Valens Market Phase Cycle Monitor – January 2022 – Credit Demand Means Green Shoots of Growth Are Returning
January 20, 2022
- Credit Demand Means Green Shoots of Growth Are Returning. U.S. corporate profitability has recovered impressively since the pandemic. Now, investment growth appears to be accelerating to match strong profits based on credit growth and management sentiment indicators. U.S. corporates are remarkably profitable and growth is starting to accelerate.
- While inflation and valuations issues remain, sentiment indicators are removing a further overhang for the market rising in 2022.
- Credit markets remain supportive of profitability and growth through the cycle, and the Fed raising rates won’t disrupt these signals. This facilitates the market rising and limiting any risk for a downside shock.
- Monthly inflections:
- Credit (55% of macro outlook): Bullish (no change)
- Earnings Growth (30%): Bullish (no change)
- Momentum/Sentiment (10%): Neutral/Positive (upgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 50/50 Split for 5-10 Year Money and upgrade to 7 Month Dollar Cost Averaging.
