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

• We Are Waiting for Growth. The speed of the recovery in return on assets after the pandemic highlights the resiliency and strength of U.S. corporate profitability. 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.
• After the pullback of the last 2 months, investor sentiment has moderated. This reduces the risk of near-term volatility. However, valuation and growth concerns mean the market is not necessarily moving higher. While sentiment indicators reduce equity downside, valuation and growth indicators point to a sideways market.
• However, near-term growth and valuation issues are not a reason for concern, 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 11 Month Dollar Cost Averaging.