Intermarket Analysis

Disinflation (which lasted from 1981 through 1997) is bad for commodities but is good for bonds and stocks. Deflation (which started in 1998) is good for bonds and bad for commodities—but is also bad for stocks.

And also to improve the timeliness of their signals. This is done by a closer monitoring of commodity prices more directly tied to the economy.

As a rule of thumb, consumer staples are closely tied to bond prices; cyclical stocks are closely tied to commodity prices.

While economists were looking at inflation in medical costs and college tuition, American companies were being bled by deflation in manufactured goods.

took a lot of people a long time to recognize that a major change had taken place in the bond-stock relationship, and even longer to understand why.

stocks usually change direction ahead of their related commodity.

It was also another manifestation of the intermarket reality that financial trends are usually global in nature.

When any one global market (even one as big as the United States) is the only one to reach a new high, it qualifies as a global divergence.

in deflationary times is the Federal Reserve’s attempt to reflate the economy. It does this by weakening the dollar in an attempt to create a little inflation, which in turn boosts the price of gold.