Intermarket analysis is the study of how the four major asset classes — equities, bonds, commodities, and currencies — move relative to one another, on the premise that no market trades in isolation and that the relationships between them carry information no single market reveals on its own. Popularized by John J. Murphy (whose 1991 Intermarket Technical Analysis and later Intermarket Analysis established the canon), the discipline treats the four markets as a coupled system rotating around the business cycle: bond prices, commodity prices, the dollar, and stock prices push and pull on each other through interest rates, inflation, and capital flows. The core tension of the entire field — and the single fact a practitioner must internalize before anything else — is that the signs of these relationships are regime-dependent and time-varying, not fixed laws. The same "dollar up" or "bonds rallying" reading means opposite things depending on whether the dominant macro shock is to growth, inflation, or financial stress. Used as a regime classifier, intermarket analysis is a respected institutional tool; used as a fixed-sign mechanical signal, it fails.

What this section covers

This branch decomposes the four-market system into the relationships that matter most for equity-focused analysis, with one node per linkage:

• Stocks vs Bonds — the central axis. Covers the structural difference (ownership vs. creditor claim), the equity risk premium, and above all the time-varying stock–bond correlation that governs the 60/40 portfolio and flags whether the regime is flight-to-quality (bonds hedge equities) or inflation-driven (both fall together, as in 2022). Also treats the contested "Fed model."
• Commodities & Inflation — why raw-material prices both drive and respond to inflation, the cost-push / demand / dollar channels, and the genuine but inconsistent commodity inflation hedge (strong for energy and metals, empirically weak for gold at investor horizons per Erb & Harvey).
• Dollar & Equities — the most genuinely unstable link. Covers the translation/competitiveness channel (a real accounting effect on multinational earnings), the safe-haven channel, the capital-flow channel, and the "dollar smile." The directional S&P–dollar correlation is not reliably signed.
• Credit Spreads as Risk Gauge — corporate-minus-Treasury yield spreads (HY/IG OAS) as a market-priced read of financial stress, with the peer-reviewed Excess Bond Premium (Gilchrist & Zakrajšek) as the part that actually forecasts the economy. The highest-value early-warning use is HY-spread/equity divergence.

The core framework (Murphy's relationships)

Murphy's canonical "rules of thumb" describe a typical inflationary regime (StockCharts ChartSchool; Murphy, Intermarket Analysis, Wiley):

• The dollar trends inversely to commodities (commodities are dollar-priced).
• Commodities trend inversely to bond prices (rising commodities → inflation → higher rates → lower bonds).
• Bond prices trend in the same direction as stock prices (low rates stimulate profits).

He also posits a late-cycle rotation sequence — bonds tend to peak first, then stocks, with commodities the last to top — making the four markets a rough business-cycle clock.

The crucial honesty layer, which Murphy himself flagged: after the 1998 Asian crisis the world shifted toward a disinflationary regime and several of these signs inverted — stocks and bonds became inversely correlated, stocks and commodities positively correlated. So the "rules" are not constants; the inflation regime sets the sign. Empirically, the stock–bond correlation alone has swung roughly from −0.6 to +0.5 across windows (academic surveys; AQR; Vanguard), and the 2022 inflation shock pushed it sharply positive. Any consumer of intermarket signals must first ask which regime is in force.

When it matters — and when it doesn't

Intermarket analysis is a medium-to-long-term, macro-context tool. It earns its keep at the regime and risk-appetite level: classifying whether the backdrop is risk-on growth, flight-to-quality, an inflation/rate shock, or financial stress, and confirming or cautioning a directional view by checking whether the four markets agree. Its highest-value uses are divergences — e.g. equities making new highs while HY credit spreads quietly widen, a classic "smart-money" warning that the credit market is pricing risk equities are not.

It matters least as a short-horizon, single-name timing tool. The relationships are tendencies measured over cycles, not day-to-day signals; the correlations are too unstable to trade mechanically; and they can be distorted by central-bank intervention (the 2020 corporate-bond backstop compressed credit spreads before any fundamental improvement). Murphy's own caution stands: "One indicator or one relationship should not be used on its own to make a sweeping assessment of market conditions."

Adoption, debate & evidence

Intermarket analysis is mainstream — standard on sell-side macro desks, in CMT curricula, and at central banks for the credit-spread piece specifically. But its evidentiary footing is uneven across the four nodes, and conflating the strong parts with the weak parts is the field's biggest credibility trap:

• Strongly supported: the existence of a regime-switching stock–bond correlation tied to inflation (well-documented academically); the commodity–inflation diversification case for energy/metals (Gorton & Rouwenhorst, 2006); the credit-spread/Excess-Bond-Premium recession-forecasting channel (Gilchrist & Zakrajšek, 2012; the Fed's EBP recession model).
• Genuinely contested or weak: a fixed-sign dollar→equities rule (the BIS's Bernard & Galati, 2000, found rising US equities associated with only very small dollar appreciation and no robust co-movement; later evidence shows the sign flips with the volatility/monetary regime, and the trailing correlation has commonly been modestly negative in recent years); gold as a short-horizon inflation hedge (Erb & Harvey, 2013, found it unreliable at 1–20-year horizons); the Fed model (Asness, 2003); and any precise bp-spread→recession-probability threshold (back-fitted, not out-of-sample-validated). The children flag each of these explicitly.

The honest synthesis: intermarket relationships are real but conditional. What is robust is the regime-classification value; what is folklore is the set of memorized fixed signs and precise thresholds.

Sources

• John J. Murphy — Intermarket Analysis: Profiting from Global Market Relationships (Wiley); Intermarket Technical Analysis (1991) — foundational framework, four-market rules, business-cycle rotation, post-1998 regime inversion.
• StockCharts ChartSchool — Intermarket Analysis — inflationary vs. deflationary rule sets and Murphy's "don't use one relationship alone" caveat.
• Supporting evidence summarized at section level; full citations (AQR A Changing Stock-Bond Correlation; Vanguard stock/bond correlation research; Gorton & Rouwenhorst, Facts and Fantasies about Commodity Futures, FAJ 2006; Erb & Harvey, The Golden Dilemma, FAJ 2013 / NBER w18706; Bernard & Galati, The co-movement of US stock markets and the dollar, BIS Quarterly Review Aug 2000; Asness, Fight the Fed Model, 2003; Gilchrist & Zakrajšek, Credit Spreads and Business Cycle Fluctuations, AER 2012; the Fed's Excess Bond Premium recession model) live in the four child nodes.

Section-overview altitude — points to the four child nodes for depth. Disputes flagged at the field level: the relationship signs are regime-dependent, not fixed; the dollar→equities sign, gold-as-inflation-hedge, the Fed model, and precise spread thresholds are the genuinely contested pieces.