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Vermilion Int'l Compass: Global Equity Strategy

MSCI ACWI (ACWI-US) Bullish Above $93

Global equities (MSCI ACWI) continue to hold above $93 on ACWI-US, a level that, since January, we had anticipated would cap upside in 2023. While ACWI-US remains below $96-$97 (a target we discussed was possible in our April 18, 2023 Int'l Macro Vision), we could easily see $93 act as support moving forward. Therefore, we are bullish on global equities as long as ACWI-US is above $93... see chart below. The break above $93 signals a 1-year inverse head-and-shoulders breakout, a very bullish pattern that provides a “measured move” target of $110.29, or roughly 16% upside from current levels. The only thing that would invalidate this pattern is if ACWI-US breaks below $93, which would indicate a false breakout. Only then would we shift to a more defensive posture.

Europe. Since our April 27, 2023 Int'l Compass we have discussed that we were looking for a new uptrend to form from the December 2022 lows on the EURO STOXX 50, and that we wanted to be buying pullbacks to the uptrend. This uptrend has provided support this week and we are bullish from a price perspective as long as the uptrend is intact. We are also watching for a breakout above 4400-4415 resistance... see chart below.
Country Overweights. Our current country overweights remain unchanged, and include Japan, India, Taiwan, and Greece.
Bullish Big Picture Trends. (1) The U.S. dollar (DXY) remains below $105.50 and has made a sequence of lower highs since November 2022. (2) Global sovereign yields have generally been consolidating since October/November 2022, with the 10- and 30-year Treasury yields both below their critical 4.0% resistance levels. (3) MSCI ACWI defensive Sectors (Consumer Staples, Utilities, and Health Care) are all near 1+ year RS lows. As long as these three dynamics remain true, and ACWI-US is above $93, a bullish outlook is appropriate... see page 2.
Actionable Theme: Growth Sectors. As long as global sovereign yields continue to move sideways or lower, growth Sectors can continue to lead. We highlight favorite names to buy/stay long within Consumer Discretionary (includes several "value" names), Technology, and Services... see pages 3-15.