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Gavekal Dragonomics
The Narrowing Profit Boom
Thomas Gatley
4 Sep 2026
China’s corporate profits are surging after years of little growth, and producer prices are rising again following nearly three years of deflation. But Thomas argues that beneath the headline figures, the picture is considerably less rosy: the current upswing rests on a narrowing set of industries, which seem unlikely to invest enough in the coming months to boost profits in the wider industrial sector.
Gavekal Research
Video: The Bond Market’s Big Question
Will Denyer
3 Sep 2026
In the last few years, investors have generally done well to minimize their exposure to long-dated US treasuries. But now, with the 10-year US treasury yield up almost 430bp in the last six years and the US Treasury itself buying back long-dated debt, it makes sense to ask whether investors should reassess their stance on bond market duration.
Gavekal-IS
The Macroeconomics Of AI In Practice
Didier Darcet
3 Sep 2026
In the third part of his series on the macroeconomics of AI, Didier develops a framework for deciding when investors should favor information and technology over energy. After briefly tilting toward energy during this year’s confrontation in the Strait of Hormuz, the framework is once again signaling that investors should favor information.
Gavekal Research
AI Versus The Labor Market
Tan Kai Xian
3 Sep 2026
Federal Reserve chair Kevin Warsh has argued that the AI revolution will support real GDP growth, raise productivity and and weigh on inflation. So far, however, solid US productivity growth since the launch of ChatGPT in late 2022 has coincided with rising inflation and real GDP growth continuing to chug along at around its 20-year median of 2.3%. The missing piece in the puzzle may be the labor market.
Gavekal Dragonomics
Chokepoints Aren’t Changing
Andrew Batson
Shrinking The Presales System
Xiaoxi Zhang
Will An Aging China Save Less?
Ernan Cui, Yu Wu
The Renminbi After Bessent’s Interventions
Wei He
The Great Bank Consolidation Begins
Xiaoxi Zhang
Gavekal Research
Are US Long Bonds A Buy? (Part II)
Will Denyer
Can Spanish Dominance Continue?
Cedric Gemehl
A World In Disequilibrium: Too Much Cash In China
Charles Gave
Where Should One Buy Bonds?
Louis-Vincent Gave
The Friend Of My Friend
Louis-Vincent Gave
Gavekal Technologies
The Deployment Challenge For Cheap Solar
AJ Cortese
Alibaba’s AI Conundrum
Laila Khawaja
China Wind Power’s Global Challenge
AJ Cortese
The Next Stage Of The LLM Race
Laila Khawaja
The Tech Truce Starts To Fray
Arthur Kroeber, Laila Khawaja, AJ Cortese, Tom Hancock
Gavekal-IS
The Macroeconomics Of AI: Part II
Didier Darcet
The Macroeconomics Of AI In Simple Terms
Didier Darcet
Currency Momentum Trading
Didier Darcet
The End Of The Risk-Free Asset
Didier Darcet
The Great Confusion Over Economic Quadrants
Didier Darcet
Gavekal Research
Who Is Copying Who? Part IV
Louis-Vincent Gave
27 Jul 2026
The growing push to restrict Chinese AI models could mark a major escalation in US-China tensions—and a watershed for the US economy. Louis argues that a ban would protect US tech giants at the expense of start-ups, consumers and productivity, while accelerating the fragmentation of the global technology system. Over time, the result could be weaker US equities, a softer dollar and higher bond yields, raising the question of whether such a policy would truly serve the public good or merely entrench corporate power.
Checking The Boxes
Our short take on the latest news
Fact
Surprise
Takeaway
US ADP employment rose 38k in Aug, versus 46k in Jul
Below expected 47k
Consistent with other data pointing to jobs market softening but not collapsing
US factory orders rose 0.9% MoM in Jul, versus -0.2% in Jul
Above expected 0.7%
Led by uptick in volatile aircraft orders; US mfg sector outlook remains positive
Italy PPI rose 9.3% YoY in Jul, versus 6.8% in Jun
NA
Driven by higher energy prices; downside risk rising for energy-intensive industries
Canada left benchmark policy rate unchanged at 2.25%
As expected
Rising upside risks to inflation from tariff war with US underpins BoC's hawkish tilt
Test Your Knowledge
What international competition, with the participation of 104 countries, kicked off in Kyrgyzstan on the eve of the Shanghai Cooperation Organization’s summit on Sunday?
