Gavekal Research

Most Recent

NOK, NOK, Who Is There?

Gavekal Research

Lock

NOK, NOK, Who Is There?

Cedric Gemehl
7 Jun 2023
Ask yourself who has been Europe’s biggest winner in the last six months and energy-rich Norway likely springs to mind. Sweden’s economy may be cratering due to wilting export markets and a deflating property bubble, but Norway’s has benefited from Europe’s acute need for non-Russian oil and gas, with proceeds racking up in a carefully-managed sovereign wealth fund. Indeed, Norway’s current account surplus leapt to a whopping 30% of GDP last year, from just 3.7% in 2019. So how come the Norwegian krone is one of the developed world’s worst performing currencies, asks Cedric?
The Inflation-Deflation Tug Of War

Gavekal Research

Lock

The Inflation-Deflation Tug Of War

Louis-Vincent Gave
7 Jun 2023
Markets today are pricing in a return to an inflation rate of 2-3% in most major economies. Behind this forecast lie numerous sound factors. On the other hand, there are powerful inflationary forces at work. In short, there’s a real tug of war going on. So in the near term, what could tip the balance one way or the other?

Gavekal Dragonomics

Lock

Local Governments Play The Debt Game

Xiaoxi Zhang
7 Jun 2023
China’s local-government debt mess is back in the headlines, as local officials go increasingly public with pleas for support in dealing with their huge piles of off-balance-sheet obligations. But Xiaoxi argues that these are moves in a game played among officials, and the likely outcome is for everyone to "extend and pretend" for a while longer.

Gavekal Research

Lock

What Is A Recession? Yes, The Answer Matters

Anatole Kaletsky
6 Jun 2023
Amid all the debate about whether or not the US economy will fall into a recession this year, two questions are often overlooked. What exactly is a recession? And why does the definition matter? In this paper, Anatole argues trenchantly that the “technical” definition favored by most observers—two consecutive quarters of negative GDP growth—is dangerously misleading, and obscures the true nature of the risk facing the US economy and markets.

The global view

The Inflation-Deflation Tug Of War
Markets today are pricing in a return to an inflation rate of 2-3% in most major economies. Behind this forecast lie numerous sound factors. On the other hand, there are powerful inflationary forces at work. In short, there’s a real tug of war going on. So in the near term, what could tip the balance one way or the other?
Lock
From Discord To Deficit
It is a sign of the discord among the Opec+ oil producers that the cartel is not inviting reporters from key media organizations to its gathering in Vienna this Sunday. Saudi Arabia’s call for stricter discipline and further production cuts to support prices are meeting resistance from Russia—which the Saudis suspect has been failing to make the “voluntary” cuts Moscow announced earlier this year.
Lock
Questions Raised By The AI Surge
This month’s surge in artificial intelligence-related stocks has Louis wondering about the underlying signaling. On the one hand, he asks if mega-cap tech is merely sucking up the liquidity that until recently had been going into other markets. On the other hand, he wonders if this violent move signals a structural shift in the global liquidity environment.
Lock
The Fools And Money Seesaw
It is a long-standing Gavekal trope that managing money is largely about figuring out whether there is “more money than fools” in the markets. The idea is that financial markets act as reservoirs of liquidity, and that these reservoirs get tapped when the real economy finds itself short of cash. Louis examines where we are today on the fools-versus-money seesaw.
Lock
Test Your Knowledge
The US list price for a Tesla Model 3 sedan is US$40,240. How much might a middle-class buyer in California expect to pay?
Post Your Answer

Chart of the Week

Week 22, 2023
China's outbound tourism has been slow to recover, partly due to limited flights and backlogs as people renewed travel documents. It's been easier for Chinese nationals to go to Macau and Hong Kong, which can serve as bellwethers for travel from China to the rest of Asia. As more return to their favorite hotspots, expect their contribution to the service sector in Asian economies to grow.
Open Chart

US economy & markets

After May’s Payrolls
Friday was a classic risk-on day. US equities rose sharply, with cyclical andsmall-cap stocks outperforming. Corporate credit spreads narrowed. And US treasuries and gold fell. The news coming out is undoubtedly good, but Kai Xian argues it may not have been quite as good as Friday’s risk-on move in markets suggests.
Lock
The Rest Of The US Equity Market
Judging by the frenzy surrounding artificial-intelligence plays, the technology boom is back with a vengeance. Yet aside from standout superstars, US equities have generally done poorly in 2023: the S&P 500 equally-weighted index is pretty much flat and has underperformed the float-weighted S&P 500 index. Kai Xian explains that given the state of profits in the US economy, this all makes sense.
Lock
The After-Effects Of The Debt Ceiling Deal
Assuming it passes Congress without a hitch, Saturday’s 11th-hour deal to suspend the US federal debt limit until 2025 will bring down the curtain on the political drama over the debt ceiling until after the 2024 election. But for investors, the story is far from over. The ripple-effects of the debt ceiling deal on financial markets and monetary policy are only just getting started.
Lock
No Good News For US Commercial Real Estate
As the US Federal Reserve nears the end of its tightening cycle, it is possible to identify some good news—at the margin—for the US residential real estate market. However, Kai Xian argues that the commercial real estate market has not seen the end of its woes.
Lock

