Most Recent
Gavekal Dragonomics
The Global Impact Of The Construction Malaise
Thomas Gatley
18 Aug 2022
China’s construction recession has already lasted a year, with little prospect of a meaningful rebound in coming months. Thomas argues an extended downturn for the industry would hit commodity exporters among emerging markets and capital-goods exporters among developed markets, a prospect that financial markets do not yet seem to be pricing in.
Gavekal Research
Gold As An Alternative Reserve Of Value
Charles Gave
17 Aug 2022
In a Keynesian world in which "clever" central bankers have manipulated the interest rate below the natural rate, bonds will no longer act as a hedge for equities in a bear market. Charles shows that at such times, gold has worked well as an "alternative reserve of value".
Gavekal Dragonomics
Infrastructure Isn’t Enough
Andrew Batson
17 Aug 2022
China's government is relying heavily on public-sector infrastructure investment to stabilize growth. But Andrew argues that infrastructure spending alone has never been enough to turn around the business cycle. Unless and until officials can stabilize the property market, growth could continue to grind lower.
Gavekal Research
Inflation And Financial Markets
Charles Gave
17 Aug 2022
Charles contends that financial markets do not so much care about the level of US inflation, but rather whether it is accelerating or decelerating. To this end, he explores the inflationary dynamic in today’s markets to offer specific investment recommendations
Gavekal Dragonomics
The Faltering Recovery Forces Easing
Dragonomics Team
The Construction Recession Deepens
Rosealea Yao
Policy Banks Are Back
Xiaoxi Zhang
Manufacturing Diversification Gains Speed
Dan Wang
Refined Covid Policies Are Working, So Far
Ernan Cui
A Transatlantic Convergence On China
Yanmei Xie, Dan Wang
The End Of Emergency Liquidity
Wei He
Macro Update: Confidence Crumbles
Dragonomics Team
Plenty Of Friction But No Flames Over Taiwan
Arthur Kroeber
The Blind Spot In Bank Supervision
Xiaoxi Zhang
More Research
Don’t Count On A Delisting Deal
Thomas Gatley
The US Inventory Cycle Turns
Tan Kai Xian
Europe’s Electric Power Problem
Cedric Gemehl
Germany And China: The End Of The Affair
Yanmei Xie
The Pros And Cons Of A Pivot
Louis-Vincent Gave
In Search Of A Fed Pivot
Will Denyer, Tan Kai Xian
The CNH Renaissance
Vincent Tsui
Why The Yen Beats The Euro
Udith Sikand
Trouble In Store
Cedric Gemehl
An Inflation-Battling Law In Name Only
Tan Kai Xian
Gavekal Research
Trouble In Store
Cedric Gemehl
9 Aug 2022
Amid all the lamentations, accusations and recriminations over Europe’s natural gas supply squeeze, it is easy to lose sight of a vital question: just how big is the energy shortage that Europe is facing this winter likely to be? This paper provides some pointers to the answer by examining three of the main variables at work: the gas supply, the amount of gas in storage and the demand for gas.
The global view
Gold As An Alternative Reserve Of Value
In a Keynesian world in which "clever" central bankers have manipulated the interest rate below the natural rate, bonds will no longer act as a hedge for equities in a bear market. Charles shows that at such times, gold has worked well as an "alternative reserve of value".
Inflation And Financial Markets
Charles contends that financial markets do not so much care about the level of US inflation, but rather whether it is accelerating or decelerating. To this end, he explores the inflationary dynamic in today’s markets to offer specific investment recommendations
International Liquidity Crisis: The Wicksellian Take
In recent reports, Charles has outlined the essential elements of an International liquidity crisis, and offered comments on how investors can avoid losing too much money in such a dangerous environment. In this paper, he assesses what is needed to mark an exit from such a crisis.
The Fed’s Signaling And Markets
In their collective wisdom, global financial markets have clearly decided to interpret the Federal Reserve’s recent decision to abandon forward guidance as a dovish turn. But is the markets’ collective conclusion correct? Several, very different scenarios are possible from here.
Test Your Knowledge
A decade after the Bank of Japan started to buy exchange traded funds, what share of locally-listed ETFs did the BoJ hold in July?
