Most Recent
Gavekal Research
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.
Gavekal Research
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?
Gavekal Research
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.
Gavekal Research
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.
Gavekal Dragonomics
Demystifying Excess Deposits
Wei He
The Consumer Rebound Begins
Ernan Cui
Macro Update: Reversal, Reopening, Recovery
Dragonomics Team
The Limits To Iron Ore’s Rally
Rosealea Yao
Eight Questions For China’s Tech Sector In 2023
Dan Wang
Covid’s Final Blow Before The Rebound
Dragonomics Team
Earnings And The Reopening Rally
Thomas Gatley
The Coming Credit Bounce
Xiaoxi Zhang
A Quicker Road To Reopening
Ernan Cui
Ready For Takeoff
Wei He, Thomas Gatley
More Research
Tension Over Telecoms
Yanmei Xie
Is The US Fudging Inflation Data?
Will Denyer
The Semiconductor Stranglehold Tightens
Yanmei Xie, Dan Wang
The Implications Of Adani
Udith Sikand
Video: Towards A South American Common Currency
Udith Sikand
The Devil In The Detail Of Eurozone Inflation
Cedric Gemehl, Nick Andrews
Don’t Count On China To Save US GDP
Will Denyer
Webinar: Worst Case Averted. What Next For Europe?
Near-Term Bets In Brasilia
Udith Sikand
The Message From Dr. Copper
Louis-Vincent Gave
Gavekal Dragonomics
Webinar: China’s Covid Surge And The Reopening Rally
Thomas Gatley, Ernan Cui
20 Jan 2023
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.
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.
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.
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.
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.
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?
Post Your Answer
Chart of the Week
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.
Open Chart
US economy & markets
Disinflation And A Potentially Stubborn Fed
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?
Is The US Fudging Inflation Data?
The US consumer price index is set for a makeover. Some worry the US is “pulling an Argentina” by making inflation look lower so the central bank can claim an artificial victory and turn dovish. I would demur and argue that if there is artifice at play, it probably relates to fiscal, not monetary, policy.
Don’t Count On China To Save US GDP
The US is not in a recession. But the data still point in that direction. China’s reopening and Europe’s good fortune in avoiding a winter energy crisis will boost external demand. But this effect is unlikely to be strong enough to reverse the US domestic credit cycle, which continues to point to slower growth, slowing inflation and very possibly a near-term recession.
Looking Beyond The US Housing Slump
Two weeks ago, on January 10, US banking giant Wells Fargo announced it will scale back its home loan business “to reduce risk.” Seasoned observers may wonder whether the retreat of a top three mortgage lender from the sector is a sign the US housing market slump is nearing a bottom.
Ukraine Fallout
Investing For A New Cold War
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
Gavekal Research
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
Gavekal Research
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
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.
Europe's economy
The Devil In The Detail Of Eurozone Inflation
Europe has dodged an economic bullet. Worst-case fears of a crippling energy shortage have vanished and investors have revised down the growth and inflation risks they were pricing into European markets. But while this is unambiguously positive for European growth, the implications for eurozone inflation are less straightforward.
After The Rally
Eurozone equities have started 2023 on a tear. Notwithstanding Tuesday’s dip, the MSCI EMU index is up 6.6% year-to-date in euro terms. The market’s new-year surge has pushed the gains since late September to 21.5%. Is this rally sustainable?
Beware Eurozone QT
In the last week, three of the eurozone’s big four economies have reported unexpectedly large declines in consumer inflation for December. This has raised hopes of an early end to European Central Bank rate rises. However, expectations of an early end to ECB tightening are premature.
Hawk Ascending
European Central Bank president Christine Lagarde laid it on with a trowel Thursday. “Anybody who thinks that this is a pivot for the ECB is wrong,” she insisted. Is Lagarde’s hawkishness just a rhetorical device, or will the ECB stick to its hardline inflation-fighting stance? And is the latter priced in by markets?
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
A Constrained Brazilian
Luiz Inácio Lula da Silva has snuck a tight win in Brazil’s presidential election race, while defeated incumbent Jair Bolsonaro looks not to be contesting the result as feared before the second-round run-off. Assuming that an orderly transition of power duly unfolds, the effect should be to lower the political risk premium on deeply undervalued Brazilian assets.
Asia’s New Interventionists
Asian central banks are spooked by the US dollar’s apparent one-way ascent and are resorting to direct intervention. Is there method to their apparent scramble for control?
Fire On The Frontiers
After the US Federal Reserve raised interest rates Wednesday, a spate of central banks have followed suit. This mass tightening threw an unwelcome spotlight on the central banks that have not joined the general trend, and all this has detracted attention from the mounting stresses in the world’s frontier economies.
The Cost Of Being A Fed Follower
It has been a tough few weeks for emerging East Asia’s currencies. Yet, even as some regional currencies have tracked the yen lower, the headwinds that have battered others have abated. In short, some Asian currencies are more attractive than others.
Latest video
Gavekal Research
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.
Gavekal Research
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.
Equities
Strategy Monthly: Europe’s Good News Can Only Go So Far
Webinar: China’s Covid Surge And The Reopening Rally
The Perfect Storm For US Banks
Asian Exposure For The Risk-Averse
Positioning For A Changing US Liquidity Environment
Anchored Much?
Oil & commodities
Anchored Much?
Of Gold And Oil
Webinar: China After The Reopening
An Ugly Week For Energy
The Demise Of Imperial Privilege
Can An Oil Price Cap Work?
China tech
Video: The Asian Trade Cycle Lives
The Semiconductor Stranglehold Tightens
Eight Questions For China’s Tech Sector In 2023
A Respite In The Strategic Rivalry
The Enforcement Challenge For US Chip Controls
US Chip Sanctions And China’s Options
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.
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.
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.
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.
