Valens Market Phase Cycle Monitor – September 2024 – Will The Fed Be In Time To Maintain Corporate Growth
September 19, 2024
- Will The Fed Be In Time To Maintain Corporate Growth. The second half of the year has kicked off with a mix of optimism as we may see growing access to credit for the first time in over two years thanks to Fed cuts on the horizon, and concerns the Fed will be too late and we’ll fall into a recession soon. A wave of refinancing removed the risk of a market collapse, and now the question is if the Fed’s cuts will be in time to stimulate growth or will just be arriving as we enter a recession.
- Analysts expect AI and a broader market recovery to fuel a slight recovery in growth this year. However, that optimism appears to be slowing. 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. However, forecasts for growth are starting to stagnate, and the next step for the Fed and corporates will be important to see if that can resume.
- After recent volatility sentiment moderating leading up to the most recent Fed meeting, some near-term pressure has been taken off.
- Monthly inflections:
- Credit (55% of macro outlook): Negative (no change)
- Earnings Growth (30%): Neutral (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 16 Month Dollar Cost Averaging.
