EUR 85.33 For Business Accounts Only

Int'l Macro Vision: Sector Synopsis

Int'l Equity Strategy


Market indicators continue to lean bearish amid the ongoing Russia-Ukraine conflict, rapidly rising global rates/inflation, and tightening monetary policy. Moreover, the broad global indexes remain below our key “lines in the sand,” including $54 on MSCI ACWI ex-US (ACWX-US), $75.25 on MSCI EAFE (EFA-US), and the 200-day MA/$99 on MSCI ACWI (ACWI-US). As long as prices are below the aforementioned levels, we are bearish at the index level, and we expect more volatility and lower prices ahead. From a Sector perspective, we want to remain overweight commodity Sectors (Energy and Materials) and also defensives (Health Care, Utilities, and Consumer Staples). There are also bright spots within Financials (esp. insurance names), Manufacturing, Transportation, and Telecomm, but it is hard to paint them with a broad brush.



Below we summarize the basis for our bearish outlook.



Bearish-Leaning Indicators:

In addition to the aforementioned MSCI indexes being below our “lines in the sand,” MSCI EM (EEM-US) and China (MCHI-US, KWEB-US) remain in 14-month downtrends.
Japan's TOPIX and Nikkei 225, and Hong Kong's Hang Seng each remain in downtrends. Europe's EURO STOXX 50 remains below resistance in the 4040-4090 range. Germany's DAX remains below major resistance in the 14,815-14,950 zone.
The US dollar remains in an uptrend and above support at 97-97.70.
MSCI ACWI defensive Sectors including Consumer Staples, Utilities, Health Care, and Real Estate are hitting 1-2-year relative strength highs (vs. MSCI ACWI).


Bottom Line: Broad global MSCI equity indexes remain bearish, as do indexes in Japan, Hong Kong, China, Europe, and Germany. Until we see indexes break above the aforementioned levels, we cannot be bullish. In terms of Sector allocations, remain overweight Energy and Materials with the secular commodity bull market intact. Defensive Sectors are also hitting 1-2-year RS highs, and we recommend overweights to Health Care, Utilities, and Consumer Staples.