Ukraine Fallout

China Risks Sliding Into A Proxy War
Lock
The Ultimate Head Fake
Lock
Behind Russia’s Oil Production Cut
Lock
Investing For A New Cold War
Lock
Russia, Do Your Worst
Lock
Who Is Copying Who? Part II
Lock

Gavekal Research

Lock

Webinar: In Search Of Europe’s Second Half Drivers

Nick Andrews, Cedric Gemehl
2 Jun 2023
Europe analysts Cedric Gemehl and Nick Andrews assess the eurozone’s economic outlook and ask what the main drivers of European asset market performance over the second half of 2023 will be.

India chartbook

Gavekal Research

Lock

India Macro Update: Normalization In Sight

Udith Sikand, Tom Miller
13 Dec 2022
Indian economic growth data is all over the place. Despite some positive signs, especially the upturn in the investment cycle, rising external volatility and domestic policy tightening mean growth could slow a little more, contend Udith and Tom. Here, they unpick the factors influencing India’s macro picture and markets.

China chartbook

Gavekal Dragonomics

Lock

Macro Update: The Consumer Cycle

Dragonomics Team
27 Apr 2023
China’s reopening is here, and early growth outcomes have been better than expected. Household consumption is returning to pre-pandemic trends, and a combination of reopening dynamics, policy support and base effects will ensure decent growth for 2023. Our latest quarterly chartbook assesses the economic outlook and market implications for the months ahead.

Europe's economy

NOK, NOK, Who Is There?
Ask yourself who has been Europe’s biggest winner in the last six months and energy-rich Norway likely springs to mind. Sweden’s economy may be cratering due to wilting export markets and a deflating property bubble, but Norway’s has benefited from Europe’s acute need for non-Russian oil and gas, with proceeds racking up in a carefully-managed sovereign wealth fund. Indeed, Norway’s current account surplus leapt to a whopping 30% of GDP last year, from just 3.7% in 2019. So how come the Norwegian krone is one of the developed world’s worst performing currencies, asks Cedric?
Lock
An Exposed Euro
On Tuesday, eurozone growth data came in soft, followed by a retreat in the euro against the dollar. Despite a much-improved energy supply situation, the activity gauge from Europe’s factory lands is the weakest since the depth of the pandemic in May 2020. Nick assesses the outlook for the euro amid global economic uncertainty.
Lock
The UK Labor Exception
On Tuesday, the UK released data showing that payroll employment fell by 136,000 in April. Anyone hoping that April’s data marks the beginning of a labor market easing big enough to deter the Bank of England from maintaining a tight monetary policy stance over the coming quarters will be disappointed.
Lock
Europe’s Food Crisis Is Topping Out
Italy’s government convened an emergency meeting on Thursday to address a mounting pasta crisis. Comedians may be having a field day but Italians are not amused by rising prices for staples. The story is similar across Europe. So why is food production proving such a problem?
Lock

Gavekal Dragonomics

Lock

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.

Latest video

Gavekal Research

Lock

Video: A Disappointing China

Louis-Vincent Gave
31 May 2023
Louis recently spent time meeting companies and investors in China and found that animal spirits have indeed taken a big knock as a result of government policies. In this video interview, he discusses what this mood shift means for asset markets and offers a view on how investors should play a more circumspect China.

Oil & commodities

NOK, NOK, Who Is There?
Lock
From Discord To Deficit
Lock
Behind The Softness In Energy
Lock
Strategy Monthly: Through A Glass Darkly—The Oil Market Outlook
Lock
India And The New World Order
Lock
Video: The Outlook For Oil Prices
Lock

China tech

The EM-AI Crossroads
Lock
Controls To Chill Venture Capital
Lock
A Turn In The Asian Electronics Cycle
Lock
Deja Vu All Over Again, Again
Lock
China Risks Sliding Into A Proxy War
Lock
Video: The Asian Trade Cycle Lives

From the archives: oldies but goodies

Deficit Deniers Of The World Unite
Gavekal Research
Lock

Deficit Deniers Of The World Unite

Anatole Kaletsky
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. I believe that both of these obsessions will soon be forgotten.
More
Are We Entering into Revolutionary Times?
Gavekal Research
Lock

Are We Entering into Revolutionary Times?

Louis-Vincent Gave
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. But the modus operandi for most leaders is to try and maintain the status quo. But if the problems are large enough, this does not work, and the same challenges reappear until either a solution is found, the elite is replaced by a new elite, or the country, system or civilization disappears.
More
The High Cost Of Free Money
Gavekal Research
Lock

The High Cost Of Free Money

Charles Gave
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’. This is worrying, for extended periods of cheap money typically come back with a hefty price tag.
More