Vermilion Int'l Compass: Global Equity Strategy
Ride the Trend Higher in MSCI ACWI and S&P 500Our bullish outlook on global equities (MSCI ACWI) remains intact with ACWI-US and the S&P 500 firmly trending higher. Our recommendation since mid-October to use any pre-election pullback in the MSCI ACWI or the S&P 500 (the U.S. remains our only country overweight) as an opportunity to add exposure continues to pay off, and there is not much left to do except ride the trend higher. Additionally, we still see a high probability of significant upside going into year-end and the early part of 2025 -- and likely beyond. In terms of Europe and Japan, we continue to have select interest only, as they remain below critical resistance levels of 5000-5120 on the EURO STOXX 50 and 2740-2820 on the TOPIX. With that said, Germany's DAX is breaking out, potentially a sign that the EURO STOXX 50 can follow suit.
Remain Overweight the U.S. Our only country overweight is the U.S. (S&P 500).
Risk-On Market Dynamics. U.S. and European high yield spreads remain at 3+ year narrows. Global sovereign 10-year yields and the U.S. dollar (DXY) remain below critical resistance levels, and have been moving lower recently, as expected. U.S. interest rate volatility (MOVE index) has collapsed following the election. MSCI EAFE and ACWI ex-U.S. display bullish 2-month downtrend reversals. MSCI Emerging Markets (EEM-US) remains above its 200-day MA and the critical $41 level. Mainland China (Shanghai Composite) remains bullish. Global cyclical Sectors are outperforming (Consumer Discretionary, Technology, Financials, and Communication Services) while defensives are underperforming (Consumer Staples and Health Care). The global Discretionary vs. Staples ratio (RXI-US vs. KXI-US) is breaking to all-time highs. All of this strongly points to a risk-on environment... see charts below and page 2.
Actionable Themes: Consumer Discretionary, Services, and Technology. Global growth Sectors are starting to pull away, and three of our favorites continue to be Consumer Discretionary, Services, and Technology -- add exposure. We expect continued outperformance from these Sectors..
Benguet is engaged in the mining and mineral exploration and producing and marketing gold, refractory chromite, limestone and aggregates in the Philippines. Through its subsidiaries, Co. is engaged in eco-tourism; engineering and construction; reforestation; trucking and warehousing services; retail of industrial equipment and supplies; developing water resources; and developing real estate projects.
Geely Automobile Holdings is an investment holding company. Through its subsidiaries, Co. is engaged in the investment holding and export of sedans outside the People's Republic of China (PRC); research, production, marketing and sales of automobile parts and related components and the research and development of electric hybrid engines in the PRC; procurement of automobile parts and components in the PRC; and marketing and sales of sedans in Russia and South America. In addition, through its associated companies, Co. is also engaged in the manufacturing of traffic facilities; provision of webpage design and related technology support services; manufacturing of emission control systems.
Mahindra & Mahindra is a holding company. Through its subsidiaries, Co. is engaged in manufacturing, distributing and selling of tractors and multi utility vehicles, light commercial vehicles and three wheelers. In addition, Co. is also engaged in provision of information technology and telecommunications services and other services related to financing, leasing, hire purchase of automobiles and tractors. Co. has four significant segments: Automotive, Farm Equipment, IT Services and Financial services.
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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