InterMarket Analysis Update for Monday August 25, 2025

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Intermarket Analysis Video Update Summary (Prepared for August 25, 2025)
This weekly video analyzes markets beyond the S&P 500 to identify clues about its direction, focusing on valuation, growth vs. value, inflation, sectors, correlations, and long-term trends.
1. Valuation:
S&P 500 is significantly overvalued historically and on a forward-looking basis (e.g., P/E ratio at 22.3, mega caps at 29.6).
Overvaluation can persist for years but doesn’t predict timing of corrections. A significant decline (to about 4,300) would be needed to reach "expensive" levels.
Small and mid-caps are more fairly priced (S&P 600 at 15.2, mid-caps at 15.9), but their performance has been inconsistent despite attractive valuations.
Globally, U.S. markets are overvalued compared to more fairly priced markets such as Spain, emerging markets, and the UK.
2. Growth vs. Value:
Growth continues to outperform value, but short-term shifts suggest a more defensive market stance, especially since early August.
Friday’s market surge (post-Powell’s speech suggesting rate cuts) saw both growth and value rise, but growth slightly outperformed.
Ratios (e.g., growth-to-value ETFs, indices) show value gaining strength, indicating a potential defensive shift, though long-term trends remain growth-driven.
3. Inflation:
Recent PPI data raised inflation concerns, reducing expectations for a 50-basis-point Fed rate cut in September.
Upcoming GDP and core PCE data (Fed’s preferred inflation gauge) will be critical. A hot PCE could pressure markets; a mild one could support them.
CRB Index (monthly) shows slight inflationary trends, but daily charts lack conviction. Baltic Dry Index suggests inflation, while commodities such as oil, corn, and wheat are in downtrends, showing mixed signals.
4. Sectors and Indices:
Tech, discretionary, industrials, and communication sectors are overvalued but drive market growth. Defensive sectors (staples, utilities, healthcare) are underperforming but showing signs of strength.
Financials hit all-time highs but continue to underperform the S&P. Semiconductors and tech pulled back but remain in uptrends.
Equal-weight S&P outperformed the weighted S&P on Friday, suggesting broader participation, but this could indicate a defensive shift.
Small caps and mid-caps improved but face resistance and have a history of false starts.
5. Correlations and Other Markets:
Stocks outperforming bonds and commodities long-term, though recent pullbacks suggest caution.
The U.S. dollar’s weakness is supporting stocks, but a rebound could pressure them. The dollar is in a downtrend against the euro and other currencies.
Copper’s decline (vs. gold) signals economic caution, but high-yield loans remain strong, giving mixed economic signals.
Gold and silver are choppy, with no clear outperformance. Oil’s downtrend reduces inflationary pressure but remains a geopolitical risk.
6. Long-Term Trends:
U.S. stocks underperforming globally but show signs of weakening momentum (e.g., declining KST oscillator).
Bonds underperforming stocks, with junk and corporate bonds in uptrends but not at all-time highs.
Interest rates are stabilizing at a higher range, closer to historical norms. A rise in Japan’s 10-year yield could disrupt markets (e.g., carry trade issues).
7. Positive/Negative List:
Most indicators remain positive, with the U.S. dollar as the only negative (weakness supports stocks).
Friday’s rally (Dow hit all-time high, S&P and NASDAQ close) may be an emotional response to Powell’s rate cut comments, but overhead resistance and defensive shifts suggest a potential decline.
Conclusion:
The S&P 500 is overvalued, with growth outperforming value but showing defensive shifts. Inflation concerns linger, and upcoming data (GDP, PCE) will be pivotal. While most indicators are positive, the dollar’s weakness and subtle shifts toward value and defensive sectors suggest caution. A decline may occur without shifting to a bear market, but further follow-through is needed to confirm trends.

PDF of Slides:
https://drive.google.com/file/d/1F93X829KZtfoUyQosOm1kPD_WcZdPncI/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!