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Gavekal Dragonomics
Why Households Are Deleveraging
Wei He, Xiaoxi Zhang
18 Sep 2026
In 2026, bank lending to Chinese households is in outright decline for the first time in history. This deleveraging is more than a sign of household caution, although households are indeed more risk averse. As Wei and Xiaoxi explain in this piece, financial regulators have for years been tightening standards for lending to households. With household creditworthiness still deteriorating, this focus on risk control will ensure household deleveraging will continue.
Gavekal Research
Where The US Is (Still) Exceptional
Tan Kai Xian, Cedric Gemehl
18 Sep 2026
Compared with European stocks, US stocks are no longer exceptional. Over the past four years, there has been no sustained trend in the relative performance of the two. That said, at the sector level, US consumer discretionary and staples stocks have continued to outperform their European counterparts.
Gavekal Research
Video: The Challenge For Fixed Income Investors
Louis-Vincent Gave
17 Sep 2026
So far this decade, US treasuries have delivered no returns whilst European government bonds have delivered negative returns. Japanese government bonds have been an unmitigated disaster. The one major government bond market that did deliver positive returns has been China’s .Following a dismal five years, is it time to return to OECD government bonds?
Gavekal-IS
When Asia Revalues…
Didier Darcet
17 Sep 2026
Asia’s extraordinary rise over the past 25 years has transformed the distribution of global wealth and gold reserves, but currencies have yet to reflect that shift. Asian currencies, says Didier, remain structurally undervalued. When this long-delayed monetary adjustment finally occurs, a stronger Asia could deliver a substantial transfer of purchasing power from the West and mark a fundamental rebalancing of the global monetary order, he argues.
Gavekal Dragonomics
Governance Over Growth
Andrew Batson
The Energy Shock Moderates
Wei He, Dragonomics Team
Still Waiting For EV Consolidation
Ernan Cui
The Capex Correction Continues
Thomas Gatley
Investing In People Is Also Industrial Policy
Tilly Zhang
Gavekal Research
Dario Cannot Pace The AI Frontier, But Real Yields Might
Will Denyer
When Will The Trump PAC Money Be Spent?
Louis-Vincent Gave
Central Banks Under Pressure
Will Denyer, Udith Sikand
Desperately Seeking An Anchor
Charles Gave, Louis-Vincent Gave
Rapidly Shifting Sands
Louis-Vincent Gave
Gavekal Technologies
The US-China AI Safety Debate
Laila Khawaja
The China New Energy Guidebook
Arthur Kroeber, AJ Cortese, Laila Khawaja, Ernan Cui, Huang Shichan, Damien Ma
A China Tech Report Card
Arthur Kroeber, AJ Cortese, Tom Hancock
The Deployment Challenge For Cheap Solar
AJ Cortese
Alibaba’s AI Conundrum
Laila Khawaja
Gavekal-IS
Where Does The Money Go?
Didier Darcet
The Macroeconomics Of AI In Practice
Didier Darcet
The Macroeconomics Of AI: Part II
Didier Darcet
The Macroeconomics Of AI In Simple Terms
Didier Darcet
Currency Momentum Trading
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 housing starts fell -2.6% MoM to 1.28mn in Aug, versus -9% in Jul
Below expected 6.7%; building permits fell -2.7% MoM to 1.39mn in Aug, vs 4.3% in Jul
Elevated mortgage rates crimping demand and weighing on homebuilding
Bank of England left benchmark rate unchanged at 3.75%
As expected; split decision with 3 of 9 members voting for a hike
BoE edging towards rate hike cycle amid persistent upside risks to inflation
Japan CPI rose 1.9% YoY in Aug, the same pace as in Jul
Below expected 2%; ex-fresh food & energy rose 1.9% YoY in Aug, the same pace as in Jul
Reinforces case for steady, but not accelerated, pace of rate hikes by BoJ
Japan hiked benchmark rate by 25bp to 1.25%
As expected; split decision with 2 of 9 members voting for a hold
Dissenting votes from Takaichi appointees will hurt BoJ's inflation fighting credentials
Test Your Knowledge
Apple TV took home 28 Emmy Awards this year, handily beating established media empires like HBO Max owned by Warner Bros. Discovery. Which streaming service now dominates in the US?
