InterMarket Analysis Update for Monday August 18, 2025

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The intermarket analysis video update, prepared for Monday, August 18th, examines various markets and indicators to gain insights into the S&P 500's performance, emphasizing that no market operates in isolation. Key points include:
1. Valuation Analysis: The S&P 500 is historically overvalued, with a PE ratio above 20, but this has persisted for years without immediate impact. Earnings are strong, unlike during the dot-com bust, supporting current valuations. The Shiller CAPE ratio also indicates overvaluation at 38.84, though markets focus on forward-looking earnings.
2. Growth vs. Value: Growth stocks are outperforming value stocks, indicating a positive market sentiment. Growth ETFs and indexes consistently show strength, while value is underperforming, with recent value gains (e.g., post-PPI release) not altering the overall trend.
3. Inflation Concerns: Recent CPI data was favorable, but stronger-than-expected PPI is raising fears of rising producer prices passing to consumers, potentially fueling inflation. Long-term charts (e.g., CRB index) show rising inflation trends, while short-term indicators such as the Baltic Dry Index suggest inflationary pressures.
4. Other Markets: Commodities including aluminum, corn, and wheat are in downtrends, showing no immediate inflationary signals. Fertilizer and lumber are choppy but trending up, while oil remains in a downtrend despite geopolitical tensions. Copper, an economic barometer, shows weakness, potentially signaling economic concerns.
5. S&P 500 Sectors: All 11 sectors are analyzed individually and relative to the S&P 500. Tech and communication sectors are strong, while financials and industrials are underperforming, raising potential concerns. Defensive sectors including staples and utilities are also lagging, and healthcare shows weakness despite some positive earnings (e.g., LLY).
6. Indexes and Correlations: Major indexes (S&P, NASDAQ, Dow) are in uptrends, with NASDAQ 100 slightly underperforming the broader NASDAQ. Small and mid-caps surged post-CPI but retreated after PPI. The U.S. dollar's decline supports stock market gains due to favorable exchange rates.
7. Bonds and Yields: Bonds are underperforming stocks, with junk bonds outperforming more conservative bonds. The 10-year yield is rising but remains below the critical 4.5% level, which could pressure stocks if breached. Bond volatility is decreasing.
8. Positive/Negative Lists: Most indicators are positive, with the U.S. dollar index as the only negative, aiding stock market gains. Bitcoin, emerging markets, and semiconductors are also positive, though small caps and some sectors show cautionary signals.
The analysis highlights a generally positive market driven by growth stocks and strong earnings, tempered by concerns about financials, industrials, and potential inflation pressures. The U.S. dollar’s weakness continues to support equities, but overvaluation and sector divergences warrant close monitoring.

PDF of Slides:
https://drive.google.com/file/d/1dDGHnKJjsiaY39CLkf4MZ0fidaBUzVVM/view?usp=sharing

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!