E.g., 10-08-2020
E.g., 10-08-2020
We have found 4191 results.
View by: Grid List
Sort by: Relevancy Date
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The State Of The US Recovery

    The renewed Covid-19 outbreak in the past two months put a brake on the US recovery, but that engine is again firing. Despite many states having reversed opening measures, Friday’s payroll report came in strong, with the unemployment rate down to 10.2%; high-frequency data like mobility readings paint a similar picture.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    How To Pay For Sin In The Future?

    Just as success has many fathers, there are many possible explanations for the upside breakout in gold prices. Obvious explanations include a rapid rise in monetary aggregates across the OECD, the fall in the US dollar and growing US-China tensions. An overlooked explanation is the demise of physical cash as a liquid and easily transportable asset.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Emerging Markets And The Dollar

    A weakening US dollar is usually an unalloyed positive for emerging markets, so it is no surprise that their assets have rallied since the March 23 bottom in global markets—equities are up 45%, while bonds (both US dollar and local currency-based indexes) have gained 20%. Happy days indeed, but the next stage of the EM rally is likely to be more exacting for investors.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Different Decades, Different Backdrops

    In the months after the 2008 global mortgage crisis, gold prices broke out to new highs in part driven by the belief that quantitative easing would trigger higher inflation, perhaps even hyper-inflation. Against such a backdrop investors flocked to real assets. Today, similar forces seem to be at work, although maybe in more concentrated form.

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Assault On Chinese Tech

    After a whirlwind of negotiations, the US government may have succeeded in forcing the sale of TikTok’s US operations to a US company. The US earlier used national-security grounds to restrict the business of Huawei. Both companies still have large domestic businesses, but US government actions over the past year may mark a peak for the global expansion by Chinese tech firms.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Europe Stares Down A Second Wave

    Europe beat back the Covid-19 outbreak in March and April with decisive responses and reaped the benefit by reopening its economy in the early summer. Now, however, the price of fun in the sun has come due, with a rising case count that has led Britain’s prime minister, Boris Johnson, to label it Europe’s “second wave”. In response to rising infections in Spain, the UK has reimposed quarantine rules on returning travelers from the country, while...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Not All Tech Markets Are Created Equal

    Aided by lockdown effects, Big Tech has rolled out some stellar results. Self-isolating consumers have replaced devices and devoured cloud computing services, spurring a new upgrade cycle. Such demand has boosted Asia’s tech supply chain, but surging hardware demand is about to become more specific, with some segments facing excess supply and others sustained tightness.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Conventional Fed

    The Federal Reserve did not shift its policy stance yesterday and nor is it likely to announce some big-bang reform after a “strategic policy framework review”, which Jerome Powell indicated should be wrapped up within a couple of policy-setting meetings. That may not be an exciting story, but it is one that financial markets will welcome.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Don’t Fear The Fiscal Cliff

    The Republican Senate proposal for a new stimulus falls far short of the Democratic bill passed in the House in May. Reconciling these differing visions into a unified bill that can pass through both chambers and into law will likely take several weeks at least. As a result, the incomes of 17mn jobless Americans will fall off a cliff at the end of July.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Not Cheap, But Not Expensive Either

    I don’t propose to wade into the debate over whether US equities are in are in a bubble or not. I'd only point out that by one key metric—relative valuation—equities do not look excessively expensive today, at least when compared with the relative valuations seen at the height of the dot-com boom at the turn of the century.

    9
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The EU And The Bond Markets

    The European Union’s decision last week to issue an additional €750bn of debt in its own name has profound implications for the euro-denominated bond markets. Firstly, the decision will mark the emergence of the EU (or more specifically the European Commission) as a major—and relatively attractive—issuer, on a par with sizable European sovereigns. Secondly, EU supranational issuance will be a stabilizing force in the market, reducing the risk...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Edging Toward A New Cold War

    The US decision to close China’s consulate in Houston is a big deal. The precise motivations are obscure but the story is not: the Trump Administration is turning up the heat on China before the US presidential election. In the next few months Washington is likely to make new moves pushing the US closer to a Cold War posture against China.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Living With Hard Times

    Even as the Covid-19 outbreak materially worsens in the US, the pricing of financial assets remains benign. Is this equanimity justified or are we just waiting for the next shoe to drop? Myself and Will Denyer have been in the constructive camp on US equities, even if we are now squeamish about valuations, and continue to think that markets have it about right.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Europe's Deal

    Most of the attention paid to the European Union’s recovery fund deal, secured in the early hours of Tuesday morning, focused on how much of the agreed €750bn would be distributed as grants and how much as loans. That’s understandable. Haggling over this balance was one of the main reasons the talks dragged on into their fifth day. But as far as investors are concerned, the relative size of grants and loans is among the least significant aspects...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Toward A Renminbi-Gold Standard

    As the international trading and monetary order of the last 50 years continues to crumble, the endgame must be the US dollar losing its lofty position at the apex of the system. Louis and I have argued that this process began in and around 2005 as the US moved to “weaponize” the dollar, thereby ensuring the renminbi’s emergence as a competitor.

