InterMarket R-EView

Short reviews of four of the largest global markets: US Interest Rates, US Dollar, Commodities, and US Equities and how they inter-act with each other. What does this mean to investors is added for context.

LayLine Asset Management Inc

Harry J. Campbell III, CMT

6/9/26

Shortened version today.

Interest Rates

All three Rates covered (5yr, 10yr, 30yr) are up on the month but remain below the highs from last month.  The direction of Rates since early March (start of the War in Iran) have been decidedly upward with higher highs and higher lows.  Looking at the 10yr, it’s up a little more than .5% in three months.  For Rates that’s a significant move up in a relatively short period of time.

Overall, the 30yr is still being influenced, upwardly, by inflation.  The CPI (Consumer price index) reading tomorrow will be telling.  The 5yr is substantial farther below its prior high than either the 30yr or 10yr are in relationship to their prior highs, suggesting the environment for growth is still somewhat challenged.

US Dollar Index

The US$ is still trying to put together a trend, one way or the other, for more than a year.  However, since the beginning of the war the US$ has been establishing a pretty solid uptrend.  The next higher high and the uptrend will be complete. Quick reminder, the US$ has failed three times in the last year to establish a lasting uptrend.

Commodities

I have a question.  If 25% (or so) of the worlds oil supplies come through the Straits of Hormuz and it has been cut off for more than three months, why is oil only ~$88 to $91/barrel today and not $150/barrel.  Perhaps we don’t need as much oil as was previously thought. 

US Equities

US Equities, Fundamentally, year over year earnings are expected to top 20% for 2^nd quarter.  Revenue growth is equally impressive at ~12%, well above the its 5 and 10 year average. Very strong fundamentals.  Technically, US Equities have gone from a strong upward trend to a somewhat challenged one.  Watch the 50-day MA (moving average of prices) for indications of a trend change.

What Does This Mean To Investors?

Since the beginning of the war; Rates are up (bond prices down), US$ is stronger, Commodities prices are up, and US Equities are up.  What this means is that since the war started; holders of the US$ are happy, commodity producers are happy, and US Equity investors are happy.  Odd that the only investors that are unhappy are bondholders, doesn’t seem right.

LayLine Asset Management Inc

Harry J. Campbell III, CMT

5/26/26

Interest Rates

All three Rates covered (5yr, 10yr, 30yr) in the past couple of weeks have gone up quickly and then basically right back down to the same level.  Of particular note is the 30yr reached 5.2% last week, a level not seen in a couple of decades.  The 30yr is still hovering slightly above 5%.  Both the 5yr and the 10yr need to get to about 5% for each to reach new cycle highs.  Currently the 5yr is ~ 4.2% and 10yr ~4.5%.  For reference, the FED Funds Rate is currently set at between 3.5% and 3.75%, below all three Rates.

Looking back one year ago, the FED Funds Rate was set at between 4.25% to 4.5%, while the 10yr was at about the same level, 4.4%.  In other words, the FED lowered the FED Funds Rate by about .5% to 1% over the past year, yet the 10yr has not gone down at all.  Looking at the 30yr, it is actual higher now than when the FED lowered the Funds Rate last year.  Even the 5yr has not gone down in tandem with the FED Funds, even though its closer in duration to the FED Funds Rate than the other two Rates covered.  Going back two years, the FED Funds rate was set at 5.25% to 5.5% and at that time the 10yr was hovering around 4.4%, about the same level as today, 4.5%.  The FED lowered the FED Funds Rate by ~2% (200 basis points) and the Treasury Rates across the curve; 5yr, 10yr, 30yr, are still at about the same level as they are two years ago. 

It appears that the FED main policy tool, adjusting the FED Funds Rate, does not have the same effect on Treasuries Rates in this business cycle.

US Dollar Index

The US$ continues to move up and down within a fairly well defined sideways channel, remaining at about the same value as the US$ was one year ago.  As we consider the economic implications of the energy shortage globally, keep in mind that most all energy sold globally is transacted with the US$.  The weaker the US$ is, the more expensive oil gets.  For example, an oil producer sells their oil and gets paid in US$.  When they convert a weaker US$ back to their stronger (relative to the US$) local currency, they get less of their local currency.  To compensate for the currency exchange they need to raise the price of the oil they sell to make the same. A stronger US$ has the opposite effect, that of lowering the price.

