Intermarket relationship

The 4 market groups are: currencies, commodities, bonds, and stocks.

One market groups affect another.

  • Interest rate:
    • Rise interest rate:
      • Bad for utilities stock: High debt => higher interest payment
      • Good/Bad for Bank, insurance, Brokerage firm (Higher net interest income, but higher default on debt repayment)
      • To watch: Real estate (cost of debt higher)
      • Flow from Equity to Bond
  • Inflation: 
    • Rise inflation: 
      • Gold appreciate
      • US depreciate
  • US dollar:
    • reverse relationship with Gold
    • Appreciation of US dollar is bad for “Multi-national companies” (Less export)
  • Crude oil: 
    • Increase in oil price:
      • Good for Energy sector
      • Bad for Airline sector
  • Global Crisis: Hide in “Safe-haven asset”
    • Just hold cash.
    • Commodity: Gold
    • Currency: Japanese Yen, Swiss franc,
    • Bonds: Treasury bills
    • Equity: Utility, Healthcare, Consumer goods