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

• Weathering a storm requires a strong foundation, which this economy has. The coronavirus pandemic has pushed the world into an almost certain short-term recession – but that does not need to mean a protracted deep recession or long recovery thanks to credit fundamentals. Favorable bank, corporate, and consumer credit fundamentals heading into this disruption give reason for optimism for a strong recovery

• Corporate fundamentals and valuations warrant optimism for equity upside if the recession is not protracted. Strong corporate profitability, management optimism about growth before the pandemic surprise, and very pessimistic investor sentiment based on current valuations point to fundamental reasons for market upside after this short-term overhang is removed

• Sentiment indicators have become excessively bearish. The current technically oversold conditions set the market up for a short-term snapback rally in the near-term, even if it is not a sustainable move higher and a retest is probable