Post Your Answer
Chart of the Week
Week 32, 2022
Germany’s unemployment rate has been on the rise for the last two months, going from 5% in May to 5.4% in July. This does not signal a recession just yet, but rather the integration of Ukrainian refugees into the labor market. That said, unemployment figures are also no longer declining for German citizens. We expect they will go up as the German economy falls into an economic recession.
US economy & markets
The US Inventory Cycle Turns
The US inventory cycle is turning. After a rapid post-lockdown restocking process, US businesses are no longer suffering from empty shelves. On the contrary, their shelves look relatively well stocked even as the outlook for sales is deteriorating. As a result the upward pressure on prices from inventory rebuilding is diminishing, as is the tailwind for manufacturing.
In Search Of A Fed Pivot
After US inflation surprised on the downside for the first time in 18 months, markets rallied hard on Wednesday, betting that US monetary policy will become less exacting. While good news, investors should not get carried away as a proper Federal Reserve pivot is not yet in the cards.
An Inflation-Battling Law In Name Only
Senate Democrats have passed the Inflation Reduction Act and the House of Representatives is likely to follow suit this week. The legislation advances President Joe Biden’s climate agenda but does little to address near-term inflation and growth issues.
Payrolls And Consumption
After a string of strong US jobs reports, investor attention will be even more closely focused than usual on July’s payrolls number, due for release Friday. With good reason; the trend in payrolls over the coming months will hold important information for the outlook for US personal consumption.
Ukraine Fallout
Russia, Do Your Worst
Who Is Copying Who? Part II
The Microsoft-ification Of Warfare
The End Of The Unipolar Era
World Enters New Liquidity Crisis
Gas! Gas! Gas!
Gavekal Research
Webinar: Inflation, Recession, Liquidity Crisis — Navigating Troubled Economic Waters
Anatole Kaletsky, Charles Gave, Will Denyer
22 Jul 2022
In this webinar Anatole Kaletsky and Will Denyer discussed the outlook for the US economy and markets over the next 18 months. Additionally, Charles Gave gave an update on the evolving international US dollar liquidity crisis.
India chartbook
Gavekal Research
India Macro Update: Unmet Potential
Udith Sikand, Tom Miller
13 Jun 2022
As high inflation crimps consumption and interest rate hikes retard capital spending, Indian growth for 2022/23 is set to register a disappointing 7-7.5%. A slew of fiscal measures aimed at cooling inflation will take some pressure off the Reserve Bank of India. But in a global environment of resurgent price pressures and the threat of more supply disruptions, India seems set to undershoot its growth potential, argue Udith and Tom in their quarterly assessment.
China chartbook
Gavekal Dragonomics
Macro Update: Confidence Crumbles
Dragonomics Team
26 Jul 2022
China has mostly reopened from the latest wave of mass lockdowns, and manufacturing is back online. But household consumption is subpar and confidence is poor, while the property sector is undergoing its deepest downturn since 2008. In our latest quarterly chartbook, the Dragonomics team explains the changing outlook for the economy and markets.
Europe's economy
Europe’s Electric Power Problem
In Europe spot baseload prices for electricity in France and Germany are up more than 1,000% over the last two years to trade at €440/MWh, the equivalent of oil prices at US$700/bbl. And if futures markets are to be believed, this is only a taste of price rises to come.
Trouble In Store
Amid all the lamentations, accusations and recriminations over Europe’s natural gas supply squeeze, it is easy to lose sight of a vital question: just how big is the energy shortage that Europe is facing this winter likely to be? This paper provides some pointers to the answer by examining three of the main variables at work: the gas supply, the amount of gas in storage and the demand for gas.
Revenge Of The Euro-Tourists
Eurozone economic growth defied investors’ pessimism in the second quarter, rising 0.7% QoQ and comfortably exceeding consensus expectations of just 0.2%. However, a reality check suggests this was likely the last hurrah before the eurozone slides into a severe economic downturn.