Given the economic implications of both the on and off again tariffs on international trade, predominately done in US$, and an energy shortage of unknown severity or length of time, that is also primarily transacted with US$, it is economically reassuring that the US$ has remained so stable, albeit weaker, for the past year.

Commodities

The strong upward trend in the GSG since the beginning of the year is starting to show the first signs of exhaustion, with a lower low after a higher high.  This is a weak indication to say the least, but it does suggest some reduced stress in the supply and demand dynamics resulting from the shortages, of many commodities in addition to oil, from the shutdown of the Straits of Hormuz.  Energy is a large percentage in the GSG, like most commodity indexes.  It would not take much of a drop in oil and other energy related products to push the index lower.  From the Technical advantage point this is the first time since the beginning of the year that the GSG is positioned to go below its 50-day MA (moving average of prices).  A confirmed break below the 50-day MA would target the 200-day MA, which is positioned quite a bit lower. 

As mentioned above, the weaker US$ adds upward pressure on oil and other commodities prices, suggesting that any downtrend in commodity prices may be shallow and or short lived if the US$ stays weak.

US Equities

US Equities set another record high today and up are ~10% YTD (year to date).  

On the index level the Fundamentals continue to be quite impressive on both the earnings and revenue levels.  However, on the index level the concentration of rapidly rising earnings and revenues in a relatively small number of very large, giant size, companies is a consideration to contend with.  When viewing the market from the 10,000 foot level, it is hard to see what’s actually happening on the ground.

Technically, US Equities continue in a strong position, well above its 50-day MA and 200-day MA, and the 50-day MA is above the 200-day MA and both are trending upward.  Nothing really has changed, most Technical indicators continue to provide a positive read. One thing to consider, the same market concentration of a few companies that is reducing visibility on the Fundamentals, also affects the clarity of the Technical reads. This is most evident in the sector and index level analysis. 

What Does This Mean To Investors?

The FED has not been able to affect Rates like they used to, leaving Rates higher than the FED wants, raising cost for capital to grow the economy.  The US$ weakness is putting upward pressure on energy products, increasing inflation fears.  Commodities continue to hold at thirteen year high prices, supporting those inflation fears.  US Equities continue to be pushed higher by the exceptional earnings and revenue growth from a relatively few, very large companies.  What this means to investors is that operating costs are on the rise, earnings need to continue to grow fast enough to cover those rising costs.

LayLine Asset Management Inc

Harry J. Campbell III, CMT

5/12/26

Interest Rates

All three Rates covered (5yr, 10yr, 30yr) are once again testing their short-term highs, the 30yr at 5.02%, the 10yr at 4.46%, and the 5yr at 4.12%.  One conventional way to establish the existence and direction of a trend, in our case a rising trend, is to look for higher highs and higher lows. As of today, all three Rates have higher highs and higher lows, classic signs of durable uptrends. In addition, each of the Rates 50-day MA (moving average) has crossed above its 200-day MA, a strong Technical indication. Along with a couple of negative trendline violations (breaking through resistance), the Rates markets are heavily leaning to the upside.

The CPI (consumer price index) was released this AM and even though there are some issues with the data due to the government shutdown a while back, the CPI came in generally stronger than anticipated. Being that the core CPI (excluding food and energy) is at ~2.8%, well above the FED target of 2%, it shouldn’t be any surprise that Rates have been pushing higher, especially the 30yr.  Coming out of the Pandemic, Rates topped out at 5.1% on the 30yr, 5.0% on the 10yr, and 5.0% on the 5yr.  Currently the 30yr is the only one close to breaking above its prior cycle high.  The 30yr is our InterMarket tell for inflation, so one would expect the 30yr to be the first to break out to new highs.

US Dollar Index

Surprisingly, the US$ appears to be the calm in the storm.  The other InterMarkets are all moving upward with significant velocity.  The US$ today closed squarely where it was on the 1^st day of the year, perfectly flat.  Between the tariffs and the Iran conflict, you could have easily argued that the US$ should have weakened and at the same time argued that the US$ should have strengthened.  This is not to say there hasn’t been a few ups and downs, but as of today the US$ is at the same level as at the beginning of the year.

