Vermilion Int'l Compass: Global Equity Strategy
ACWI Below Our Line In The SandWith the MSCI ACWI (ACWI-US) breaking below our $70 “line in the sand†support level we highlighted last week, we believe additional downside is likely and that the path of least resistance is lower for global equities. Considering the damage done to major indexes around the world, any potential bottom is likely to take months to develop and until we see evidence of this repair process we want to be positioned primarily in Sectors with defensive characteristics. Of course, there will be major countertrend rallies along the way, but for now the trend is lower and we would treat rallies as selling opportunities.
· What Would Change Our Outlook? There are several things we would like to see before having confidence that equity markets are bottoming, including but not limited to: (1) improving breadth/bullish inflections in metrics such as advance/decline lines, (2) narrowing high yield spreads, (3) bottoming sovereign yields, (4) bottoming commodity prices, (5) outperformance, or at least market-performance, from small-caps, (6) bullish divergences in indicators such as RSI and the % of S&P 500 & ACWX stocks above their 50- and 200-day MAs, and (7) bullish inflections in the global Consumer Discretionary vs. Staples ratios. Right now, none of these things are happening. Until they do, it is hard to be bullish.
· Index Overviews. Support levels in all the indexes that we highlighted last week failed to hold. As we suggested last week, breakdowns signal additional downside is likely -- something we continue to believe. Indexes highlighted (priced in local currency) include: MSCI ACWI, ACWI ex-US, EAFE, STOXX Europe 600, CAC 40, DAX, and Japan's TOPIX.
· Overweight Emerging Markets Relative To MSCI ACWI. Bullish RS inflections for the MSCI EM index is a silver lining for global equities as it flies in the face of what a typical bear market looks like. Beginning with our 2/27/20 Int'l Compass, we suggested adding exposure to China, and that only continues in today's report..
· Actionable Themes: Services and Consumer Staples. Today's focus is on the Services and Consumer Staples Sectors as we continue our theme of recommending areas with defensive characteristics.
Waste Connections is a solid waste services company in North America, providing waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets in the U.S. and Canada. Through its R360 Environmental Solutions subsidiary, Co. is also a provider of non-hazardous exploration and production (E&P), waste treatment, recovery and disposal services in several of the natural resource producing areas in the U.S. Co. also provides intermodal services for the rail haul movement of cargo and solid waste containers in the Pacific Northwest through a network of intermodal facilities.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.