EUR 231.76 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Key Points:

• We remain constructive on the market and are sticking with our recommended Sector allocation.

• REITs and Utilities stocks are experiencing short-term rotation, indicative of interest rates correcting short term. Homebuilders are benefitting as well from that trend.

• Regional Banks, Assets Managers, and Investment Banks are all outperforming, a great sign for the economy and market.

• The equity market is discounting surging inflation, but the bond market is pausing with rates softening, possibly hinting at a “not-so-fast” scenario. How this resolves itself remains unclear, but we have conviction in the equity side.

• Breadth continues to improve in the Health Care Sector, primarily from pharma and biotechs. The devices are convincing leadership, and the HMOs seems to be joining the party. Within this report are several bottom-up ideas within pharma and biotech.

• Technology remains leadership. Semiconductors and semi-related Groups are outperforming, which should continue. Other Groups are adding to breadth within the Sector and include: Data Storage, Peripherals, and Software. See the two Insights reports on Technology published last week entitled, “Tech Groupies” and “The Power of Tech.”

• The Energy Sector is correcting despite the stability in crude oil prices. The XLE is testing major support and needs to hold near here, or we will be forced to lower our recommended overweight rating.


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