InterMarket Analysis: June 16, 2025 Overvaluation, Growth vs Value, and Geopolitical Impacts!

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The weekly Intermarket Analysis Update examines various financial indicators beyond the S&P 500 to assess overall market conditions. Key points from the June 16, 2025, update include:
Valuation: The market remains overvalued historically and on forward-looking P/E ratios. The S&P 500 P/E is 21.3, above the expensive threshold of 20, while the Mega Cap 8 is at 27.6. Mid-caps (15.7) and small-caps (14.7) are more fairly priced but underperforming, remaining below their 200-day moving averages. The Shiller P/E ratio is 36.52, significantly above the historical median of 16-17, indicating persistent overvaluation.
Growth vs. Value: Growth stocks are outperforming value stocks, a positive market signal. Growth ETFs and indexes are showing strength, with ratios such as the S&P growth-to-value ratio forming a recent golden cross, though it weakened slightly after Friday’s market drop.
Inflation: The CRB index (commodities) suggests mild inflationary pressure, particularly driven by oil and gold due to geopolitical tensions (e.g., Israel-Iran conflict). Oil surged to the mid-70s, while the Baltic Dry Index hints at rising shipping costs. However, inflation expectations are declining, and other commodities such as aluminum, corn, wheat, and lumber show mixed or weak inflationary signals.
Other Markets and Correlations:
Oil and Gold: Oil spiked due to geopolitical events, while gold has outperformed oil long-term (gold-to-oil ratio down). Gold is up over 30% in 2025.
U.S. Dollar: In a downtrend, with the euro, yen, and pound gaining against it, which is often positive for stocks.
Bonds: The 10-year bond price is in an uptrend, but corporate bonds are in a downtrend. Junk bonds are outperforming safer bonds, indicating risk appetite.
Copper: In an uptrend, suggesting a positive economic outlook, though the copper-to-gold ratio is declining.
S&P 500 Sectors:
Strong performers: Financials (Underperforming the SPX) and industrials showing resilience, with industrials forming a golden cross. Communication and tech sectors are improving but remain in downtrends.
Weak performers: Energy spiked recently but is in a longer-term downtrend. Real estate and staples are underperforming, with staples’ weakness indicating a risk-on market.
Indexes: Most major indexes (S&P 500, Dow, NASDAQ, etc.) are in downtrends but above their 200-day moving averages, except for mid-caps, small-caps, and micro-caps. The equal-weight S&P 500 is underperforming, signaling weaker broad market participation. Global stocks outperforming U.S. stocks.
Other Assets:
Semiconductors and AI: Improving but in downtrends.
High-leverage loans and emerging markets: In uptrends.
Bitcoin: In an uptrend, reflecting risk appetite.
Long-Term Trends: The NYSE and S&P 500 monthly charts remain above moving averages, but momentum indicators (e.g., PPO, KST) show declining momentum. Global markets (e.g., China, Europe, Japan) are flat or trending down.
Positives: Copper, euro, pound, yen, CRB index, gold, silver, low-volatility ETFs, staples, bonds (except corporate), FANG index, high-leverage loans, emerging markets, and Bitcoin are in uptrends or improving.
Negatives: Growth and value indexes, corporate bonds, Dow Jones composite, tech, semiconductors, and most major indexes remain in downtrends, though many are improving.
Highlights include an SPX with persistent overvaluation, growth outperforming value, mixed inflationary signals, and geopolitical influences (e.g., Middle East tensions) impacting oil and stocks. While some sectors and assets show strength, broader market participation is weak, and long-term trends suggest caution.

PDF of Slides: https://drive.google.com/file/d/12-HLLQNuO9121csNklHpXzcGYVm7rIsY/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!