Valens Market Phase Cycle Monitor – February 2023 – A Highly Correlated Market Is One Driven By Fear, Not Opportunity
February 16, 2023
- A Highly Correlated Market Is One Driven By Fear, Not Opportunity. The market has had an impressive rally to start the year. However, underlying technical indicators point to it growing extended, with limited structural investor support.
- Uniform earnings growth deceleration and continued credit headwinds that will meter growth signal means the market structure is unlikely to change favorably. Near-term corporate management demand for investment has buoyed growth. However, credit and investment metrics signal that on the margin, this is slowing, thanks to the Fed’s efforts.
- Any credit issues do not need to lead to a deep recession, thanks to healthy borrowers. Healthy corporate and consumer balance sheets limit the risk that ongoing tightening leads to a credit rout and waves of defaults.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Neutral (no change)
- Momentum/Sentiment (10%): Negative (downgrade)
- Valuations (5%): Negative (downgrade)
- Timetable Recommendation: 50/50 Split for 5-10 Year Money and 22 Month Dollar Cost Averaging.
