Valens Market Phase Cycle Monitor – September 2023 – Recessions Are Caused By A Need To Refinance Debts

September 21, 2023

  • 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 is 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.
  • Investors’ Blinders To Risk Continue To Point To A Potential Pullback. After the recent rally, investor sentiment is once again elevated. More bullish sentiment is likely to increase market volatility in the short-term.
  • Monthly inflections:
    • Credit (55% of macro outlook): Negative (no change)
    • Earnings Growth (30%): Negative (no change)
    • Momentum/Sentiment (10%): Negative (no change)
    • Valuations (5%): Negative (no change)
    • Timetable Recommendation: 50/50 Split for 5-10 Year Money and 24 Month Dollar Cost Averaging.

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