Holding its current value under the circumstances is not necessarily a positive thing, assuming a preference for a stronger US$. The US$ is weaker than it was at the beginning of 2025.  A weaker US$ makes things produced internationally more expensive for US consumers to purchase, but makes US produced goods and services less expensive for international consumers to buy.  That’s over simplistic but you get the drift.  Put another way, a stronger US$ helps some, US consumers of international goods and services, and hinders others, international consumers of US produced goods and services as it take more of the local currency to buy products denominated in the stronger US$.  It works the other way with a weaker US$. 

Commodities

The GSG is touching levels not witnessed since 2014.  Outside of the obvious surge in energy there are other examples of higher commodity prices, i.e. copper is at or near historical highs related to the infrastructure build out of data centers and energy projects.  Looking back the GSG had plateaued from 2009 to 2014 at about the same level as it is now, only to drop significantly in 2014 and stayed below that level until now, twelve years later.  Looking back over the past couple of decades commodities tend to track sideways as the markets absorbs the changes that instituted the rapid and significant price change after long periods of relative calm pricing.  The confluence of; tariff costs, rising production and shipping costs due to high energy, and a weaker US$, suggests that commodities are staking out new ground, at higher prices.

US Equities

US Equities hit another record high yesterday. The move off of the late March low is by all counts, one for the record books. 

On the Fundamental front, earnings currently being reported and the estimates for the full year are really strong.  So far, 1^st quarter estimates are for ~27% earnings growth and ~11% revenue growth, both very good numbers.  The rising earnings has held the P/E ratio (price to earnings) to ~21, still high by historical levels.  We are nearing the end of the earnings season for the quarter.  As usual, it was a good quarter for those companies that made their numbers, not so for those that did not.

Technically, US Equities are in a strong position, well above its 50-day MA and 200-day MA, and the 50-day MA is above the 200-day MA and both are trending upward.  The swift and significant move up has pushed the market into somewhat overbought conditions.  Loosely translated, overbought suggests we are running out of buyers at this price level.  The RSI (relative strength index) indicator I use is often referenced when someone says the market is overbought. But as it is often said, positions can remain overbought for much longer than we would expect.  Overbought is not a trade indication, it’s more of a warning light to watch for a possible slowdown ahead.

What Does This Mean To Investors?

Let’s see, Rates are on the rise but US Equities seem to don’t care, The US$ does not seem to be particularly bothered at the moment, Commodities are on the rise, something Rates are taking note of, and US Equities continue to rise, concerned about neither rising Rates or rising commodity prices, both of which result in higher operating costs. What this means to investors is that for the moment (an obvious and needed hedge), the economy appears to be strong enough to handle the higher costs of both rising Rates and higher Commodity prices.

LayLine Asset Management Inc

Harry J. Campbell III, CMT

4/28/26

Interest Rates

All three Rates covered (5yr, 10yr, 30yr) are attempting to either confirm or establish the technical qualifications of a solid uptrend.  The 30yr and 10yr have confirmed the uptrend with higher highs and higher lows.  The process started last October for these two Rates with a cycle low followed by higher low with the high after the higher low, higher than the high prior to the higher low.  The 5yr is in the process of establishing it’s uptrend, it just needs a higher high and it qualifies as an uptrend.  Translation, the 30yr is moving higher to counter perceived upward pressure on prices, inflation.  The 5yr is rising due to the increased growth associated with rising inflation (at least in the short term).  The 10yr supports both indications.   

Before the war in the Gulf erupted, Rates appeared to be on a nice glide path lower.  However, when about 20% (probably more, but what do I know) of the global supply of energy is cut off, it’s going to push prices higher and that’s what the Rates markets is suggesting.  The issue comes down to time.  The longer energy supplies are constricted, the more likely a one-time price shock like we are experiencing will morph into an inflationary impulse we would prefer to avoid.

US Dollar Index

Surprisingly, the US$ is at about the same level it was at the beginning of the year, notwithstanding several swings up and down during that time.  Technically, it hanging around both the 50-day MA (moving average of prices) and 200-day MA, both of which are fairly flat.  The US$ has been holding up very well considering the tariff issues are still present and there is a war in a very sensitive, economically, region of the world. 

