InterMarket Analysis Update for Monday April 21, 2025

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This Weekly Intermarket Update, prepared for April 21, 2025, covers several key financial market areas:
1. Valuation Analysis:
Historical Valuation: The S&P 500’s price-to-earnings (P/E) ratio remains above 20, indicating an overvalued market. A drop to 4,200 would be needed to reach the "expensive" threshold. The Shiller P/E ratio is at 32.66, well above the historical median of 16-17, reinforcing overvaluation.
Forward-Looking P/E: Forward P/E ratios are declining below 20 for the S&P 500, though mid-caps (13.8) and small caps (13.2) are more reasonably priced. However, technical analysis suggests avoiding these due to downtrends.
2. Growth vs. Value:
Growth stocks are entering a downtrend, with a "death cross" forming, while value stocks are holding up better but still under pressure. Value is outperforming growth, as seen in various ETF ratios, indicating a defensive shift by money managers constrained by mandates.
3. Inflation and Commodities:
The CRB Index (commodities) is in a long-term uptrend but recently volatile. Inflation expectations and related ratios (e.g., inflation vs. deflation, TIPS) are declining, suggesting inflation isn’t a major concern. Specific markets such as corn and lumber show potential inflationary signals, while oil and aluminum are in downtrends.
4. Other Markets:
Metals and Energy: Gold is hitting all-time highs, outperforming copper and silver. Copper remains in an uptrend, signaling economic optimism, but high leverage loans show some recent weakness.
Currencies: The US dollar is in a downtrend, falling below 100, while the euro, yen, and pound are gaining strength.
Bonds: Bonds are outperforming stocks in 2025, with high-yield and investment-grade bonds are in uptrends. Yields (10-year, 30-year) are rising longer term, and bond volatility is currently correlated with stock volatility.
5. S&P 500 Sectors:
Defensive sectors such as staples, utilities, and healthcare are outperforming the S&P 500, which is in a downtrend. Growth-heavy sectors such as tech and communication are underperforming, while financials and industrials are showing relative resilience.
6. Indexes and Ratios:
The S&P 500 equal-weight index is slightly underperforming the weighted version, reflecting broader market weakness. Small caps, mega caps, and tech-heavy indexes (NASDAQ, NASDAQ 100) are underperforming the S&P 500. Low-volatility stocks are in an uptrend, signaling a continued defensive market posture.
7. Long-Term Trends:
Long-term indicators (e.g., NYSE, S&P monthly charts) show weakening momentum, with stocks underperforming commodities and bonds. Global markets (China, emerging markets, Europe, Japan) are also in downtrends.
8. Correlations:
Stocks and the dollar show a slight inverse correlation, while stocks, tech, and yields (2-year, 10-year) are moving in tandem. Stocks are underperforming commodities and bonds.
9. Positives and Negatives:
Positives: Value indexes, copper, gold, silver, low-volatility ETFs, staples, and bonds remain in uptrends.
Negatives: Growth indexes, mega caps, semiconductors, small/micro caps, broad market measures (Wilshire, total US stock ETF), and Bitcoin are in downtrends.
Summary: Stocks are experiencing a challenging period in 2025, with the S&P 500 and growth stocks in downtrends, overvaluation concerns, and a continued shift toward defensive assets such as value stocks, low-volatility ETFs, and bonds. Inflation signals are mixed, with commodities showing some strength, but overall, economic indicators such as copper suggest cautious optimism. Global markets are also weak, and correlations highlight a defensive, risk-off environment.

PDF of Charts and Slides used in today's video:
https://drive.google.com/file/d/1-SlxRDqkE61Ym5qagC8xJZukkNDIdIDR/view?usp=sharing

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DISCLAIMER This video is for entertainment purposes only. I am not a financial adviser, and you should do your own research and go through your own thought process before investing in a position. Trading is risky!