Vermilion Int'l Compass: Global Equity Strategy
EM Outperformance to Continue -- Add on a PullbackThe MSCI EM vs. EAFE ratio (local currency) shows MSCI EM has outperformed relative to EAFE since the U.S. dollar (DXY) peaked in November 2022, and also shows signs of reversing topside the 2-year downtrend. As long as the DXY remains below $103.50-$106, we expect outperformance from EM to continue. From a price perspective we discussed in late-October/early-November the potential for a bear market rally, which we believe has turned into a full-fledged bottoming pattern for global equities. on MSCI EM (EEM-US) specifically, we prefer to buy on pullbacks to the 50-day MA.
Below we highlight attractive and actionable themes within EM.
EM Countries. A big theme in today's report is attractive charts in China (MSCI China/Shanghai Comp.) and, by extension, Hong Kong (Hang Seng). Top country overweights include Greece (ATHEX Comp.), South Africa (FTSE JSE All Share), and Mexico (S&P/BMV IPC). Additionally, Taiwan (TAIEX) and South Korea (KOSPI) display bottoming price action, though are not yet leadership... see pages 2-3.
EM Sectors. EM Sectors that stand out as being particularly attractive and actionable include Communications, Consumer Discretionary, and Technology -- add exposure on pullbacks... see page 4.
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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