Valens Market Phase Cycle Monitor – October 2023 – Even A Dead Cat Will Bounce If You Drop It From High Enough

October 19, 2023

  • Even A Dead Cat Will Bounce If You Drop It From High Enough. After the recent pull-back, investor sentiment has dropped from excessively bearish levels. This increases the likelihood of a pause in the sell-off, or even a short bounce.
  • Corporate Credit Metrics Are Showing Signs Of Growing Stress. Credit availability is lacking, and corporates and individual consumers are starting to show pressure from credit tightening. Credit issues highlight the risk of a recession growing.
  • The Fed’s efforts to slow lending continue to push management teams to be more cautious. Uniform earnings growth continues to decelerate. In late 2022, data showed management teams holding off on capex, and in early 2023, management teams slowed overall borrowing as well.
  • Monthly inflections:
    • Credit (55% of macro outlook): Negative (no change)
    • Earnings Growth (30%): Negative (no change)
    • Momentum/Sentiment (10%): Neutral (upgrade)
    • Valuations (5%): Negative (no change)
  • Timetable Recommendation: 40% Equity/60% Bond Split for 5-10 Year Money and 22 Month Dollar Cost Averaging.

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