Vermilion Int'l Compass: Global Equity Strategy
Pullback UnderwayOur long-term bullish outlook (since early-November 2023) remains intact. With that said, we believe a 1-3-month pullback has likely begun. Supports to watch are at $110 on MSCI ACWI (ACWI-US) and $41-42 on MSCI EM (EEM-US), and whether these levels hold or not will determine the severity of the pullback. The S&P 500 is violating its 20-day MA, Europe's EURO STOXX 50 is breaking below 4884, and Japan's TOPIX appears to be staging a false breakout at the 2800-2815 level. This all points to more sideways to lower price action in the near-term. Global value Sectors have continued to outperform in recent weeks and this area remains our main focus. We are also interested in defensive Sectors as global equities pull back.
Country Overweights. Current country overweights are unchanged and include Taiwan, Japan, and the U.S.
Mostly Risk-On Signals, Though Some Reason for Caution. For now, the many risk-on signals continue to suggest that this is a normal 5%-10% pullback, for which there are usually about three per calendar year. Risk-on signals that support our bullish long-term outlook include: local tops that could end up being major tops in U.S. Treasury yields and foreign sovereign yields, the U.S. dollar (DXY) remains below $107.40 resistance, important energy commodities (WTI crude oil and gasoline) and the Bloomberg Commodity index (DJP-US) are well-below significant resistances. We continue to believe that sovereign yields, the DXY, energy commodities, and DJP-US are all headed sideways to lower. Additionally, bond market volatility (MOVE index) is at 2.5-year lows and U.S. and European high yield spreads remain near 2.25+ year narrows. We are watching these closely and we are starting to see some reason for caution as it relates to global equities; the main concern at the moment is that defensive Sectors show signs of potential long-term RS bottoms... see pages 2-3.
Actionable Themes: Health Care, Utilities, and Telecommunications. We continue to focus on areas outside of the Technology Sector (IXN-US), something we have been doing since our June 27, 2024 Int'l Compass. As noted above, global defensive Sectors are showing signs of long-term RS bottoms, with the two most attractive Sectors being Health Care (IXJ-US) and Utilities (JXI-US). We highlight actionable ideas within Health Care, Utilities, and Telecommunications.
Medipal Holdings is a holding company controls, administers and supports the operating activities of subsidiaries and affiliates in which it holds shares in the prescription pharmaceutical wholesale business, cosmetics, daily necessities and OTC pharmaceutical wholesale business, Animal health products and food processing raw materials wholesale business, and related business. Co. is involved in the wholesale of pharmaceutical products, medical equipment and test reagents; cosmetics, daily necessities, soap, detergents, over-the-counter pharmaceuticals; and veterinary products, food additives and food processing raw materials.
Suzuken is mainly engaged in the manufacture and sale of pharmaceutical products. Co. is engaged in the sale of pharmaceuticals and medical equipment; the manufacture of pharmaceutical products and diagnostic medicines; the operation of dispensing pharmacies; the provision of medical-related services, such as the sale of healthcare-related literature and the provision of clinical research coordinators; the provision of home nursing care and facility nursing care services; the manufacture of biological and physiological measuring equipment, such as electrocardiographic equipment and blood pressure gauges; as well as the transportation of pharmaceutical products.
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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