Vermilion Int'l Compass: Global Equity Strategy
Global MSCI Indexes at Multi-Year HighsNew multi-year highs on the MSCI ACWI, ACWI ex-US, EAFE, and EM indexes -- combined with overwhelmingly healthy market dynamics -- validates our bullish outlook on global equities. We continue to view the latest 5-6% pullback as healthy and normal within the ongoing bull market, and we expect higher prices ahead.
Global MSCI Indexes at Multi-Year Highs. There are few things more bullish than an index hitting multi-year highs, and that is exactly what is happening on the MSCI ACWI, ACWI ex-US, EAFE, and EM indexes. Short-term supports to watch include $110.50 on ACWI-US, $53.50 on ACWX-US, $80 on EFA-US, and $41-42 on EEM-US; as long as these supports hold, we expect significantly higher prices ahead and we would be buying any dips... see chart below.
Risk-On Signals. In addition to new multi-year highs on global indexes, there are plenty of other risk-on signals that support our bullish outlook, including: local tops that could end up being major tops in (1) U.S. Treasury yields, (2) foreign sovereign yields, (3) the U.S. dollar (DXY), and (4) important energy commodities, WTI crude oil and gasoline (UGA-US). Additionally, (5) Bond market volatility (MOVE index) is at 2.25-year lows, and (6) U.S. and European high yield spreads are hitting fresh multi-year narrows. These risk-on signals are all very clearly supportive of our bullish outlook.
Global Energy Sector Topping, is Materials Next? In addition to crude oil prices topping, so is the global Energy Sector (IXC-US). We continue to view this as a positive sign as it means inflation is not likely to be a concern. We remain cautious on the global Energy Sector (IXC-US) which displays a massive false breakout; and we are reiterating our 5/2/24 call to sell/take profits (5/2/24 Int'l Compass). We are on the lookout for the Materials Sector to pause/consolidate, at minimum, after recent massive outperformance from gold/silver/copper/aluminum stocks... see page 2.
Country/Region Overweights. Current country/region overweights remain unchanged, and include Japan, Taiwan, Europe, and Poland.
Actionable Themes: Technology and Consumer Discretionary/Retail. The global Technology Sector (IXN-US) is moving back into a leadership position, and is quickly becoming a top Sector yet again -- add exposure. We also highlight buys within Consumer Discretionary/Retail, including a few Staples retailers..
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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