Although the US$ is weaker than when the current administration took the reins, once the tariffs were put in place last April the US$ has been relatively flat, resilient one might say.  One issue to consider is that oil is traded mostly in US$ and when the pent-up oil starts to follow again, it will increase the demand for US$.  Market participants will be watching closely to see if there are enough US$ in the system and or how the Treasury reacts to any significant variations in the US$ supply. 

Commodities

Nothing like a parabolic (vertically steep move up) move in commodities to get your attention.  It goes without saying, but I will, energy products make up a significant portion of the commodity index GSG used here, and in most commodity indexes.  One of the reasons is that energy is a major cost (like aluminum or mining) in the processing and transporting of commodities.  The explosive move up in commodities comes after years of either stable or lower commodity prices.  The last time the GSG was this high was mid 2014.  Between 2014 and now, commodity prices have been consistently lower, and from 2015 to 2021 substantially lower. 

The US, and global, economy has not had to deal with such a steep and fast increase in energy prices in a long time.  Fundamentally there are so many variables, considering the war and tariffs, it’s impossible to gauge the future direction for commodities.  But from a Technical perspective, parabolic moves like we have seen year to date in commodities tend to retrace (down) most of the move up.  The economy can only hope.

US Equities

US Equities continue to move up in steep fashion off the 3/30 low, yesterday setting another all-time high.  However, it worth noting that the last eight days has seen US Equities take a break (moving sideways) after a historic, virtually straight up, move up over the prior thirteen days.

Early on in the earnings season a familiar pattern is emerging, companies that post good numbers well above expectation and you may get rewarded, post a miss or results below the streets whisper number and the equity gets punished badly.  Fundamentally, earnings so far this season are coming in well, up ~15%, and higher than the ~13% expected going into the reporting season.  Even with the rise in earnings, the P/E (price/earnings) ratio remains slightly elevated as compared to the last 5-10 years.  What’s quite impressive is the reported combined net profit margin so far this earnings season has been very strong, above 13%.  Fundamentally, the 1^st quarter was a solid quarter for US Equities.

On the Technical side, US Equities remain strong.  The steepness of the rebound off the March 30^th low was so steep it bent the 50-day MA from a downtrend to an uptrend in a very short period of time, not an easy feat mathematically speaking.  The 50-day MA is now much closer to the 200-day MA then before, but at the moment both are moving upward in parallel.  My weekly indicators are strongly positive, however the daily indicators suggest a certain degree of over bought conditions.  In other words, longer-term US Equities upward enthusiasm remains intact, however, in the shorter-term there is some concern that the market has moved too far, too fast. 

What Does This Mean To Investors?

In summary, Rates are rising, the US$ is basically flat, commodities are up significantly in price, and US Equities are at record highs.  It would seem that US Equities are looking through the rising costs associated with higher Rates and commodity prices.  What this means to Investors is that rising Rates and commodity prices are not a combination generally well received by businesses or consumers.  The current eight day flat spot in US Equities may signal some degree of reevaluation of Rates and input costs related to rising commodity prices.

LayLine Asset Management Inc

Harry J. Campbell III, CMT

4/14/26

Interest Rates

All three Rates covered (5yr, 10yr, 30yr) are flat to slightly lower on the month, but noticeably higher than in the beginning of March as war broke out in the Middle East. Before the war Rates were meandering lower since hitting cycle highs in May of 2025; the 5yr was at 4.17, 10yr was at 4.63, 30yr was at 5.15.  Currently, the 5yr is at 3.89, 10yr is at 4.27, and the 30yr is at 4.88.  Rates across the curve are lower now than about a year ago. 

The good news is that Rates are lower, the difficult part is that all three Rates are in the technical process of establishing varying degrees of upward trends.  The 30yr is clearly in a short term uptrend that started last October with the classic pricing structure of higher highs and higher lows.  The 10yr did not put in a lower low, but it was close, so combined with consistently higher highs since its low last October, it’s still in an uptrend of sorts, just not as strong as the 30yr.  The 5yr put its low in when the war began in March so it’s too early for a trend indication.

If you are wondering about the longer trend indications, if the 30yr rises above 5.153 before it puts in a lower low, technically that would signal a longer term uptrend.  If the 30yr goes below 4.528 before putting in a higher high, technically that would indicate the beginning of a downward trend in Rates.  Currently the 30yr is at 4.879, pretty much in the middle of the two levels.  Similar analysis can be applied to the 10yr.

