InterMarket Analysis Update for Monday December 29, 2025

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Summary of the Intermarket Analysis Video Update prepared for Monday, Dec 29, 2025:
This weekly video examines intermarket relationships and broader indicators to assess the health of the S&P 500 beyond simple price action and valuation. The market is ending 2025 strongly (S&P up 17–18%, Nasdaq over 20%), with a quiet Santa Claus rally in the holiday-shortened week, but there are cautious questions to raise about sustainability when 2026 begins.
Key Themes:
Ongoing Concern: Growth stocks have underperformed value stocks since the highs met in October and in some cases back to summer 2025. Multiple growth/value ratios peaked in August–October and have since declined, even as the S&P hit new all-time highs.
– This could signal (1) an impending pullback in early 2026, or (2) a lasting character shift where value leads and the S&P 500 advances differently.
– Historically, strong bull markets feature growth outperforming value; current leadership from value and broader participation is unusual.
The S&P 500 remains “too positive” heading into year-end, but breadth is mixed (equal-weight S&P holding up, mega-caps and Nasdaq-100 lagging new highs).
Valuation:
S&P remains significantly overvalued:
Trailing P/E far above 20 (historical “expensive” threshold).
Shiller CAPE at 40.76 (well above mean/median 16–17).
Forward P/E at 22.1 (mega-cap 8 at 29); small/mid-caps cheaper (15.5–16.3) but lack earnings momentum.
Overvaluation has persisted for years without derailing the rally, so it is not an immediate trigger but a background risk.
Inflation:
The markets are largely unconcerned despite hotter-than-expected inflation component in the latest GDP report.
Mixed signals: one inflation/deflation ratio looks alarming, but commodities (oil, gas, lumber, diesel) are mostly declining, CRB index sideways, and inflation expectations remain subdued.
Copper surged post-GDP, signaling growth optimism.
Other Markets & Commodities:
Precious metals strong: Gold and especially silver hitting all-time highs; gold/silver ratio collapsing.
Dollar weaker recently (supportive for stocks); watch for potential reversal in early 2026.
Commodities mixed: Copper up (growth proxy), most others down or sideways.
Bonds: Choppy but generally underperforming stocks; junk bonds hitting highs (risk-on signal).
Sector & Index Performance:
Value and cyclical areas (materials, industrials, financials) improving.
Traditional growth leaders (tech, discretionary, semiconductors, mega-caps, FAANG) lagging or sideways.
Small caps briefly showed promise but underperformed last week.
Defensive sectors (healthcare improving, utilities under pressure).
Breadth & Confirmations:
Positive: Advance-decline lines strong, broader indexes (Wilshire 5000, NYSE) hitting highs, junk bonds strong.
Negative divergences: Nasdaq-100, semiconductors, homebuilders, transports not confirming S&P/Dow highs; mega-cap and AI-related indexes lagging.
Correlation Notes:
Many key correlations have moved toward neutral recently (e.g., S&P vs. yields, dollar).
Stocks and bonds weakly positively correlated; stocks and dollar negatively correlated (as expected).
Positive Factors (unchanged for months):
Strong breadth in many areas, risk-on behavior in junk bonds, copper strength, declining volatility (VIX & MOVE), stocks outperforming bonds/commodities.
Negative Factors (short list):
Dollar, British pound vs. dollar, yen vs. dollar, Bitcoin — all in downtrends.
Overall Tone:
Cautiously observant rather than bearish. No crash is predicted but highlighting risks of a 2026 pullback driven by growth/value rotation and leadership shift. Any decline would likely be healthy (shake out excessive optimism) rather than a trend change. Be prepared rather than panic.

PDF of Slides:
https://drive.google.com/file/d/176N-ukZT5Vlocp4xQV1JxzPoYGxCI6sM/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!