Valens Market Phase Cycle Monitor & Corporate Credit Macro View for February 2020

• Party like it’s early 1999 the markets are set up to. Fundamental and management sentiment data point to accelerating earnings growth, at the same time that credit lending standards are starting to flash signs of tightening. This is a classic set up for the beginning of the late stage of a bull market, where growth takes over, driving a market higher. A set up like early 1999. Signs of strong 2020 earnings growth and growing management confidence on this issue point to continued reason for fundamental acceleration
  
  

• Credit lending standards point to early reasons for monitoring credit, as does the recent re inversion of the yield curve even after the Fed’s lowering of rates in lateHowever, these are often 18 month to 2 year leading indicators, and there are still no signals of an impending credit crisis. Low cost to borrow, favorable credit fundamentals, and a recent wave of refinancing gives room for corporate growth. A low to no credit risk environmentsuggests limited risk to US equities in 2020
  
  

• Excessively positive investor sentiment had created elevated market risk in mid January. After the pullback in late January the sentiment overhang for the market appears to have been removed