Intermarket Analysis and Asset Allocation

Markets are interrelated because they are all expressions of the economic cycle.

• Relationships between commodities, currencies, bonds, and stocks are historically evident.

• Rising bond prices have usually led stock market bottoms

• Commodity prices move inversely to bond prices and usually signal inflationary trends

• A rising dollar usually moves opposite of commodity prices—signaling more deflationary conditions • Sectors and Industry groups also demonstrate relationships that are dependent upon the business cycle.

• Sub asset classes are also linked in ways influenced by the overall business cycle.

Big Idea: Intermarket relationships can be exploited within a systematic asset allocation framework