Vermilion Int'l Compass: Global Equity Strategy
Major Top for the U.S. Dollar (DXY) = Risk-OnOur outlook remains bullish on global equities (MSCI ACWI). We have been bullish since early-November 2023, save for a two month period from late-July to late September 2024 when we were neutral. We discussed in last week's Int'l Compass (Feb. 13, 2025) how both ACWI-US and the S&P 500 were coiling just below all-time highs, likely setting up for major breakouts; the breakouts are here. We also believe the U.S. dollar (DXY) and Treasury yields have put in major tops, which is a crucial risk-on signal for global equities. With more and more countries breaking out, we see every reason to remain bullish as long as ACWI-US is above $116, the S&P 500 is above 5770-5850, and the EURO STOXX 50 is above 5030.
Remain Overweight U.S. and Germany. Our two country overweights include the U.S. (S&P 500) and Germany (DAX). With that said, we are considering upgrading the entirety of Europe (EURO STOXX 50) to overweight as we are seeing substantial improvement in other European countries including Sweden, Greece, Austria, Poland, and Czech Republic, among others. Korea (KOSPI) also displays decisive price and RS bottoms.
Market Dynamics Remain Risk-On, Improvement Continues. We continue to see local tops that now appear to be major tops on the U.S. dollar (DXY) and 10-year Treasury yield; a break below $107.30 on DXY and 4.5% on the 10-year Treasury yield signals a longer-term top is in, which is very bullish for global equities. To recap some other crucial developments: ACWI-US and the S&P 500 display 2.5-month breakouts, the EURO STOXX 50, MSCI EAFE, and MSCI ACWI ex-US (all local currency) all display major 9-month base breakouts, high yield spreads remain a multi-year lows (multi-decade in the U.S.), cyclical/growth Sectors remain leadership, crude oil prices remain in downtrends, and U.S. interest rate volatility (MOVE index) remains a 3-year lows. Japan's TOPIX could very well be next to break out as it consolidates below 2740-2820 resistance. It is not hard for us to remain bullish... see charts below and page 2.
Actionable Themes: Industrials, Materials, Health Care, Consumer Discretionary, and Technology. Our favorite Sectors have not changed for months, and include Technology, Services, Communications, Financials, and Consumer Discretionary. But today we are also focusing more on other Sectors including Industrials (which we also highlighted last week), Materials, and Health Care, where strength is not as widespread, but there are still many attractive names nonetheless... see pages 3-20.
Hitachi and its subsidiaries are engaged in the development, manufacture and sale of diversified product mix ranging from electricity generation systems to consumer products and electronic devices. Co.'s businesses are diverse, and include information and telecommunication systems, social infrastructure and industrial systems, electronic systems and equipment, construction machinery, high functional materials and components, automotive systems, life & eco systems, financial services, and others including logistics services, optical disk drive, as well as real estate business.
Jiangsu Hengli Hydraulic is principally engaged in the research, development and manufacture of high-pressure oil cylinder, hydraulic parts, hydraulic systems, hydraulic pumps and motors, hydraulic valves, precision casting products, and related technical and support services; manufacture of machinery parts, and sale of self-produced products; and road freight transportation services (general freight). Co.'s major products include hydraulic cylinders, mobile valves, industrial valves, piston pumps, test benches, hydraulic systems, precision casting, cold-drawn seamless tube and pneumatic products.
Rheinmetall is a holding company. Through its subsidiaries, Co. operates in two sectors: defence and automotive. Co.'s defence sector is comprised of three divisions: combat systems, engaging in armored tracked vehicles and NBC protection systems; electronic solutions, engaging in air defence systems and soldier systems; and wheeled vehicles, engaging in wheeled logistics vehicles and wheeled tactical vehicles. Co.'s automotive sector is comprised of three division: mechatronics, engaging in cutting emissions and air management systems; hardparts, engaging in pistons and plain bearings and bushes; and motorservice, which includes aftermarket activities for replacement parts business.
Telekom Austria is engaged as full service telecommunications providers of long distance, local and wireless services, corporate data communications services as well as internet services and television broadcasting. Co. generates revenues from fixed line services and mobile communication services to individuals, commercial and noncommercial organizations and other national and foreign carriers. To a lesser extent, Co. generates revenue from the sale of mobile communications handsets. Co. also supplies telephones and technical equipment for telephone communications. These activities are conducted primarily in Austria, Croatia, Slovenia, Bulgaria, Serbia, Macedonia and Belarus.
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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