Valens Market Phase Cycle Monitor – September 2025 – When Management Teams Talk…Listen
September 18, 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 remains neutral but on upgrade watch. Banks are slowing down their tightening, credit spreads remain historically tight, and C&I demand is rising. Early signals suggest that if the Fed proceeds with its anticipated rate cuts, credit creation may accelerate further later this year, potentially 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 approximately 24x, 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): Neutral (no change – upgrade watch)
- Earnings Growth (30%): Positive (no change)
- Momentum/Sentiment (10%): Negative (no change)
- Valuations (5%): Neutral (upgrade)
- Timetable Recommendation: 50% Equity/50 Bond Split for 5-10 Year Money and 10 Month Dollar Cost Averaging.