Gavekal Research
December 3, 2021
A year after a handful of auto manufacturers first began to complain about difficulties sourcing integrated circuits from component suppliers, the global semiconductor shortage has broadened to affect the sales outlook of high-end industry segments—such as premium smartphones—that until recently have remained largely immune.
Gavekal Research
December 3, 2021
As winter sets in, Europe seems beset with uncertainties: around Covid, energy prices and inflation. Anatole Kaletsky, Cedric Gemehl and Nick Andrews weigh these and other forces that will be at work in 2022 to assess the outlook for Europe’s economy and markets in the new year.
Gavekal Research
December 2, 2021
As 2021 draws to a close, economies and markets are once again beset by uncertainty. But looking beyond the immediate short term, there are reasons for cautious optimism about the eurozone’s economic performance in 2022, although investors are advised to assume a defensive stance.
Gavekal Research
November 19, 2021
One of Will’s key calls for 2021 was that real yields on US treasuries would rebound from their deeply negative levels. But despite the news of Fed tapering, real yields have remained stubbornly low.
Gavekal Research
November 17, 2021
The last month has seen a number of major shifts occur in the US treasury market which may well be leaving investors scratching their heads over how to interpret them, especially as some appear at first to be conflicting. On examination, however, the market is sending four clear messages. They are consistent with each other.
Gavekal Research
November 16, 2021
On Monday, Anatole argued that Markets Are Right To Ignore The Inflation Panic. His case is that favorable base effects and more moderate demand growth now that the initial reopening boom is over mean headline inflation rates will moderate significantly next year.
Gavekal Dragonomics
August 11, 2021
The rapid spread of the Delta variant across China is posing the biggest challenge yet to the government’s zero-tolerance policy toward Covid-19. In this report, Ernan explains why officials are confident in the policy and will likely keep it in place for the indefinite future—at the cost of depressed travel and consumer services.
Gavekal Research
June 9, 2021
Now that a deal has been done on corporate taxation, this weekend’s Group of Seven summit will focus on helping low-income countries roll out Covid-19 vaccination programs. Given inevitable production and distribution problems, the world is unlikely to be fully vaccinated before the end of 2022.
Gavekal Dragonomics
May 25, 2021
China’s Covid-19 vaccination program has significantly accelerated in May, bringing it on track to reach its target of administering at least one dose to 40% of the population by end-June. In this report, Ernan explains why this achievement does not mean the country will be opening its borders or removing domestic precautions this year.
Gavekal Research
October 6, 2021
Wherever you look, energy prices are shooting up, and shortages abound. The global economy, it seems, is in the grip of a full-blown energy crisis. Drill down, and it appears this is not one crisis, but many. The effects—worsening shortages and surging prices—are much the same in differentregions.
Gavekal Research
September 14, 2021
Steve Martin once said “before you criticize a man, walk a mile in his shoes. That way, when you do criticize him, you’ll be a mile away and have his shoes”. In this piece Louis takes a stroll in Mohammed bin Salman’s shoes to see what issues Saudi Arabia has faced recently, and outlines four scenarios that affect energy prices and geopolitics.
Gavekal Research
July 6, 2021
Last year, when Opec+ talks broke up without an agreement on setting production quotas, the oil price collapsed. On Monday, when Opec+ talks broke up without an agreement on setting production quotas, the oil price surged. The majority of market watchers see no inconsistency, but they are making some large assumptions, which deserve close scrutiny.
Gavekal Research
November 10, 2021
As a child, I was lucky enough to attend a Jesuit school. I once asked a teacher: “Father, is it true that Jesuits always answer a question with another question?”. The priest looked me up and down and answered: “Who told you that?”.
Gavekal Research
November 5, 2021
One of Europe’s enduring mysteries is why the continent’s left-of-center political parties, many of them steeped in Marxist theory, became such eager exponents of European integration. Integration, after all, promised to expose the domestic workers whose interests the left claimed to represent to cut-throat cross-border competition.
Gavekal Research
November 4, 2021
In the past few weeks, the central banks of developed commodity producers including Canada, Australia and New Zealand have given up on the idea that monetary policy will stay easy forever. But the world’s major central banks do not seem to share their concern. This makes for an unstable equilibrium.
Gavekal Research
November 19, 2021
Visiting Gavekal clients in Italy this week for the first time in 18 months, I have been struck by the mood of sunny optimism that pervades the country’s financial community. Arriving there myself with a relatively upbeat view on Italy’s economic prospects, I was expecting at least a partial reality check from clients.