- The World Nomad Games
- The 2026 Eurasian Sambo Tournament
- The inaugural “Green Silk Road” Rally
Chart of the Week
China’s policymakers are now talking up the need for services, due to a combination of the squeeze on manufacturing sector profits and the boom in artificial intelligence. This is not the first time that policymakers have focused on boosting services, but unlike in the past, China’s services share of GDP is no longer materially lagging other middle-income countries.
Open Chart
Gavekal Research
Essential Reading: A Book For Every Week Of The Year
Gavekal is often asked for a recommended reading list. So, here it is: a book a week that everyone interested in the world of macro investing—whether hoary veteran or eager apprentice—can benefit from reading.
Gavekal Research
Webinar: Regime Change Can Cause Market Madness
Anatole Kaletsky, Tom Holland
3 Jul 2026
Markets continue to behave as if the world has not fundamentally changed, even as inflation, interest rates, geopolitics and global capital flows enter a new regime. Anatole argues that investors are systematically mispricing four major shifts: the long-term outlook for inflation and bond yields, the global growth cycle, the rotation from AI-led growth to cyclical value and the end of US exceptionalism.
The Iran War And Fallout
The Limits Of Economic Fury
The US administration is now switching its focus to a campaign of “economic fury” in an effort to achieve its strategic aims against Iran. It is not obvious that this latest phase of the conflict is any more likely to result in a quick and easy US victory than the kinetic war. However, the
economic implications of a prolonged stand-off may be less ominous than they at first appear.
Geoeconomic Monitor: Dominance And Decline
One upshot of the wars in the Persian Gulf and Ukraine is that the US oil and gas industry is booming. The drawback is that US consumers are paying twice Trump's target price for gasoline. With the midterms approaching, there is a risk the US administration might decide export controls are the only way to square the circle, writes Tom Holland. Meanwhile, Cedric Gemehl looks at how Germany is warming to the idea of protectionist measures to insulate its industries from Chinese competition.
The Energy Risk Remains (Part II)
The energy risk from the conflicts in the Middle East and Ukraine continue to escalate, and away from the limelight, listed pureplay oil refiners (outside of China and its price and export controls) have been having a monster year of their own, with recent gains starting to go parabolic. The obvious risk is that as crack spreads rise, so does the pressure on politicians to do something about the rising price of gasoline and diesel. So how can investors guard their portfolios against such risks?
The Energy Risk Remains (Part I)
Energy stocks, as a GICS sector, have delivered the best total return performance of any US sector over the past five years. Yet, tech stocks now account for almost 40% of the S&P 500’s market capitalization, while energy stocks—with their 3% weight—are close to record lows. So why are energy stocks so unloved, especially in the midst of an oil shock?
US economy & markets
AI Versus The Labor Market
Federal Reserve chair Kevin Warsh has argued that the AI revolution will support real GDP growth, raise productivity and and weigh on inflation. So far, however, solid US productivity growth since the launch of ChatGPT in late 2022 has coincided with rising inflation and real GDP growth continuing to chug along at around its 20-year median of 2.3%. The missing piece in the puzzle may be the labor market.
Are US Long Bonds A Buy? (Part II)
With 10-year US treasury yields back at pre-2008-crisis levels and the US government trying to limit further increases, investors must ask whether it is now time to increase duration in their portfolios. In the second installment of his series attempting to answer this all-important question, Will looks at the US government’s own demand for debt financing and examines how it is likely to affect yields from here onward.
A DTR Moment For The Fed And Treasury
The annual Jackson Hole symposium has often been used by Federal Reserve chairs to signal major shifts in US monetary policy. Given recent events, the market was looking for Kevin Warsh to use his stage to “define the relationship” between the US central bank and the US Treasury. He delivered on this score.
The Way Ahead For US Hyperscalers
The big US tech companies, including Amazon, Meta and Alphabet, have long commanded investors’ attention. Now in an attempt to secure AI dominance, they are investing capital at breakneck pace in the necessary AI chips, data centers and supporting infrastructure. The relative trajectories of their capex and free cash flow will shape their businesses and determine the performance of their share prices. There are four main scenarios to consider.
China chartbook
Gavekal Dragonomics
Macro Update: Pushed And Pulled
Wei He, Dragonomics Team
3 Aug 2026
China’s economy is being pushed and pulled by two external shocks: the supply shock from the Iran war and the demand shock from the AI capex boom. Both are creating lots of volatility in trade flows, prices and profits, although the underlying trend of the domestic economy has not yet changed much. Neither are China’s policymakers showing much sign of significantly changing course. In our latest quarterly chartbook, Wei and the Dragonomics team diagnose the current situation and the policy outlook.
