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Gavekal-IS
A New Misery Index
Didier Darcet
5 Nov 2026
Financial markets are often unsettled by unexpected changes in economic growth and inflation, especially when the two move in opposite directions. In this report, Didier introduces a new version of the Misery index that measures these shifts and shows a notable relationship between economic surprises and global equity returns over the past two decades. While the indicator still points to a relatively favorable environment for equities, its recent deterioration suggests that investors should be getting cautious.
Gavekal-IS
Complexity Versus Hierarchy
Didier Darcet
22 Oct 2026
In a world of growing complexity, identifying the few variables that really matter can be more useful than deploying ever greater computing power, says Didier. Building on Charles Gave’s recent revival of the Misery index, he argues that a simple combination of unemployment and inflation can explain much of the variation in expected equity returns across the US, Japan, Germany and France.
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The Big Neutral
With few obvious bargains across equities, bonds or gold, investors face a difficult environment of lower expected returns and heightened risks. Didier argues that the global economy is in a transitional phase, making diversification more attractive than concentrated bets on individual asset classes. His allocation models point toward Harry Browne’s permanent portfolio, suggesting that a neutral approach could offer reasonable inflation-adjusted returns while limiting exposure to major market shocks.
Why Aren’t Stocks Plunging?
Early autumn is often a fearful time in markets. And this year, investors have plenty of reasons to be nervous, including shipping disruptions, high energy prices, accelerating inflation and rising interest rates. Yet global equities continue to advance. This week, Didier examines the market psychology of today’s bullish investors, and asks whether their positive sentiment is sustainable.
Amathia
Amathia is not simply ignorance, but a refusal to learn from new information and past mistakes, says Didier. History offers plenty of examples, but the same problem can be seen today in education, politics and our response to rapid technological change. As artificial intelligence reshapes the world, he contends that the ability to learn and adapt will matter more than ever.
When Asia Revalues…
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.
Where Does The Money Go?
The cost of financial intermediation in the US has remained remarkably stable at around 2% a year for more than a century, despite huge productivity gains and sharply falling fund management fees. For Didier, the explanation may lie in Baumol’s cost disease, as rising coordination and compliance costs have absorbed much of the savings generated by technology. This matters particularly for long-term government bonds, whose real returns increasingly struggle to cover the cost of keeping the financial system running.
The Macroeconomics Of AI In Practice
In the third part of his series on the macroeconomics of AI, Didier develops a framework for deciding when investors should favor information and technology over energy. After briefly tilting toward energy during this year’s confrontation in the Strait of Hormuz, the framework is once again signaling that investors should favor information.