Int'l Macro Vision: Sector Synopsis
Int'l Equity StrategyIn our latest Int'l Compass (September 28, 2023), we discussed how some key support levels on global equity indexes were starting to break on the EURO STOXX 50, MSCI ACWI ex-US (ACWX-US), and MSCI EAFE (EFA-US), as the U.S. dollar (DXY) and 10-year Treasury yield broke above $105.70 and 4.35%. We also discussed how the breakouts in the DXY and 10-year Treasury yield increased the odds of a break below major $91.50-$92 support on MSCI ACWI (ACWI-US), but that we need to see a break below $91.50 happen first, in order for us to shift to a more cautious outlook.
We are maintaining a constructive outlook for the following reasons: (1) In addition to MSCI ACWI (ACWI-US) holding above $91.50, the MSCI EM index (EEM-US) is also still above major support at $37. (2) Although global sovereign 10-year yields are breaking out to new highs, 1- and 2-year yields are not; this suggests global central banks (esp. the Fed and ECB) could be done hiking rates. (3) The DXY could be staging a false breakout at $105.70, and a break below this level would be very bullish for global equities. (4) High yield spreads in the U.S. and Europe have been making lower highs for a year or more. (5) Defensive Sectors are lagging, a clear risk-on signal. (6) Non-U.S. small-caps are outperforming relative to non-U.S. large-caps. (7) Broad commodities (Bloomberg Commodity index) and WTI crude oil recently violated their 3.5-month uptrends, so rising commodity prices is much less of a near-term concern, even with the evolving situation in the Middle East/Israel.
The upcoming days will be critical; will the indexes that are breaking down (EURO STOXX 50, ACWX-US, EFA-US) be able to reclaim supports (i.e., false breakdowns), or will the ACWI-US and EEM-US be added to the list of indexes that are breaking down? The former would be bullish, and the latter would be bearish.
Our current country overweights include Japan and India. We are also overweight value and small-caps within non-U.S. equities.
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Nippon Yusen Kabushiki Kaisha is a shipping and transportation company. Through its affiliates, Co. provides global logistics based on international marine transportation business, cruises, terminal and harbor transport, shipping-related services, real estate, and other business. Co. operates various types of carriers including container ships, bulker and specialized carriers, tankers and gas carriers to carry iron ore, coal, cement, crude oil, gas, wood chips, grain, fertilizer, dry bulk and reefer cargoes, chemical products and other products.
Vermilion Research delivers timely, actionable, and unique research inputs to professional investors. Our research strategists highlight securities which we believe are at major inflection points, based on our various proprietary technical indicators, and offer asymmetric risk/return profiles. We believe our research methodology, which is not limited by industry sector or market capitalization, enables us to deliver superior investment recommendations.
Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.
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