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

• A Sideways Market Is Not The End Of The World, And A Reasonable Outlook. Coming out of Q1 earnings season, management continued to show more reservation about their outlook, which may slow earnings growth the market is already pricing in. Corporate fundamentals signal a strong recovery in profitability, but the market is not pricing in a potential impending pause in growth.
• That doesn’t mean the market has to collapse, because credit signals remain incredibly healthy. There can be no bear market or return to recession even if growth slows, without credit overhangs. Favorable bank, corporate, and consumer credit fundamentals coming out of this disruption still point to optimism for an ongoing recovery.
• After the recent pullback we highlighted as a risk in April, investor sentiment levels have moderated. With investors no longer in an exceptionally overbought position, the short-term downside risk for the market is much lower. Neutral sentiment but more negative growth and valuation factors point to reasons for a sideways market at best until growth re-engages.
• Timetable Recommendation: 50/50 Split for 5-10 Year Money and 10 Month Dollar Cost Averaging.