Valens Market Phase Cycle Monitor – January 2023 – Our Outlook for A Sideways Market in 2023 Remains Intact

January 19, 2023

  • Our Outlook for A Sideways Market in 2023 Remains Intact. For 2022, Uniform earnings growth is forecast to be -3%, and until that trend changes, the market can’t engage higher.
  • Uniform earnings growth is unlikely to reaccelerate until credit conditions are more constructive, and most metrics are trending in a negative direction. Healthy corporate and consumer balance sheets limit the risk that continued tightening turns into a credit rout and triggers waves of defaults. However, credit signals continue to point to a significant tightening of lending availability.
  • Investor sentiment is neutral while valuations are now reasonable to elevated. This appears to signal we’re at the middle to higher end of a sideways market.
  • Monthly inflections:
    • Credit (55% of macro outlook): Negative (no change)
    • Earnings Growth (30%): Neutral (no change)
    • Momentum/Sentiment (10%): Neutral (no change)
    • Valuations (5%): Neutral (downgrade)
  • Timetable Recommendation: 50/50 Split for 5-10 Year Money and 18 Month Dollar Cost Averaging.

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