Vermilion Int'l Compass: Global Equity Strategy
Downgrading Europe to Market WeightNot much has changed since our latest Int'l Compass from May 31, 2024 titled "Buy the Pullback." As the title suggested, we were buyers of the pullback in global equities (MSCI ACWI, ACWI ex-US, EAFE, EM, Europe, Japan, Taiwan, etc.) due to important short-term supports holding, combined with ongoing healthy market dynamics. Supports are holding, and our bullish outlook (since early-November 2023) remains intact. Continue to buy dips.
Downgrading Europe to Market Weight. We remain bullish on Europe from a price perspective, with uptrends intact on the STOXX Europe 600 and STOXX Europe 50 indexes, and with the EURO STOXX 50 reclaiming key support at 4884. With that said, RS has deteriorated due to a higher weighting to Financials and Industrials, and a lower weighting to Technology; as a result, we are downgrading Europe to market weight.
Country/Region Overweights. Current country/region overweights include Taiwan, Japan, and Poland. We are monitoring Japan for a potential downgrade to market weight, as the 2+ year RS uptrends are being tested on the TOPIX and Nikkei 225.
MSCI ACWI and Emerging Markets. Important supports continue to hold on MSCI ACWI (ACWI-US) and EM (EEM-US) at $110 and $41-$42, respectively. Our bullish outlook remains appropriate as long as these supports continue to hold... see page 2.
Risk-On Signals. Market dynamics have remained healthy. In addition to important supports holding, other risk-on signals that support our bullish outlook include: local tops that could end up being major tops in U.S. Treasury yields and foreign sovereign yields, the U.S. dollar (DXY) remains below $107.40 resistance, important energy commodities (WTI crude oil and gasoline) are well-below significant resistances. Additionally, defensive Sectors continue to underperform, bond market volatility (MOVE index) is at 2.25-year lows, and U.S. and European high yield spreads remain near 2+ year narrows. These are very clear risk-on signals which support our bullish outlook.
Actionable Themes: Technology, Services, Consumer Discretionary, Financials, and Telecommunications. The global Technology Sector (IXN-US) has significantly outperformed in recent months and remains leadership; we have been highlighting buys within Technology in every single Int'l Compass report since March 28, 2024, and this report is no exception -- add exposure on pullbacks. We also highlight buys within Consumer Discretionary, Financials, and Telecommunications... see pages 3-20.
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Infinity Lithium is engaged in the exploration of rare earth element mineralization in Greenland.
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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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