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

July 22, 2021

  • This Market Appears Well Positioned to Climb the Wall of Worry. For the past several months, we have been highlighting a lack of management commitment to growth as an overhang for the market, and the market’s pause over the last several months has confirmed this. However, even as the market is uncertain about headlines around the Delta variant and inflation there are very early signs this might be lifting, and if they are confirmed, it is bullish for stocks. Concerns about an investment pause may be lifting, which could accelerate corporate earnings growth.
  • Credit markets remain supportive of growth and profitability, as all facets of the credit market are giving positive signals.
  • With investors no longer in an exceptionally overbought position, short-term downside risk for the market is much lower. At the same time, high valuations and rising inflation risks may offer headwinds for appreciation. Neutral sentiment removes overhangs for the market, and if growth is accelerating, the market can be positioned to rise even with elevated valuation risk.
  • Timetable Recommendation: 50/50 Split for 5-10 Year Money and upgrade to 8 Month Dollar Cost Averaging.