Valens Market Phase Cycle Monitor & Corporate Credit Macro View for November 2021
November 18, 2021
- The Market May Get Growth And Inflation Concerns For Christmas. While the market has rocketed higher in the past month and a half, datapoints about two key drivers of market valuations, inflation, and growth, have gotten worse. Inflation headlines, combined with growth headwinds and excessively bullish investor sentiment may pressure valuations.
- U.S. corporate profitability has recovered impressively since the depths of the pandemic, powering the market to rebound. At current valuations, the market is expecting this to continue and for growth to be above average going forward. However, in the near-term, subdued management confidence limits growth, which limits equity upside.
- However, near-term growth and valuation issues are not a reason for concern for long-term investors, thanks to the bedrock of any bull market, healthy credit. Credit metrics show healthy availability of credit from both credit markets and banks, and no risk of defaults. This means the risk of a pullback turning into a bear market is exceptionally low.
- Timetable Recommendation: 50/50 Split for 5-10 Year Money and upgrade to 12 Month Dollar Cost Averaging.