 US Dollar Index

To suggest that nothing happened to the US$ b/c it is only slightly higher than when the war began, would be misleading.  In actuality, for the full month of March up until April the US$ went up in value, significantly in currency terms.  Since the end of the month, the US$ as weakened by the same degree it strengthened, but in half the time.  Sometimes referred to as, escalator up, elevator down. 

The US$ will play an influential role in the global economic aftermath of the war.  With all the caveats it deserves, oil is mostly traded in US$ and as such a weaker US$ will increase the global price of oil and a stronger US$ will decrease the global price of oil.  The challenge is that the US$ has both gone up and down during this war.  Considering the repercussion of higher or lower energy cost on the global economy, the strength or weakness of the US$ will be closely monitored.

Commodities

It is always difficult to look at commodities as an economic sector (indexing) when energy is not only a very large percentage of the index product makeup, but energy is also a large cost in the production of many commodities, think electricity and aluminum.  However when you add the complexities of new rounds of tariffs, two wars (Ukraine and Iran), and a building shortage of global energy supplies, commodities are going to be exceedingly difficult to get a read on.

Normally (whatever that is at this point in time) we would expect higher energy prices to feed into inflation, pressuring consumer prices and manufacturing costs higher.  However, this time around the idea of demand destruction pressuring prices lower cannot be discounted completely.  The demand destruction would result from not just rising prices on consumption in general, but the immediate rise in transportation costs (hard to substitute in the short term) would require consumers to cut back on spending elsewhere in the budget. Left to their own device, higher prices reduce spending and demand, eventually lowering prices (high prices are the cure for high prices).  Lower prices eventually increases demand, increasing spending and allowing prices to rise.  The catch is that both demand destruction and inflation can once unleashed, spiral out of control.  Something that needs to be avoided.

US Equities

To borrow from a phrase used above, since February, US Equities took the escalator down and the evaluator up.  It took US Equities 2 months to go down about 10% and about two weeks to make it back and close near an all-time high. 

This earnings season Fundamental analysts have their hands full with: spillover concerns from the private credit markets, a major dislocation in the supply of global energy with a wide variety of potential outcomes to decipher, none of which look promising, and there are the negative economic outcomes from the price shock from higher gas costs on consumers spending habits, both domestic and international.  This will pressure profit margins for many companies with a combination of less revenue from slower consumer spending and higher production costs related to higher energy prices.  In addition, the war with Iran adds another layer to the fundamental complexity we are likely to see throughout this earnings season.

On the Technical front comes the heading, you don’t see that every day.  Last week US Equities gapped (opened higher) from below the 200-day MA (moving average of prices) to above the 50-day MA, which was at a much higher level, in a single day.  Technically, that’s a show of strength and the follow through over the next four days supports that observation. 

After a strong moves like this, technically we can expect a retest of the 50-day MA at some point in the future.  Another technical consideration is that markets tend to close gaps, in our case a close below the low side of the gap, as part of a retest of the this strong move up.  At current levels, closing that gap would also result in a retest of the 200-day MA.  A closing of the gap and a hold of the 200-day MA would position US Equities for a strong move up.  Obviously, any failures along the way will be technically a challenge for US Equities to deal with.

What Does This Mean To Investors?

In summary; Rates are trending higher, the US$ is trending sideways, commodities are trending higher, US Equities are back near record highs.  Still not a great combination for growth.  What this means to investors remains the same, for everyone’s sake, let’s hope that the war ends quickly.

References:

5yr: 5 Year Treasury Yield (FVX)

10yr: 10 Year Treasury Yield (TNX)

30yr: 30 Year Treasury Yield (TYX)

US$: On 9/24, Switched from Invesco DB (Deutsche Bank) US Dollar Index Fund UUP to DXY, ICE US Dollar Index.

GSG: On 2/11/25, iShares S&P GSCI Commodity Index replaced the DBC: Invesco DB (Deutsche Bank) Commodity Index Tracking Fund, as our commodity index.

Yield Curves: The difference between the 5yr and 10yr, and between the 10yr and 30yr.

FED: Federal Reserve

ECB: European Central Bank

US Equities: S&P 500

EURO: Eurozone Currency

YEN: Japanese Currency

IMF: International Monetary Fund

CMT: Chartered Market Technician

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