Valens Market Phase Cycle Monitor – December 2024 – 2025 Is Set Up For Growth, With A Bumpy Start
December 19, 2024
- 2025 Is Set Up For Growth, With A Bumpy Start. Valuation levels remain elevated, and investor sentiment has continued rising to the point of excessive bullishness. That could lead to some near-term choppiness.
- Banks Are Finally Getting Ready To Open The Vault. Banks have finally stopped raising lending standards. Q3 was the first quarter since early 2022 banks didn’t tighten credit availability, signaling one of the last headwinds in the credit market is settling down. With banks ending their multi-year tightening cycle, we have upgraded our credit grade to neutral. If banks start easing credit standards, companies may shift from just refinancing debt maturities to borrowing for growth, fueling even stronger earnings growth the next few years.
- Corporates Are Finally Investing In The Future. Analysts expect AI and a broader market recovery to fuel a slight recovery in growth this year. Investment trends show that is warranted. After seeing profits shrink 9% in 2023, investors are betting corporations can resume margin expansion and growth to fuel an earnings recovery. Improving credit conditions could facilitate this. Also, data on hard asset investment, partly thanks to AI, highlights they may be starting to put money to work.
- Monthly inflections:
- Credit (55% of macro outlook): Neutral (no change)
- Earnings Growth (30%): Neutral (no change)
- Momentum/Sentiment (10%): Negative (downgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 50% Equity/50 Bond Split for 5-10 Year Money and 12 Month Dollar Cost Averaging.
