Valens Market Phase Cycle Monitor – June 2025 – The Supply Chain Supercycle Is Powering Through
June 18, 2025
- Slow earnings is being priced in for the future. Even after this month’s rebound from last month’s low valuations, investors only expect roughly 4% annual earnings growth over the next three years. However, recent results continue to show corporates are already well ahead of that pace. Uniform Earnings grew 9% in 2024 and are expected to grow another 8% in 2025. This is being fueled by reinvestment, margin recovery, and long-term capital projects. With that kind of momentum in place, earnings should remain the core driver of market upside.
- The market’s recent volatility hasn’t changed the bigger picture. While tariff headlines are still causing swings, they’ve mostly succeeded in doing one thing: pulling sentiment and valuations back to earth. Uniform P/E sits near 22 times. No longer excessive, and much more sustainable given the strength in fundamentals. With sentiment back in neutral territory, the market setup is more constructive than it’s been in years.
- Credit conditions held steady this month. After tightening in the second quarter due to tariff-related concerns, U.S. banks did not meaningfully change their lending posture. Other signals also remain consistent. C&I demand continues to rise, the yield curve is smoothing, and corporate earnings expectations are firming. While credit is no longer on upgrade watch, it remains neutral and that continues to support a positive backdrop for growth.
- Monthly inflections:
- Credit (55% of macro outlook): Neutral (no change)
- Earnings Growth (30%): Positive (no change)
- Momentum/Sentiment (10%): Neutral (no change)
- Valuations (5%): Neutral (no change)
- Timetable Recommendation: 50% Equity/50 Bond Split for 5-10 Year Money and 8 Month Dollar Cost Averaging.
