Valens Market Phase Cycle Monitor – November 2025 – The Market Is Finally Letting Some Air Out
November 20, 2025
- Earnings Growth remains robust and ahead of expectations. Uniform Earnings grew a strong 9% in 2024, and they are expected to increase another 8% in 2025, driven by significant reinvestment, margin improvement, and long-term capital projects. Businesses are continuing to fund capital expenditures internally, with particular focus on productivity-enabling technologies like AI, data centers, and supply chain modernization.
- Credit conditions are improving. Banks are slowing down their tightening, credit spreads remain historically tight, and C&I demand is rising. The Fed has begun a rate cutting cycle, fueling lower credit costs and an improving borrowing environment. Credit creation may accelerate further later this year, fueling incremental growth and investment activity.
- Sentiment has become euphoric. The market’s rally has pushed active equity allocations, investor correlations, and put/call ratios into extremely elevated levels, surpassing those seen at Liberation Day. This suggests limited upside in the near term and a heightened risk of volatility if sentiment reverses.
- Valuations have risen to stretched levels. After moderating earlier this year, the Uniform P/E ratio has now climbed back to nearly 25x, which is above the normal range for this environment. Though based on forecast earnings growth, valuations aren’t unreasonable.
- Monthly inflections:
- Credit (55% of macro outlook): Positive (no change)
- Earnings Growth (30%): Positive (no change)
- Momentum/Sentiment (10%): Negative (no change)
- Valuations (5%): Neutral (no change)
- Timetable Recommendation: 50% Equity/50 Bond Split for 5-10 Year Money and 7 Month Dollar Cost Averaging.