EUR 94.77 For Business Accounts Only

Int'l Macro Vision: Sector Synopsis

Our outlook remains bullish on global equities (MSCI ACWI) as of our October 17, 2024 Int'l Compass. This is the point where it became clear that the 1- to 4-month pullback/consolidation that we called for in late-July (7/25/24 Int'l Compass) was over, and that a new uptrend was underway. We have also been discussing 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. As long as ACWI-US is above $117 and the S&P 500 is above 5650-5670, we see every reason to remain bullish. At the same time, while Europe and Japan could easily be next to break out, we still want to be selective as they remain below critical resistance levels of 5000-5120 on the EURO STOXX 50 and 2740-2820 on the TOPIX.

In addition to the base breakouts on the MSCI ACWI and S&P 500, other risk-on signals that support our bullish outlook include: (1) U.S. and European high yield spreads remain at 2.5+ year narrows. (2) Global sovereign 10-year yields and (3) the U.S. dollar (DXY) remain below critical resistance levels, and we expect them to start moving lower. (4) U.S. interest rate volatility (MOVE index) has collapsed following the election. (5) Global cyclical Sectors are outperforming (Consumer Discretionary, Financials, Industrials, and Communication Services) while defensives and commodity Sectors are underperforming (Consumer Staples, Health Care, Energy, and Materials). (6) The global Discretionary vs. Staples ratio (RXI-US vs. KXI-US) is decisively breaking above its YTD base. (7) RS for U.S. small-caps (Russell 2000 vs. S&P 500) displays a 3.5+ year downtrend reversal. (8) MSCI EM (EEM-US) and China (Shanghai Composite and Hang Seng) have decisively bottomed. These risk-on signals are all reasons why we are bullish on the MSCI ACWI – and especially the U.S.