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Strategy Monthly: Europe’s Good News Can Only Go So Far

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Strategy Monthly: Europe’s Good News Can Only Go So Far

Cedric Gemehl, Nick Andrews
2 Feb 2023
Eurozone equity markets and the euro have rallied strongly over recent months thanks to a milder than expected winter and expectations of more monetary tightening in from the European Central Bank than the Federal Reserve this year. But there are indications the recent rally has squeezed much of the juice out of eurozone equities.
Disinflation And A Potentially Stubborn Fed

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Disinflation And A Potentially Stubborn Fed

Will Denyer
2 Feb 2023
For the first time in this cycle, Federal Reserve chair Jay Powell cheerily intoned on Wednesday that “a disinflationary process has started”. So given this apparent disinflationary dynamic, why is Powell and his policymaking committee still signaling “ongoing increases” in rates?

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Video: The Asian Trade Cycle Lives

Vincent Tsui
1 Feb 2023
Export-orientated Asian economies always suffer in times of global economic weakness and Vincent does not expect this cycle to be markedly different. However, he does wonder if two key pillars supporting Asian export demand mean that asset markets have overdone the gloom in making the adjustment.

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The End Of Central Banks As A Driver Of Markets

Charles Gave
1 Feb 2023
I started out in this business in February 1971, some 18 months before Richard Nixon cut the link between the US dollar and gold, thereby ushering in a 50-year stretch when central banks dominated money. My argument today is that this era has ended.

The global view

The End Of Central Banks As A Driver Of Markets
I started out in this business in February 1971, some 18 months before Richard Nixon cut the link between the US dollar and gold, thereby ushering in a 50-year stretch when central banks dominated money. My argument today is that this era has ended.
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Webinar: The Big Investment Themes Of 2023
Will the fall of the US dollar over the last quarter of 2022 continue in 2023? What does China’s reopening mean for asset markets? For commodities demand? And for global inflation? And what is the outlook for OECD bonds? In this webinar Louis tackles the big questions head-on, and expands on his key investment themes for the year ahead.
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Of Gold And Oil
Economic activity, as Charles often contends, should be thought of as energy transformed. It means that a certain level of oil inventory must be kept on hand in an economy. At the same time, gold has proved a far better reserve of value than treasuries. From this, he has identified a new decision rule.
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How Capitalism And Markets Really Work
The role of banks as leveraged intermediaries between risk-averse rentiers and risk-taking entrepreneurs means they act as the canary in the economic coal mine. And the vital importance of energy prices in determining profitability means the relationship between bank share prices and energy prices holds invaluable information for investors. Charles has been deciphering the signals, and he doesn’t like the messages they hold for investors.
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Test Your Knowledge
Up to half a million Britons went on strike on Wednesday to force higher wages and better terms. When was the last time the UK saw such a big strike day?
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Chart of the Week

Week 4, 2023
The yield on a two-year US treasury note has dropped below the federal funds target rate. This suggests the bond market sees more downside than upside for policy rates over the next two years, which in turn suggests a bet on recession. A negative spread between these two rates has correctly signaled all six recessions since 1979, while producing three false recession signals.
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Ukraine Fallout

Investing For A New Cold War
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Russia, Do Your Worst
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Who Is Copying Who? Part II
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The Microsoft-ification Of Warfare
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The End Of The Unipolar Era
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World Enters New Liquidity Crisis
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Webinar: Worst Case Averted. What Next For Europe?

27 Jan 2023
A mild winter has averted Europe’s long-feared energy crisis, and the prospect of a demand boost from China’s reopening has raised hopes for growth and lifted European markets. Cedric and Nick review the continent’s macro and market conditions and chart a course to navigate the coming quarters.

India chartbook

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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

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Macro Update: Reversal, Reopening, Recovery

Dragonomics Team
27 Jan 2023
China’s remarkable reversal of Covid policies in late 2022 has set the stage for an equally unusual economic recovery in 2023. It’s early days yet, but consumer activity is quickly normalizing, and this consumption-led rebound will gather strength in coming months. Our latest quarterly chartbook examines the prospects and market implications of this recovery.

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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

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Video: The Asian Trade Cycle Lives

Vincent Tsui
1 Feb 2023
Export-orientated Asian economies always suffer in times of global economic weakness and Vincent does not expect this cycle to be markedly different. However, he does wonder if two key pillars supporting Asian export demand mean that asset markets have overdone the gloom in making the adjustment.

Oil & commodities

Anchored Much?
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Of Gold And Oil
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Webinar: China After The Reopening
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An Ugly Week For Energy
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The Demise Of Imperial Privilege
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Can An Oil Price Cap Work?
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China tech

Video: The Asian Trade Cycle Lives
The Semiconductor Stranglehold Tightens
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Eight Questions For China’s Tech Sector In 2023
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A Respite In The Strategic Rivalry
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The Enforcement Challenge For US Chip Controls
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US Chip Sanctions And China’s Options
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Covid-19

Macro Update: Reversal, Reopening, Recovery
China’s remarkable reversal of Covid policies in late 2022 has set the stage for an equally unusual economic recovery in 2023. It’s early days yet, but consumer activity is quickly normalizing, and this consumption-led rebound will gather strength in coming months. Our latest quarterly chartbook examines the prospects and market implications of this recovery.
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Webinar: China’s Covid Surge And The Reopening Rally
China continues to reel from a massive wave of Covid infections, but cases may have already peaked in most places. In this webinar our China team discussed the pace of reopening and its market implications. Ernan Cui provided the latest updates on the Covid situation, and Thomas Gatley assessed how far the reopening rally has to run.
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A Quicker Road To Reopening
China is poised for a strong economic recovery once the current wave of Covid infections has peaked. Public health experts expect that to happen in late January, but Ernan’s spot checks suggest most places may already have passed their infection peaks. With most remaining Covid restrictions due to be lifted on January 8, the stage seems set for a gradual return to normal spending patterns after the lunar new year holiday.
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Strategy Monthly: China's Reopening Rebound
China’s reopening from Covid containment is well under way, and the country is suffering a massive wave of infections. While normal life is beginning to resume, many consumers remain cautious, so a full rebound in confidence will take time. But by Chinese New Year the economic recovery should begin in earnest.
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From the archives: oldies but goodies

Deficit Deniers Of The World Unite
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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.
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Are We Entering into Revolutionary Times?
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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.
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The High Cost Of Free Money
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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.
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