Gavekal Research
November 18, 2021
Faced with a fourth wave of coronavirus infections, and in some places even a fifth, European Union governments are again tightening their public health restrictions. Clearly this cannot be good news for Europe’s near-term economic outlook. But how bad is it likely to be? A Covid misery index may provide a useful guide.
Gavekal Research
October 27, 2021
Europe has by far the most ambitious decarbonization program among major regions, targeting net zero greenhouse gas emissions by 2050 and a -55% reduction from the 1990 level by the end of this decade.
Gavekal Dragonomics
November 19, 2021
The world needs more batteries, both to power electric vehicles and store electricity for green power grids. China is in a prime position to meet that demand as it already commands a large majority of both current and planned production capacity. It is therefore probable that Chinese firms will be commanding leading positions in a decade’s time.
Gavekal Dragonomics
October 12, 2021
As the US and Europe pursue more serious green agendas, they are wondering if they can wrest back production of solar power from China. The answer: probably not. China is not just the low-cost producer, but also the technological leader. In this piece, Dan explains why the global deployment of solar energy will depend heavily on China.
Gavekal Dragonomics
September 23, 2021
China’s regulatory onslaught against companies like Ant Group, Didi Chuxing and Tencent has been widely referred to as a “tech crackdown.” In this piece, Dan argues that the government’s actions are less a sign that it has turned against tech than they are a rejection of the idea that the consumer internet is the peak of technological achievement.
Gavekal Dragonomics
November 22, 2021
China’s strong consumer recovery was waylaid by renewed Covid restrictions in 2021, which has kept services like travel and tourism depressed. The zero-tolerance Covid policy is certain to continue through 2022, shaping the pattern of consumer spending. In her annual consumer review, Ernan explains the cyclical outlook and key structural trends.
Gavekal Dragonomics
November 17, 2021
China reported a record surge in its producer price index, prompting fears that the country is both a victim of the same supply-chain shocks facing the US and an exporter of further inflationary pressures. Thomas explains that while these concerns are unfounded, domestic growth momentum is the real problem.
Gavekal Dragonomics
November 10, 2021
It’s now been a year since top leader Xi Jinping first laid out his new goal of achieving “common prosperity,” but how exactly that new slogan translates into government policy still remains rather unclear. As Andrew explains in this piece, that’s because common prosperity is ultimately more of a political campaign than a coherent policy agenda.
Gavekal Research
January 27, 2021
Even though the Hang Seng index fell -2.55% on Tuesday, Hong Kong is still the world’s best performing major stock market year-to-date. In Hong Kong’s media the run-up is attributed to waves of mainland Chinese money flowing into the city’s equities.
Gavekal Dragonomics
January 19, 2021
Even after a dramatic economic recovery, many of China’s smallest businesses are still struggling. In this piece, Xiaoxi shows how the government’s financial-support measures did little to improve small businesses’ access to financing, which is already tightening. But the policies are helping banks avoid a potential spike in bad loans.
Gavekal Dragonomics
January 18, 2021
China’s Q4 GDP growth surpassed pre-Covid rates, with housing and manufacturing leading while services lagged and infrastructure investment slowed. In early 2021, this divergence is likely to continue as consumers stay home for the Chinese New Year and poor credit growth drags on infrastructure investment.
Gavekal Research
September 9, 2021
India is enduring a shaky, stop-start recovery. Headline GDP growth in the April-June quarter came in at a stellar 20%, but base effects are distorting the true picture. The biggest risk for investors, argue Udith and Tom, is an uncertain monetary environment.
Gavekal Research
July 14, 2021
While business activity in India has rebounded to above 90% of its pre-pandemic level, the economic suffering caused by lockdowns remains acute. Small firms are struggling to survive, millions of households have fallen into poverty, inequality has worsened and employment levels have structurally declined.
Gavekal Research
June 10, 2021
India’s economic recovery was hit by the April-May surge in Covid-19 infections, with the only silver lining being that the second wave was less economically damaging than the first one. With cases now declining and many states opening up, the worst of the economic disruption should be over.
Gavekal Research
November 17, 2021
The US recorded continued strong retail sales growth in October. But more forward-looking surveys are showing a deep deterioration in consumer sentiment as gasoline prices have risen to seven-year highs, acting as an effective tax on households’ discretionary spending power.
Gavekal Research
November 8, 2021
In the US expectations are growing that labor shortages will drive accelerating pay rises, exacerbating inflationary pressures. In the eurozone, as Nick explains, the situation is different. Although anecdotes abound about employers struggling to staff up, these are a temporary wrinkle caused by rapid reopening in narrow sectors.
