InterMarket Analysis Update for March 3-7 2025

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The Intermarket Analysis video update, prepared for Monday, March 3, 2025, provides a comprehensive weekly analysis of the financial markets beyond just the S&P 500. Various aspects including market valuation, Growth versus Value dynamics, sector performance, and inflation indicators, while also considering broader market trends and intermarket relationships.
Key Points:
Valuation:
The S&P 500 remains overvalued historically, with a PE ratio well above 20, a threshold indicating an expensive market. This has persisted for years despite occasional downturns.
The Shiller PE ratio, which smooths earnings over 10 years, is at 37.53—over double its historical median of 16-17, reinforcing the overvaluation narrative.
The Forward-looking PE ratios show Mega-Cap stocks (e.g., "Mega Cap 8") at 27, still expensive, while the S&P 500 is at 21.5. Mid-caps (15.6) and small-caps (15.3) appear fairly priced but lack momentum, possibly due to rising interest rates impacting smaller companies more.
Growth vs. Value:
Growth stocks are in an uptrend but pulling back, while Value stocks are holding steady above their 50-day moving average, suggesting a potential shift toward a more defensive market posture.
The ratios of Growth-to-Value across the various indexes and ETFs (e.g., S&P, Small-caps, Mid-Caps) consistently show Growth outperforming but weakening, with Value starting to bounce back. No major trend reversal has occurred yet.
Inflation and Commodities:
The CRB Index (commodities) is in an uptrend, hinting at inflationary pressures, though it recently pulled back. Longer-term, commodities may be starting to outperform stocks.
Specific commodities: corn and natural gas are in uptrends (inflationary), while oil is in a downtrend (below $70), lumber is trending up, and copper (an economic barometer) is improving, suggesting optimism about future economic growth.
Inflation expectations (via an ETF) have declined in 2025, countering market fears of rising inflation.
Broader Markets and Sectors:
The S&P 500’s equal-weight index is underperforming the weighted index, indicating broader market weakness beyond Mega-Caps.
Defensive sectors (e.g., staples, utilities, low-volatility stocks) are showing relative strength, while growth-heavy sectors (e.g., tech, semiconductors) are weakening, dropping below key moving averages.
Small and Mid-Caps continue to lag, impacted by higher interest rates, while Mega-Cap Growth remains a market driver despite recent pullbacks.
Bonds and Interest Rates:
Bond prices are rising (yields falling), with the 7-10 year bond and total bond ETFs showing strength. High-yield (junk) bonds are performing well, but some corporate bonds exhibit signs of a potential downtrend (e.g., death cross).
The 10-year yield is declining, and stocks and yields are currently moving in the same direction (both down), a recently unusual correlation.
Global Perspective:
U.S. stocks are near their 200-day moving average relative to global stocks, with potential for either a bounce or further decline.
Emerging Markets and China show slight uptrends, while Japan and Europe are mixed. The U.S. dollar remains strong against the Euro, Yen, and Pound.
Technical and Sentiment Indicators:
The VIX (volatility index) spiked above 20 but dropped below it by Friday, signaling heightened but not extreme market unease.
Long-term momentum oscillators (e.g., PPO, KST) show slowing upward momentum in U.S. stocks and a potential shift toward commodities outperforming.
Sector Breakdown:
Tech (PE above 26) remains expensive and under pressure, while energy is fairly priced. Financials and industrials show resilience, but staples and healthcare (defensive) are gaining relative strength, reinforcing a possible defensive shift.
Conclusion:
The market is at a crossroads in early March 2025, with overvaluation concerns persisting, growth stocks losing momentum, and defensive sectors gaining traction. Inflation signals are mixed, with commodities rising but expectations easing. Key technical levels (e.g., moving averages, ratios) and intermarket relationships should be watched to determine if the market will recover or turn more defensive. Despite recent weakness, many indexes and sectors remain in longer-term uptrends, suggesting resilience but also vulnerability to shifts in momentum or external pressures such as interest rates.
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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!