Most Recent
Gavekal Research
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?
Gavekal Research
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
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
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.
Gavekal Dragonomics
The Constraints On More Stimulus
Xiaoxi Zhang, Wei He
Glimpsing The Future For Property In Hainan
Rosealea Yao
The Invisible Second Wave
Christopher Beddor
Property Stumbles
Rosealea Yao
The Recession Trade Overshoots
Wei He
Controls To Chill Venture Capital
Yanmei Xie
The Recovery Loses Some Steam
Dragonomics Team
Is Shadow Banking Back?
Xiaoxi Zhang
China Woos The Global South
Tom Miller
The Long Journey Back For International Travel
Christopher Beddor
More Research
The Effect Of A Loose Fiscal, Tight Money Combination
Louis-Vincent Gave
Consumer Staples' Bad Month
Louis-Vincent Gave
After May’s Payrolls
Tan Kai Xian
Strategy Monthly: Japan—This Time It's For Real
Udith Sikand
Navigating A Terms-Of-Trade Reversal
Vincent Tsui
Webinar: In Search Of Europe’s Second Half Drivers
Nick Andrews, Cedric Gemehl
From Discord To Deficit
Tom Holland
Video: A Disappointing China
Louis-Vincent Gave
The Rest Of The US Equity Market
Tan Kai Xian
Questions Raised By The AI Surge
Louis-Vincent Gave
Gavekal Dragonomics
The Long Journey Back For International Travel
Christopher Beddor
8 May 2023
China’s travelers are getting back on the road, with domestic tourism exceeding pre-pandemic levels during the Labor Day holiday for the first time since the reopening. But Christopher argues that while international travel is also rebounding rapidly, high costs and other hurdles mean cross-border tourism will take much longer to normalize.
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?
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.
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.
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.
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
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.
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.
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.
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.
Ukraine Fallout
China Risks Sliding Into A Proxy War
The Ultimate Head Fake
Behind Russia’s Oil Production Cut
Investing For A New Cold War
Russia, Do Your Worst
Who Is Copying Who? Part II
Gavekal Research
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
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: 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?
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.
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.
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?
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
Webinar: Turkey And Thailand—Two Elections At A Hard Time For EMs
Turkey and Thailand go to the polls on May 14. Both countries have seen their share of authoritarian policymaking and populist democratic politics. In yesterday’s webinar, Udith Sikand and Vincent Tsui assessed each economy’s prospects and sought to draw some common lessons.
Webinar: The International Debt Crisis Of 2023
After global frontier markets went on a borrowing spree between 2008 and 2020, tighter global liquidity has pushed countries from Pakistan to Zambia into financial crisis. China is a major creditor, sometimes at odds with other bilateral and multilateral lenders.
Navigating Asian Precarity
Since the end of September 2022, when the US dollar peaked and investors began to price in China’s reopening from Covid lockdowns, the rally in Asian assets has been respectable, if unspectacular in relative terms.
Everything You Never Wanted To Know About Frontier Debt
After a lengthy standoff, China and other creditors appear close to a deal that would enable stressed developing countries to start restructuring their unpayable debts. But Arthur and Vincent argue that a full resolution of the debt problem is still years, not months, away.
Latest video
Gavekal Research
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.
Gavekal Research
Strategy Monthly: Japan—This Time It's For Real
Udith Sikand
2 Jun 2023
After making handsome gains in recent months, Japanese equities are poised to deliver further outperformance over the medium term. Japan is no longer a value trap.
Equities
Consumer Staples' Bad Month
Questions Raised By The AI Surge
The After-Effects Of The Debt Ceiling Deal
Japan’s Competitiveness And The New World Order
A Simple Quandary
Hope Over Experience In Japan
Oil & commodities
NOK, NOK, Who Is There?
From Discord To Deficit
Behind The Softness In Energy
Strategy Monthly: Through A Glass Darkly—The Oil Market Outlook
India And The New World Order
Video: The Outlook For Oil Prices
China tech
The EM-AI Crossroads
Controls To Chill Venture Capital
A Turn In The Asian Electronics Cycle
Deja Vu All Over Again, Again
China Risks Sliding Into A Proxy War
Video: The Asian Trade Cycle Lives
Covid-19
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.
The Invisible Second Wave
China’s second Covid wave has arrived more or less on schedule, without producing lockdowns or even much public discussion at all. Like follow-on waves elsewhere in the world, the moderate rise in Covid cases is not likely to result in big disruptions to consumer behavior or economic activity.
China’s Underwhelming Reopening
A few weeks after China surprised investors by ditching its Covid restrictions, Presidents Xi Jinping and Joe Biden held what looked like friendly and productive talks at the G20 summit. Commodities and Chinese economy-related assets rallied, but the bounce did not last. Louis explores why, and what might be next.
Shanghai Seminar — April 2023
Louis examined the global macroeconomic landscape to find the key trends and structural changes that matter for investors; Wei discussed China's economic recovery and outlined the near-term growth and policy outlook; and Arthur spoke on China’s long-term growth trajectory geopolitical strategy.
