Vermilion Int'l Compass: Global Equity Strategy
Year-End Rally UnderwayWe believe there is significant evidence that global equities (MSCI ACWI) have bottomed, and a year-end rally has begun. In our previous Int'l Compass (November 2, 2023), we discussed how the MSCI ACWI index (ACWI-US) did not display a decisive breakdown, and that we would be on the lookout for a false breakdown, something that was already evident in the MSCI ACWI when priced in local currency. We discussed how this is bullish as long as the index does not break to a new low. A potent rally has ensued, resulting in bullish 3+ month downtrend reversals in the EURO STOXX 50, ACWI-US, MSCI ACWI ex-US (ACWX-US), MSCI EM (EEM-US), and EAFE (EFA-US); all of these indexes have also reclaimed key levels, putting in bullish false breakdowns. Additionally, the U.S. dollar (DXY) is breaking below the critical $105.70-$106 level as global sovereign 10-year yields violate multi-month uptrends. The significance of all of these risk-on signals cannot be understated, and we expect for the bull market in ACWI-US to resume... see chart below and pages 2-3.
Bullish Reversals & False Breakdowns on EURO STOXX 50, MSCI ACWI ex-U.S., and MSCI EAFE. In our October 26, 2023 Int'l Compass we discussed our expectations for a bounce, but noted that we cannot get intermediate-term bullish until we see downtrend reversals and resistance levels reclaimed. That is exactly what has happened with critical resistance levels getting reclaimed, including 4200 on the EURO STOXX 50, $47.50 on MSCI ACWI ex-U.S. (ACWX-US), and $69-$70 on MSCI EAFE (EFA-US). As long as the indexes are above these levels, we are bullish -- add exposure... see page 3.
Actionable Buys in Europe/UK, Taiwan, and Brazil. Japan, India, Poland, and Greece are our country overweights outside of the U.S. (upgraded Poland and India in our 11/6/23 EM Strategy). Though we remain bullish on these countries, the timelier buys highlighted today are in Europe/UK, Taiwan, and Brazil, due to recently improving technicals.
Actionable Themes: Technology and Consumer Discretionary. These two cyclical growth Sectors have been a significant focus of ours in recent Int'l Compass reports (10/26/23 and 11/2/23) as areas we wanted to be buying on the pullback. We expect outperformance to continue... see pages 4 and 6-14.
Actionable Themes: Real Estate and Materials (Steel/Mining). Global Real Estate and Materials (Steel/Mining) Sectors have been an afterthought; rightly so, considering significant YTD underperformance. However, we see signs that suggest it is time for selective buys.
Auto Trader Group operates a digital automotive marketplace. Consumers can search from around 450,000 used cars and 6,000 new cars on the marketplace each month, using a standard make/model search or via discovery search if they aren't sure of the exact vehicle they want. In addition, Co. provides consumers services to help them make an informed decision about the car they are looking to buy, these include: vehicle check, finance, and insurance. Co. also provides free vehicle valuations providing both a private sale price as well as a part-exchange price. Furthermore, Co. provides retailers display advertising packages so they can promote their business as well as individual vehicles.
Cyber Bay Corporation is a Philippines-based company, which has an ownership of Central Bay Reclamation and Development Corporation (Central Bay), including its Joint Venture Agreement (JVA) with the Philippine Reclamation Authority to reclaim land along Manila Bay (the Cyber Bay Project) as its property core holding. The Company's Cyber Bay Project encompasses approximately 750 hectares involving the reclamation and development of an integrated urban township. The reclamation project is located Southwest of Manila along Manila-Cavite Coastal Road, within the cities of Paranaque, Las Pinas and the municipality of Bacoor, Cavite.
Okamura is mainly engaged in the manufacture and sale of office environmental equipment, commercial environmental equipment and logistics equipment. Co. has three business segments. The Office Furniture segment manufactures and sells office furniture, furniture for public and educational facilities, office security systems, and other products. The Store Displays segment manufactures and sells display fixtures, refrigerated showcases, store counters, and specialized displays. The Others segment manufactures and sells storage shelves for factories and warehouses and automated warehousing equipment.
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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