The ECB’s New Role As Political Lender
Ten years almost to the day after Mario Draghi as European Central Bank president pledged “to do whatever it takes to preserve the euro,” the fall of Draghi’s coalition government in Italy promises an early test of the ECB’s latest attempt to reconcile the fundamental contradiction at the heart of its twin mandate to target price stability and to ensure the euro’s survival.
Gavekal Dragonomics
Securing The Western Frontier
Tom Miller
China looks like a winner from the US withdrawal from Afghanistan, now free to tighten its grip on Central Asia. In this DeepChina report, Tom explains the complex reality of the latest round of the "great game." China is getting closer to Russia, skeptical of Afghanistan and Pakistan, and consolidating its economic hold on Turkmenistan.
Emerging markets
The Multilateral Road To Self-Interest
With international sympathy for China at a low ebb, Beijing is redoubling its program to promote its national self-interest via engagement with multilateral organizations. Tom Miller assesses its efforts.
Webinar: What Next For Emerging Markets?
Amid a broad-based tightening of global financial conditions, there are fears that emerging markets as an asset class could get caught in the downdraft. Yet notably, EM assets have not underperformed those in developed markets; in the case of currencies, they have outperformed.
A Fresh Look At EM Credit Risk
As global growth expectations are ratcheted down, the creditworthiness of emerging markets is again being called into question. The pace of EM bond drawdowns has only been surpassed in late 2008 and early 2020, both of which presented buying opportunities for EM credit. Udith asks: what about this time around?
A New Era Of Resource Nationalism
Between the Ukraine war and countries limiting exports of staples to protect national interests, inflation is soaring. Supplies of hard commodities may also be retarded. This would worsen a supply shortage of essential metals used in green technologies.
Latest video
Gavekal Research
Video: The Quirinale Question
Nick Andrews
14 Jan 2022
The possibility that Italian prime minister Mario Draghi could be installed as the country’s largely ceremonial president when parliament chooses a new head of state next month has raised fears of a new period of political instability. In this video interview, Nick Andrews assesses the implications for Draghi’s ongoing structural reform program, and for Italian asset prices.
Gavekal Research
Strategy Monthly: Navigating A US Recession
Will Denyer, Tan Kai Xian
1 Aug 2022
US GDP contracted in the second quarter of 2022 in quarter-on-quarter terms, following an earlier contraction in the first quarter. At this point most economists are still forecasting positive full-year growth, implying a vigorous rebound in the second half. This looks overly optimistic.
Equities
Gold As An Alternative Reserve Of Value
Inflation And Financial Markets
Why Are Financial Markets So Complacent?
Strategy Monthly: Navigating A US Recession
Beware A New Volatility Spike
The Signal And The Noise, Part III
Oil & commodities
Who Gets Cheap Energy Tomorrow?
The Signal And The Noise, Part II
Webinar: What Next For Emerging Markets?
Strategy Monthly: The Silver Lining In Emerging Markets
Webinar: Investing In The Age Of Weaponization
The Inherent Tension In Malthusian Bull Markets
China tech
Chip Investors Are Too Pessimistic
Plenty Of Friction But No Flames Over Taiwan
Multinationals Turn Cautious
London Seminar — March 2022
Better Manufacturing Through Science
Dependence And Restraint
Covid-19
Another Winter Of Overwhelmed Hospitals?
The old rule of dinner party conversation was never to bring up religion or politics. Add Covid to the list. That said, it is worth examining how different health care systems have dealt with the pandemic, and what that may mean for the coming winter.
Looking For Silver Linings
Investor sentiment towards China has flipped from exuberance to dismissal as more and more people consider the world's second-largest economy to be "uninvestible." Louis disagrees, hypothesizing that China might in fact lead the way out of today's bearish global environment.
The China Inc. Annual Report 2022
China’s companies are facing a new shock to growth from renewed lockdowns in 2022, along with weakening global demand and higher costs. How prepared are they to deal with this latest wave of disruption? In his annual chartbook, Thomas assesses the fundamentals of China’s corporate sector through a detailed examination of income statements and balance sheets.
Webinar: Global Investment Roundtable, June 2022
Concerns about global growth are escalating amid rising inflation and tightening central banks. In this webinar, our global team examined the risks, region by region.