India chartbook
Gavekal Research
India Corporate Update: Waiting For Capex
Rohan Daswani, Udith Sikand
28 Aug 2026
India remains one of the world’s strongest growth stories, supported by resilient domestic demand, improving corporate balance sheets and strong credit growth. Yet as the boost from public infrastructure investment fades, the big question is whether these strengths can finally translate into a sustained revival in private investment. Rohan and Udith assess the prospects for that transition and the implication for Indian equities, where performance is increasingly diverging across sectors.
Latest video
Gavekal Research
Video: The Bond Market’s Big Question
Will Denyer
3 Sep 2026
In the last few years, investors have generally done well to minimize their exposure to long-dated US treasuries. But now, with the 10-year US treasury yield up almost 430bp in the last six years and the US Treasury itself buying back long-dated debt, it makes sense to ask whether investors should reassess their stance on bond market duration.
Strategy Chartbook
Gavekal Research
Quarterly Strategy Review: 2Q26
Louis-Vincent Gave
3 Jul 2026
The second quarter was dominated by an extraordinary surge in risk appetite as semiconductor stocks powered one of the largest increases in global equity market capitalization on record, yet beneath the exuberance, markets underwent significant macro shifts. Louis reviews the quarter's defining developments.
Emerging markets
EMs Are The New DMs
Emerging-market bonds have dramatically outperformed their developed-market peers since 2020, helped by greater policy credibility, deeper domestic financial markets and reduced reliance on foreign investors. With DM bond yields now hitting multi-year highs, policymakers may increasingly look to the EM playbook, including softer forms of financial repression, to stabilize their markets, says Udith. From the US to Japan, signs of this shift are already emerging, suggesting that EMs may have a thing or two to teach DMs.
Video: Are EMs Back?
It’s been a good quarter for the broad emerging markets complex. The MSCI EM index has returned almost 7% in US dollar terms, while US equities are down by some -3.5%. So should investors jump on the EM train? Udith points out that there is a wide divergence in the performance of individual emerging markets, and the threat of tariffs hangs heavy over EM corporate earnings. Investors need to be selective.
Video: Southeast Asia Under Trump 2.0
Global investors are rightly focused on the potential losers from the United States pursuing an aggressively protectionist trade policy agenda, but there may be winners as well. Tom went in search of such economies last week. Today he explains how such “swing states” are likely to perform in an intensified period of great power rivalry between the US and China.
China Turbocharges EM Investment
As the rich world pulls up the protectionist drawbridge, investors risk missing a bigger story
in emerging markets. Here, Chinese outbound investment is rebounding after the fallow Covid years, and is driving a new wave of industrialization that promises to lower the cost of the green-energy transition.
Europe's economy
Can Spanish Dominance Continue?
Following a decade of disappointing performance, Spain is once again dominating international league tables. The MSCI Spain index has delivered a total return in US dollar terms of 250% over the past four years, more than twice the 100% return posted by MSCI AC World over the same period. The question now is whether this dominance can be sustained.
The Good, The Bad And The Ugly For Eurozone Bonds
Energy prices have picked up since late June, once again pushing inflation expectations higher and leading markets to price in more ECB rate hikes. But broadly, energy prices remain below their March highs. In contrast, eurozone sovereign bond yields are now well above their March high. This suggests that there are other forces beyond energy prices driving up eurozone yields. These forces can be divided into three categories: the good, the bad and the ugly.
Europe’s Public Investment Boom Changes Shape
The end of the EU’s post-Covid investment program at the end of this month will bring a significant shift in Europe’s public investment cycle, but not necessarily the investment cliff that might have been feared. As Brussels-funded civilian spending winds down, investment will rotate toward defense and geographically from Southern and Eastern Europe toward Germany and Northern Europe. August examines how these shifts will reshape Europe’s growth impulse in 2027 and change the beneficiaries of public spending.
The (Better) Case For European Banks
After more than a decade in the wilderness, European bank stocks have now had four good years, outperforming their US counterparts since 2022 in US dollar terms. The question is whether this outperformance can continue. The short answer is yes. European bank stocks are no longer priced at distressed levels, but with the earnings outlooks for European and US banks both solid, there is still room for European valuations to improve compared with the US.
Currencies
Important Recent Developments
The Slump In Asian Currencies
A Concentrated Inflationary Boom Or A Bet On The Fed?
Demand And Supply Of Money
Dialing Back Expectations For Appreciation
Monetizing US Budget Deficits
Oil & commodities
Video: Towards An Uncertain Winter For Energy
The Quid Pro Quo That Wasn’t
The Energy Risk Remains (Part I)
Energy Markets Are Too Complacent
Video: Oil After Hormuz
The State Of World Oil Stocks
