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Gavekal-IS
Wicksellian Bonds
Didier Darcet
24 Mar 2023
Not much in the financial world is free, but one exception is the cost-free benefit that comes from diversifying a portfolio by combining different assets like stocks and government bonds. The decision whether, or not, to invest in bonds depends on their expected real return.
Gavekal-IS
Tug-Of-War
Didier Darcet
3 Mar 2023
The world economy is playing a game of tug-of-war. England, Germany and France are pulling toward recession, while the situation in the United States and Japan is slightly more enviable. Meanwhile, Chinese and Indian growth could reach 5 to 6% in 2023. Which of these opposing forces will succeed in attracting the others?
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Fear Index
How can we measure in real time the fear that grips a financial market? By the statistical anomalies it generates on asset returns which we call distribution tails. If men did not imitate each other so much in their emotions, the S&P 500 would only experience a 50% crash every 6,000 years. So, is the market "afraid" today?
Inflationary Boom
The macroeconomic debates today are mainly about the speed of the disinflation and economic slowdown in the US and Europe. In other words, the predicted path of a disinflationary bust, the paradise of G7 long government bonds, and the nightmare of risky assets. But our models conclude exactly the opposite.
Innovation
The economy is about the exchange of value, i.e., goods and services. And value mixes three components: energy content, information content and the capacity to be sold. The great economic advancements of mankind have always been accompanied by major innovations in one of these three forms of value.
Gold, Silver, and Copper
Gold, silver, and copper have historically similar uses: hoarding, jewelry, and industry, but with varying proportions as well as different energy costs to extract, therefore their prices are not similarly sensitive to macroeconomic factors. Let's take a closer look.
FOMO
2023 starts with an economic gap between two camps: developed economies vs. emerging economies. On the developed side, fear prevails on stocks, bonds, and currencies. On the emerging side, it’s the fear of missing out!
The “French FAANMG”
What if growth were not flattening everywhere and across all sectors? What if China reopening, for instance, were to provide an extended leg up? Any appealing growth stocks and possibly more resilient than the FAANMG left in the market? Yes, the “French FAANMG”!