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

• Managements Showed Growth Bullishness in October, And the Vaccine Helps. Last month we highlighted the potential we’d be in a range bound market if growth signals couldn’t inflect more positively. Even before the election, management teams started to show more confidence in their outlook, and with the vaccine providing visibility, investment plans may resume sooner, helping drive earnings growth and stock market appreciation. Fundamentals should bounce back rapidly
  
• The coronavirus pandemic has pushed the world into a short-term recession, but thanks to credit fundamentals, it’s likely not to be a protracted deep recession or long recovery. Favorable bank, corporate, and consumer credit fundamentals heading into this disruption still point to optimism for a strong recovery
  
• Sentiment indicators are again excessively bullish. The recent rally has pushed investors to exuberant levels, they are not focused on near-term risks. Valuations are expensive, and continued earnings growth is needed to justify them. Valuations and sentiment may cap near-term upside, though any drop due to valuations and sentiment signals is capped by a lack of credit overhangs and a potential acceleration in growth