Gavekal Research
October 28, 2021
India posted a blazing 20% year-on-year growth figure in the calendar year’s second quarter. The country seems to have ducked a third Covid wave and equity investors remain ebullient. In this video interview, Udith explores a number of gathering problems for the Indian economy but concedes that the good times could easily keep on rolling.
Gavekal Research
November 22, 2021
As the Federal Reserve dials back its quantitative easing program, emerging market assets have come under selling pressure, much as they did in 2013. Yet, it would be wrong to see this as a “taper tantrum”. What cannot be disputed is that global bond markets have, in recent months, thrown a strop.
Gavekal Research
November 18, 2021
South Korea's central bank was the first in Asia to raise interest rates this cycle. Yet despite its apparent prudence, the market has focused on Korea’s worsening growth outlook and the BoK’s apparent limited scope to ease monetary policy. Vincent assesses the outlook for one of Asia’s powerhouse economies.
Gavekal Research
November 12, 2021
Other than in China, policymakers in Asia made two big macro bets during the pandemic. Asian governments spent big and central banks have stayed easy for longer than counterparts in other emerging markets.
Gavekal Research
October 1, 2021
Thursday saw UK GDP growth for 2Q21 revised up to a perky 5.5% from a previous 4.8%. Yet all is not well in shortage-plagued Britain. While other economies facesupply chain disruption and energy shortages, the “just in time” UK economy looks to be facing a perfect inflationary storm that could deliver a recession in 2022.
Gavekal Research
September 10, 2021
For decades, urban England has had an under-supplied and over-bought housing market. UK governments of all political stripes have tried and failed to unblock building pipelines. Britain is hardly alone in having seen home prices rocket due to pandemic effects, but there was a grim inevitability to UK home prices rising 13% in the last year.
Gavekal Research
August 25, 2021
On Monday, the International Monetary Fund began disbursing a record US$650bn of its hard currency-like reserve asset to aid stressed sovereign borrowers. Since the plan was first officially mooted in March, financing costs have fallen sharply in frontier economies.
Gavekal Research
November 5, 2021
At November's Global Investment Roundtable, Gavekal’s senior team convened to discuss the global macro environment as energy prices continue to rise and the US Federal Reserve gets closer to winding down its monetary accommodation.
Gavekal Research
November 1, 2021
Inflation is back as a major force and economic policymakers are having to reassess their crisis-period settings and plan for tighter financial conditions ahead. How these forces play out will be the key driver of markets in the coming year.
Gavekal Research
October 29, 2021
Europe is in the grips of an energy crisis that is disrupting multiple industries and acting as an effective tax on consumption. In addition to broader supply chain bottlenecks, the worry is that these factors choke off Europe's nascent economic recovery. In this webinar our team of analysts assess these dynamics.
Gavekal Dragonomics
November 15, 2021
The downturn in China’s property sector remains a major headwind for the country’s economic momentum. In this Quick Take, the Dragonomics team explains that although the downturn in China’s property sector will continue to weigh on growth, officials are showing no signs of easing up on restrictions.
Gavekal Dragonomics
November 11, 2021
China’s outstanding mortgage loans grew in October, confirming anecdotal reports that banks have been allowed or encouraged to pick up the pace of mortgage lending. Wei and Xiaoxi explain that while more relaxation measures are likely on the way for property developers, it’s too early to say that their financial conditions are improving.
Gavekal Dragonomics
October 7, 2021
China’s post-Covid property boom has unwound more rapidly than expected this year as the government’s tough policies drive developers into distress. In her annual chartbook, Rosealea explains the outlook for the rest of 2021 and 2022. Further declines in housing sales and construction will come, but policy adjustments can limit their magnitude.
Gavekal Research
November 23, 2012
In our politically correct age the pressure to bow down before certain popularly accepted and apparently proven “truths” can be overwhelming. In the aftermath of the US elections, two such nostrums are unnecessarily vexing investors—the urgency of deficit reduction and fear of higher taxes.
Gavekal Research
July 20, 2011
In A Study of History, Toynbee explains that the role of a society’s elite is to rise to the challenges of the times, and find solutions fitting to those times, even if this involves a radical break with the past.
Gavekal Research
February 28, 2011
Perhaps the most famous economic law is the one that there is no such thing as a free lunch. By keeping US short rates at abnormally low levels beyond the financial crisis and as growth bounces back beyond the dreams of the wildest optimists, the Fed increasingly seems to be trying to ‘feed the US economy for nothing’.