InterMarket Analysis Update for March 24-28, 2025

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Intermarket Analysis Update, prepared for Monday, March 24, 2025, provides a comprehensive weekly analysis of the S&P 500 and its relationship with other markets.
Key Areas:

1. S&P 500 Valuation: The analysis examines historical and forward-looking P/E ratios. Historically, the S&P 500 is trading well above the "expensive" threshold of 20 (currently between 5,500-5,600, compared to a "fair value" level around 4,000). The Shiller CAPE ratio is at 35.28, nearly double the median/mean of 16-17, indicating overvaluation. Forward-looking P/E remains slightly above 20, despite recent declines, while Mid and Small Caps are below 15, though their earnings potential is questioned.

2. Growth vs. Value: Growth stocks have outperformed value during market uptrends but are currently under pressure, falling below the 200-day moving average since mid-February 2025. Value stocks, representing defensive sectors such as staples, have been outperforming recently, reflecting a shift to a more cautious market stance. This trend is consistent across various charts and ETFs.

3. Inflation: Commodity prices (CRB Index) are in a long-term uptrend, suggesting inflationary pressure, though inflation expectations (via ETFs) have declined since early 2025. Specific commodities show mixed signals: lumber and copper are inflationary (uptrends), while oil and aluminum are not (downtrends). Copper’s strength indicates economic confidence.

4. Other Markets: The U.S. dollar is weakening, with the euro, yen, and pound gaining. Gold is outperforming silver and oil, while bonds are starting to outperform stocks. The 10-year yield and oil show a neutral correlation. Global stocks (ex-U.S.) are outperforming the S&P 500, hinting at a potential shift.

5. S&P 500 Sectors: Defensive sectors such as staples, utilities, and healthcare are outperforming, while growth sectors such as tech and discretionary lag. Energy and financials show signs of recovery, but materials and industrials are struggling.

6. Indexes and Correlations: The equal-weight S&P outperformed the cap-weighted S&P, reflecting broader market volume beyond the Mega Caps. Small Caps and tech-heavy indexes (NASDAQ, semiconductors) are underperforming, while low-volatility ETFs are gaining traction. Stocks are underperforming commodities, and correlations with yields and the dollar are mostly neutral.

7. Long-Term Trends: Monthly charts show momentum rolling over for the S&P 500, NYSE, and global stocks, suggesting potential longer-term weakness.

8. Positive/Negative Lists: Positives include uptrends in copper, gold, silver, bonds, and emerging markets. Negatives include weakening small caps, micro caps, semiconductors, and currencies against the dollar.
While the market appears overvalued and under pressure since mid-February 2025, it’s unclear if this is a temporary correction or a longer-term shift, especially with new economic policies under the Trump administration.

PDF of Charts and Slides used in today's video:
https://drive.google.com/file/d/1XTaqu72Z2r60n0BNNFTmgZf_okzOlqo9/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!