Valens Market Phase Cycle Monitor – January 2025 – Back In Business, And Ain’t It Grand
January 16, 2025
- Back In Business, And Ain’t It Grand. Now that the yield curve has uninverted, banks have more reason to ramp up lending. This lines up with the SLOOS falling to zero in the last quarter, signaling that banks are willing to lend.
- 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 upgraded our credit grade to neutral last month. 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%): Neutral (upgrade)
- Valuations (5%): Negative (no change)
- Timetable Recommendation: 50% Equity/50 Bond Split for 5-10 Year Money and 12 Month Dollar Cost Averaging.
