Vermilion Int'l Compass: Global Equity Strategy
Weakness Contained To EM & China Thus FarCracks are beginning to show, particularly in EM/China where the MSCI EM index (EEM-US) is breaking below major $52 base support, the Shanghai Composite is breaking below 3500, the CSI 300 is breaking below 4885, and Hong Kong's Hang Seng is breaking below 27,000 support. Thankfully we have stayed away from areas hardest hit since EM/China has had poor relative performance for quite some time. Despite this being largely self-induced and very China-specific due to China's regulatory crackdown, the overhang could linger as additional Sectors/industries could be targeted. Moreover, it certainly does not help our already cautious and neutral outlook, but rather reinforces it.
Index Overviews. So far, weakness has been contained to EM, China, and Hong Kong, and this does raise concerns that other countries could follow suit. With that said, other major global indexes remain above critical support levels; until this changes our neutral outlook remains appropriate. The EURO STOXX 50 remains above key support at ~3875. The MSCI ACWI ex-US (ACWX-US) and MSCI EAFE (EFA-US) are still above key longer-term support at $54 and $77, respectively. The S&P 500 and MSCI ACWI (ACWI-US) remain in uptrends. Japan (TOPIX, TOPIX Small) is still consolidating. We will need to see breakdowns start to emerge on these indexes in order to shift to a bearish outlook.
Actionable Themes: Technology & Utilities. We continue to recommend a mix of growth and defensive Sectors as our primary strategy. Today we focus on a couple Canadian Technology stocks and the Utilities Sector... see pages 3 and 5-8.
Actionable Themes: Financials & Materials. Considering our more cautious outlook we have not been focusing on cyclical Sectors such as Financials and Materials. Still, there are some bright spots within Financial Services, particularly in Europe, UK, India, and Canada. Additionally, commodities remain bullish and many Materials stocks remain bullish, particularly in Europe and Australia -- add exposure... see pages 4 and 8-14.
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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