/Sentiment (10%): Neutral (improvement)
    • Valuations (5%): Negative (no change)
  • Timetable Recommendation: 50/50 Split for 5-10 Year Money and upgrade to 8 Month Dollar Cost Averaging.

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