EUR 48.09 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Buy the Pullback in MSCI ACWI and S&P 500

Our outlook remains bullish on global equities (MSCI ACWI) with ACWI-US and the S&P 500 holding above their respective bases at $117 and 5650-5670. We have discussed since mid-October how we would 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, and that we see a high probability of significant upside going into year-end and the early part of 2025. This remains our expectation as long as the aforementioned supports hold on MSCI ACWI and the S&P 500. In terms of Europe and Japan, we continue to be 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.

Remain Overweight the U.S. Our only country overweight is the U.S. (S&P 500).
Largely Risk-On Market Dynamics With Minimal Concerns. U.S. and European high yield spreads remain at 2.5+ year narrows. Global sovereign 10-year yields and the U.S. dollar (DXY) remain below critical resistance levels, and we expect them to start moving lower. U.S. interest rate volatility (MOVE index) has collapsed following the election. Global cyclical Sectors are outperforming (Consumer Discretionary, Financials, Industrials, and Communication Services) while defensives are underperforming (Consumer Staples and Health Care). The global Discretionary vs. Staples ratio (RXI-US vs. KXI-US) is decisively breaking above its YTD base. All of this strongly points to a risk-on environment. Our concerns are minor, and stem from recent weakness for MSCI Emerging Markets (EEM-US) and Hong Kong (Hang Seng); EEM-US recently broke below $44 support, but remains above its 200-day MA and the critical $41 level, while the Hang Seng appears to be flirting with a break below 19,700 support. With that said, it is notable that mainland China (Shanghai Composite) remains rather bullish.
Actionable Themes: Uranium, Transportation, Services, Technology, Consumer Discretionary, and Financials. We continue to recommend Services, Financials, Technology, and Consumer Discretionary globally as our favorite Sectors, as the vast majority of bullish charts are found within these Sectors; instead of highlighting the same names we have for the past month or longer, we focus more on new recommendations. We also have interest within Uranium -- Cameco (CCO-CA) and NexGen Energy (NXE-CA) -- and Transportation