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Vermilion Int'l Compass: Global Equity Strategy

Major Indexes Testing Resistance

Positive news flow surrounding COVID-19 is encouraging on many fronts, notably from a human and economic perspective (e.g., peaking infections/deaths in Italy & Spain, certain European governments making plans to ease lockdowns, and that US death projections were likely overestimated). Still, despite encouraging news and the relief rally in global equities, history tells us that this is a fairly standard bear market rally in terms of its magnitude, making us believe the global equity market is not yet out of the woods. To be clear, the bulls are still in control in the short-term, but we are watching for signs of a turn of the tide. There has been significant damage inflicted and that damage is going to take time to repair.

· MSCI ACWI ex-US (ACWX-US). In last week's Int'l Compass we noted the potential for support in the $35.10-35.75 range. ACWX-US held this range and made a low of $35.78 on Friday which, at the moment, has the potential to be a higher low which tells us the bulls are in control. For now, $35.10-35.75 remains key support to watch, and a break below this level would likely mean a visit to the March lows. Current resistance we are watching continues to be in the $38.50 to $39.80 zone... see chart below.

· Favor EM (MSCI EM) Over EAFE (MSCI EAFE). We continue to believe that EM is a better place to be than EAFE, supported by the EM vs. EAFE ratio building a bullish base and making higher lows. Over half of today's individual stock recommendations are domiciled in EM countries. Remain overweight China (MSCI China, Shanghai Comp.), which continues to be a big reason for EM's outperformance... see page 2.

· Index Overviews. Several major indexes are testing significant multi-year resistance zones. This includes Europe's STOXX 600 & EURO STOXX 50, Japan's TOPIX, and Hong Kong's Hang Seng... see page 3.

· Actionable Themes: Staples, Health Care, Technology, Additional Bottom-Up Ideas. Consumer Staples, Health Care, and Technology remain global leadership Sectors, and these areas continue to be our primary focus. We are also continuing to expand our recommendations to include bottom-up ideas within several other Sectors as the market goes through a bottoming process... see pages 4-6.