EUR 94.77 For Business Accounts Only

Int'l Macro Vision: Sector Synopsis

Int'l Equity Strategy

Throughout 2024 we have discussed the theme of classic bull market behavior as evidenced by an ever-increasing number of global indexes and Sectors breaking out to new highs. The long list of breakouts discussed throughout 2024 include the MSCI EM, Frontier, ACWI, and MSCI EAFE indexes (all in local currency), and also Japan, Israel, Germany, Sweden, France, Ireland, UK, South Korea, and Norway. Another important thing to note is that none of these breakouts are failing; they all remain above their major breakout levels, a very bullish sign. Needless to say, the bullish outlook we initiated in early November 2023 remains intact. A pullback/consolidation could start at any time, however, market dynamics remain healthy, so we would continue to treat pullbacks to $102 on MSCI ACWI (ACWI-US) as buying opportunities.

We want to draw special attention to the 2-year base breakouts for MSCI Emerging Market and MSCI Frontier Market indexes (both in local currency). These are the riskiest markets to invest globally, so the fact that they are breaking above major 2-year resistances is a massive risk-on signal for global equities.

In addition to the aforementioned bullish price patterns on major global indexes, we continue to see many other reasons to be bullish on global equities, including: (1) Interest rate volatility in the U.S. Treasury market (MOVE index) remains at 2-year lows. (2) The U.S. Dollar (DXY) remains below major resistance at $106, and also below shorter-term resistance at $104.70. (3) U.S. and European high yield spreads are at 2-year narrows. (4) Defensive global Sectors including Consumer Staples (KXI-US), Health Care (IXJ-US), and Utilities (JXI-US) are underperforming (vs. MSCI ACWI). (5) Breadth remains healthy. (6) U.S. and non-U.S. small-caps are no longer underperforming. The significance of all of these risk-on signals cannot be understated, and we continue to see this as a bull market until proven otherwise.

In terms of potential concerns, we are monitoring 10-year sovereign bond yields and WTI crude oil (and the Bloomberg Commodity index more generally), both of which have been rising YTD. For now, particularly in the U.S., the YTD rising 10-year Treasury yield has been due to improving GDP expectations – NOT rising inflation expectations – and non-inflationary growth is a good thing. In terms of rising commodity prices, we want to see the Bloomberg Commodity index (DJP-US) and WTI crude oil stay below $33.20 and $94, respectively; a breakout above these levels would suggest inflation fears are warranted. These are not major concerns at the moment, but they are something we will continue to monitor closely.