What Is Intermarket Analysis?
💡 Definition
Intermarket analysis studies how major asset classes — equities, bonds, commodities, and currencies — influence each other. By tracking correlations, lead–lag effects, and macro drivers (growth, inflation, liquidity), traders can align with the prevailing risk regime and avoid fighting cross-asset flows.
Markets are connected: yields shape FX; FX and commodities feed into equities; credit conditions gate risk appetite. Context from other assets improves timing and selection.
Visual Overview
Cross-Asset Map • Regime Quadrants • Lead–Lag Flow
Track where policy, yields, USD, and commodities are pointing. Their sequence often foreshadows equity trends and sector leadership.
Key Cross-Asset Relationships
📉 Bonds ↔ Equities
Falling yields (loosening financial conditions) often support equities; rising real yields compress valuations.
💵 USD ↔ Commodities
Stronger USD usually weighs on dollar-priced commodities (oil, metals); weaker USD is tailwind.
🛢️ Commodities ↔ Cyclicals
Commodity upswings favor energy/materials; downswings favor defensives and growth/long-duration assets.
💳 Credit ↔ Risk Appetite
Tightening credit spreads and rising funding stress precede equity drawdowns; easing spreads support rallies.
🌡️ Inflation & Real Yields
Higher real yields pressure gold/long-duration equities; falling real yields are supportive.
Core Metrics & Dashboards
Watchlist
Lead–Lag Tools
Why Intermarket Works (Practically)
- Transmission Channels: Policy and rates ripple through FX and commodities into earnings and multiples.
- Flow Timing: Some assets react earlier (rates, FX) while others absorb later (equities, credit).
- Diversification & Hedges: Cross-asset signals help size exposures and overlay hedges.
Practical Intermarket Playbook
Step-by-Step
1) Diagnose regime (growth vs inflation) using yields, breakevens, and commodity complex.
2) Map lead–lag: watch USD and rates shifts for early hints; confirm via credit spreads.
3) Align equity bias and sector tilts with the regime (e.g., cyclicals in growth-up, defensives in growth-down).
4) Use MTF execution: HTF regime filter, LTF entries at technical levels.
5) Hedge tactically: if USD and real yields turn against risk, cut size or add protection.
Common Mistakes
⚠️ Avoid These Errors
- Assuming static correlations; they flip across regimes.
- Forcing equity trades that contradict rates/FX message.
- Using single indicators without a dashboard (cherry-picking).
- Ignoring lags — reacting too soon to early signals or too late after the move.
Advanced Concepts & Integrations
🧮 Factor × Macro
Relate value/growth/quality/momentum spreads to real yields, curve slope, and USD trend.
🔗 Cross-Asset Pairs
Trade thematic pairs (e.g., Copper/Gold vs 10y yield; Energy vs USD) with risk caps.
📈 Co-integration Tests
Identify mean-reverting relationships for relative-value trades across assets.
🧭 Event-Aware Filters
Re-weigh signals around central bank meetings, CPI, payrolls; widen stops or flatten.
The Bottom Line
Intermarket analysis gives you the macro wind direction. Read rates, FX, commodities, and credit together, decide the regime, and trade equities (or any sleeve) with that tailwind — managing risk when cross-asset signals turn.