What are the most important intermarket relationships to consider when valuing a stock?

I believe in order to find the true value of a stock vis a vis intermarket dependency is not just look at bond price or market because they are generally inversely proportional but also look at its resilience vis a vis commodities such as Gold and real estate as well. Generally it is seen when the share market is falling gold price and real estate value increases but the stock of good companies does not lose too much value as in the eyes of investors it is still valuable and that resilience is the true value of stock.

The easiest way to learn inter relationship in emerging markets is inflation. - If inflation goes up, interest rates are pushed up - When interest rates start going up, bonds fall because the older bonds still receive lower coupons vs the new bonds which receive higher coupons & hence the existing bonds fall in value - In the same situation of inflation & rates going up, consumption falls as loans become expensive (Real estate, Autos etc), profit margins fall because of higher floating rates & CAPEX is pushed back and hence broader markets are under pressure

The stock-bond relationship is characterized by an inverse correlation. When stocks surge, bonds often decline, and vice versa. This pattern reflects investors' risk preferences amid economic expectations. A stock outperformance signals optimism, favoring growth sectors like technology. Conversely, bond outperformance indicates pessimism, leading to a preference for defensive sectors such as utilities and healthcare.

The relationship be negatively correlated at times and it means that stock prices and bond prices move in opposite directions. High interest rates make bonds more attractive, leading to selling pressure on stocks. Conversely, low interest rates favor stocks, boosting their prices.

The same inflation can guide you to understand commodities. - Let’s talk about agri commodities first, If inflation goes up, input cost for industries go up affecting the profit margins and also if the finished good prices go up, it affects consumption and hence when inflation goes up, commodity prices go up, stocks react negatively - Precious metals, When inflation goes up, rupee depreciates. As you import gold in $ which is appreciating and ? which is depreciating, automatically the value of your gold increases in ? terms

The stock-commodity relationship is generally positive, with both moving in tandem amid economic growth and increased consumer spending. However, exceptions arise based on the type of commodities. For instance, while rising oil prices can harm industries dependent on it, an increase in gold prices may signal a lack of confidence in stocks and the economy.

Commodity prices can impact specific sectors (e.g., energy stocks and oil prices). Rising commodity prices can raise input costs for businesses, impacting profitability and stock prices. However, it can also benefit related sectors (e.g., mining companies).

- When there is inflation, currency depreciates and that’s negative for developing stock markets because foreign investors become sellers - Currency depreciation is a positive for exporters as it makes them more ? for the same $ & it is negative for importers as it costs them more ? for the same $

The stock-currency relationship generally aligns, with both influenced by exchange rates and global trade. A stronger currency enhances the appeal of stocks, signaling economic strength. However, the impact varies based on company size and exposure. For instance, a strong dollar benefits domestic-oriented firms, while a weak dollar boosts export-oriented companies by increasing foreign sales.

A weaker currency can boost exports for domestic companies, potentially increasing their profitability and stock prices. Conversely, a stronger currency can hurt export competitiveness.

The stock-sector relationship involves analyzing the performance and rotation of various market sectors, categorized as cyclical or non-cyclical. Cyclical sectors respond more to economic conditions, while non-cyclical sectors are less sensitive. Understanding sector dynamics during different business cycle stages helps investors identify opportunities and risks when valuing a stock.

Currency, interest rate, inflation though all of them somewhere interlinked, are surely the risks to be considered most important ones amongst others but more importantly 3 other risks I would consider even more important: - Geopolitical stance of Government on global issues and it’s stability - The style of government ie. Autocratic or Democratic. Also to consider whether it’s capitalist or communist. - How stringent is the governance from accounting authorities and capital market authorities?