- Apple TV
- Prime Video
- Netflix
- Disney+
Chart of the Week
The yen is the cheapest major currency in the world today. But this has been true for years, during which the yen has continued to weaken. What has changed in recent months is that Japanese bond yields now look attractive. Based on Maurice Allais’ “golden rule” which compares long-term bond yields to nominal GDP growth (defined here as a 7-year moving average), Japan now offers not only an undervalued currency but also compelling bond valuations. This may explain why global asset allocators like NBIM are planning to increase exposure to JGBs.
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: Autumnal Trouble Ahead?
Louis-Vincent Gave, Charles Gave, Anatole Kaletsky
11 Sep 2026
Global markets are being roiled by geopolitical tensions, rising bond yields and uncertainty over the outlook for inflation and monetary policy. At the same time, the AI boom and shifting trade and capital flows are reshaping the global economic and investment landscape. In our first webinar of the autumn season, Gavekal’s founding partners discuss what these crosscurrents mean for markets and how investors should position their portfolios.
The Iran War And Fallout
No Good Outcomes For Energy Inflation
It is Wednesday. Warring parties in the Middle East are again exchanging fire, and energy prices are spiking. For investors, it may be tempting to shrug off the latest flare-up, but disregarding the latest escalation in the Persian Gulf would be rash. Developments in the region will matter greatly for the trajectory of inflation over the coming months, and therefore for financial markets.
The Record High Diesel Prices
Because of soaring crack spreads, diesel prices everywhere around the world are making new all-time highs, at least in nominal terms. In real terms, the diesel price is still lower than the 2022 spike that followed the start of the Ukraine war. But Louis points out that with a real term diesel price above US$5/gallon, few good things happen.
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.
US economy & markets
Where The US Is (Still) Exceptional
Compared with European stocks, US stocks are no longer exceptional. Over the past four years, there has been no sustained trend in the relative performance of the two. That said, at the sector level, US consumer discretionary and staples stocks have continued to outperform their European counterparts.
Dario Cannot Pace The AI Frontier, But Real Yields Might
The AI investment boom came under renewed threat Saturday when Anthropic’s chief executive argued that his company and others should “slow the pace” of model development to ensure safe deployment. At the same time, there is growing grassroots pressure to regulate the pace of data center deployment. Long-term bond yields have also climbed quickly. These are all potential threats to the AI capex boom. But how likely is each to seriously throttle investment?
Central Banks Under Pressure
Amid a slew of central bank meetings this week, those of the Federal Reserve and Bank of Japan will garner particular attention. Both face political pressure, rising inflation and higher bond yields, leaving investors keen to see how policymakers respond and how markets react. Will and Udith do not expect policy to be the main driver of a shift in capital from the US to Japan, but argue that there is strong case for overweighting Japanese bonds.
Incentives And Imbalances
The Trump administration wants to reduce the US external deficit, but the incentives needed to do so are not yet in place, says Kai Xian. Strong asset prices encourage US households to spend and attract foreign capital, while notwithstanding recent treasury market ructions, fiscal pressure remains limited. Unless expensive US equities and an overvalued dollar fall under their own weight, the US external deficit is therefore likely to remain large or widen further.
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 Challenge For Fixed Income Investors
Louis-Vincent Gave
17 Sep 2026
So far this decade, US treasuries have delivered no returns whilst European government bonds have delivered negative returns. Japanese government bonds have been an unmitigated disaster. The one major government bond market that did deliver positive returns has been China’s .Following a dismal five years, is it time to return to OECD government bonds?
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
Where The US Is (Still) Exceptional
Compared with European stocks, US stocks are no longer exceptional. Over the past four years, there has been no sustained trend in the relative performance of the two. That said, at the sector level, US consumer discretionary and staples stocks have continued to outperform their European counterparts.
Higher Rates; Uneven Pain
The European Central Bank delivered a well-telegraphed 25bp rate hike on Thursday, putting the policy rate at the upper bound of the 1.75% to 2.5% range the ECB estimates is neutral for the eurozone economy. Any further interest rate hikes will push monetary policy increasingly into restrictive territory. The question for investors therefore is how much any further hikes will put a brake on eurozone economic activity.
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.
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
No Good Outcomes For Energy Inflation
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
