InterMarket Analysis Update for Monday May 5, 2025

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Summary of Weekly Intermarket Analysis Update for May 5, 2025
This intermarket analysis examines factors beyond the S&P 500 to identify trends impacting its performance, covering valuations, growth vs. value, inflation, other markets, sectors, correlations, and long-term trends.
S&P 500 Valuation:
Historically overvalued with a PE ratio above 20, currently at 20.5. Robert Schiller’s CAPE ratio is 35.26, double the historical average.
To reach a "fair" valuation, the S&P would need to drop to about 4,200.
Mega caps (PE 24.8) are overvalued, while mid-caps (14.8) and small caps (14.3) are fairly priced.
Sectors such as discretionary, tech, staples, and industrials are pricier; energy is undervalued (PE 14).
Growth vs. Value:
Both growth and value are in downtrends independently, but growth is rebounding while value is underperforming.
Growth ETFs are outperforming value ETFs recently, though growth remains in a downtrend relative to value.
Small and mid-cap growth/value are barely in uptrends but improving; S&P growth/value is rebounding.
Inflation and Commodities:
CRB Index (commodities) is pulling back but in a long-term uptrend. Inflation is underperforming deflation.
Baltic Dry Index is in a downtrend but rebounding. Inflation expectations are slightly up but not breaking out.
Aluminum and wheat are in downtrends; corn and lumber are in uptrends; oil is down (high 50s); natural gas is up but pulling back; copper is in an uptrend, signaling economic optimism.
Gold outperforming oil; gold and silver remain in uptrends. Gold-to-silver ratio shows gold leading, but silver is catching up.
Other Markets:
Dollar: Weak, fell below 100 but closed above recently, still in a downtrend. Euro, yen, and pound are in uptrends vs. dollar.
Bonds: Total bond ETF, high-yield, investment-grade, and corporate bonds are in uptrends. Bonds are outperforming stocks long-term.
Yields: 10-year and 30-year yields rose after a strong employment report; junk bonds are rebounding and outperforming government bonds.
Global Stocks: Emerging markets and non-U.S. stocks are outperforming U.S. stocks. China, Europe, Japan, and emerging markets show positive momentum.
S&P 500 Sectors:
Uptrends: Communication, financials, industrials, staples, utilities, real estate (interest-rate sensitive, improving as rates fall).
Downtrends: Materials, energy, tech, health care, discretionary, semiconductors (all rebounding but underperforming the S&P500).
Defensive sectors (staples, utilities) have been stronger, but growth sectors (tech, discretionary) need to lead for market positivity.
Other Indexes:
Equal-weight S&P is tracking the S&P closely; mega caps, small caps, and tech are underperforming but rebounding.
NASDAQ 100 (growth-heavy) is improving but not yet leading. Dow, transports, and utilities are in downtrends but recovering.
Semiconductors, AI, and robotics are in downtrends but improving. Emerging markets are improving. High-leverage loans show economic resilience.
Correlations:
S&P and dollar are moving together; S&P is moving opposite to oil and 10-year yields.
Tech is underperforming 10-year yields; stocks and bonds have a high correlation, moving in the same direction.
S&P and home builders’ correlation is weakening, a potential concern.
Long-Term Trends:
NYSE Composite is holding above its moving average but shows weakening momentum.
Stocks are underperforming commodities long-term; U.S. stocks are lagging global peers (Europe, Asia, Far East).
Bonds are outperforming stocks on a monthly basis; junk bonds remain in an uptrend.
Positives:
Uptrends in copper, euro, pound, yen, CRB Index, gold, silver, low-volatility ETF, staples, bonds (World Bond Index, total bond ETF, high-yield, investment-grade, corporate, junk), high-leverage loans, NYSE Composite, and emerging markets.
Negatives:
Downtrends in growth/value indexes, mega caps, dollar, Dow Jones Composite, FANG index, tech, semiconductors, Dow, NASDAQ 100, mid/small/micro caps, Wilshire 5000, total U.S. stock ETF, ARK, all stocks, and Bitcoin.
Conclusion: The S&P 500 remains overvalued, with growth rebounding but not yet leading. Defensive sectors and bonds are stronger, while commodities (copper, gold) and emerging markets Are showing resilience. The dollar’s weakness and mixed sector performance suggest caution, with tech and semiconductors needing to strengthen for a bullish outlook. Long-term trends favor bonds and commodities over stocks.

PDF of Charts and Slides used in today's video: https://drive.google.com/file/d/13rDSk2iyi8Ec7SdQKfiAZ40qzv7VkoZs/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!