EUR 42.67 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Opportunities Within Energy and Materials

Broad global MSCI equity indexes (ACWI, ACWI ex-US, EAFE, and EM) remain bearish, as do indexes in Japan, Hong Kong, China, Europe, and Germany. Until we see these indexes break above downtrends and key resistance levels, we cannot be bullish. Under the best-case scenario, these indexes are in the early stages of bottoming, a process that could easily come with more tests of the lows. In terms of Sector allocations, remain overweight Energy and Materials with the secular commodity bull market intact. Defensive Sectors are also hitting 1-2-year RS highs, and we recommend overweights to Health Care, Utilities, and Consumer Staples.

Japan, Hong Kong, Europe, Germany. Japan's TOPIX and Nikkei 225, Hong Kong's Hang Seng, and Europe's EURO STOXX 50 each remain in downtrends. Additionally, Germany's DAX remains below major resistance in the 14,815-14,950 zone. As long as this remains true, we cannot be bullish... see page 2.
Broad Global Indexes. The broad global indexes remain below our key “lines in the sand,” including $54 on MSCI ACWI ex-US (ACWX-US), $75.25 on MSCI EAFE (EFA-US), and the 200-day MA on MSCI ACWI (ACWI-US). As long as prices are below the aforementioned levels, we are bearish at the index level, and we expect more volatility and lower prices ahead. Additionally, MSCI EM (EEM-US) and China (MCHI-US, KWEB-US) were not even able to rally back to their respective downtrends. Short-term resistance levels we are watching include $47 on EEM-US and $33 on KWEB-US; a break above these levels would likely signal the bottom is in for EM, China, and global equities, but if EEM and KWEB are below these levels, we would avoid or think about shorting... see page 3.
Actionable Theme: Energy & Materials. Remain overweight and add exposure to Energy and Materials with the secular commodity bull market intact. We expect these Sectors to outperform in the months and likely years ahead due to rising inflation... see pages 4-13.