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What Will Stop The Gold Bull Market?

    The sustained outperformance of very large-cap tech stocks means that any manager who substantially underweighted the sector has likely lost clients. The exception may be those who favored gold and gold miners, which have experienced a “stealth” bull market. I say stealth because the precious metals rally has garnered limited headlines, scant investor interest and fewer reflections on either its causes, or consequences.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Unpicking The Tourism Effect

    Despite a worsening Covid-19 situation in many big developing economies and concerns over central banks’ monetization responses, emerging market investors continue to climb the wall of worry, betting that a putative “second wave” does not stymie the recoveries of developed economies and China. But another challenge for EM economies is a collapse in foreign tourism.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    From Temporary To Permanent

    “Nothing,” Milton Friedman famously declared, “is so permanent as a temporary government program.” He was right, which is one reason Wednesday saw the euro climb to its highest against the US dollar since the first days of the international Covid outbreak in early March, while 10-year Italian government bond yields fell to their lowest. Investors are betting that the European Union’s €750bn “Next Generation EU,” proposed as a temporary facility...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Pick Your Side

    The British government’s decision to block Huawei from the UK’s 5G mobile network, confirmed yesterday, is further evidence that the post-Covid world is splitting into two opposing security blocs. International distrust of China is hardening along ideological lines, spurring liberal nations to prioritize national security over economic growth.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Oil’s Unintended Consequences

    On Wednesday, ministers from the Opec+ oil exporting cartel will meet to decide whether to begin scaling back their production cuts, but with the prospect of a renewed increase in infection rates, it's safe to say they will adopt a cautious approach. More interesting is whether they will err on the side of excess caution, causing the oil price to rise.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Beyond Second Quarter Earnings

    The US 2Q20 reporting season gets into its stride this week, and for all but a fortunate few the earnings numbers will be abysmal. But abysmal numbers will come as no surprise to investors, and will have little impact on the market. A reasonable prospect of upside earnings surprises in 2H and upward revisions in earnings estimates will help support equities.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Buy Europe, Sell The UK

    In past crises the UK has emerged more quickly than the eurozone. In 2008-09, it restructured its banks, slashed interest rates and embraced quantitative easing before European policymakers had eaten breakfast. As a result, UK domestically-focused stocks outperformed those in the eurozone. Don’t count on a rerun in the aftermath of the Covid-19 crisis.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Testing The Boundaries Of QE

    One major emerging market central bank this week sailed boldly into waters others have so far feared to navigate, when Bank Indonesia agreed to buy IDR574trn (US$40bn or 3.6% of GDP) of government bonds in the primary market at below market interest rates, so beginning the direct monetary financing of the Indonesian government’s fiscal deficit.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Germany's Moment

    Could this be Germany’s moment? The prospect of a disgruntled Italy walking away from the European Union spurred a German move towards new burden-sharing arrangements, but the conditions have been brewing within Germany for a few years as it became clear that its old export-led development model was cooked. Such existential fears are driving a newly creative approach to Europe at a time when the EU’s biggest economy may be set to benefit from...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Is This What Capital Flight Looks Like?

    The bearish scenario for Hong Kong was that a combination of protests and Beijing’s heavy hand would trigger the flight of capital—financial and human—jeopardizing the peg and the financial system. Yet despite months of protests, and Beijing’s subsequent clampdown, the financial elements of this doomsday scenario have completely failed to materialize.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Behind The Bull Run In Chinese Stocks

    Chinese equity markets are bounding higher on ebullient animal spirits. The CSI 300 index is up some 12.5% YTD in renminbi terms Monday morning. While the sequential rebound in profits from the first quarter’s dire situation has been heartening, the prospects for year-on-year earnings growth cannot justify this exuberance.

    9
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Time To Run With The Herd?

    When a herd of cattle is being hunted by a pack of wolves, the worst thing any cow or bull can do is show individualism and originality by running off in a different direction from the rest of the herd. In financial markets, “the trend is your friend” expresses the same evolutionary logic. Are markets now displaying non-rational herd behavior?

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Rising US Covid Risk

    In the coming weeks, the headlines about Covid-19 in the US are all but certain to get much worse as case numbers rocket in many southern and western states. Higher case numbers will be accompanied by more hospitalizations, stories of overloaded hospital systems and (probably) rising death tolls.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Competing Reserves Of Value

    In order to function properly, any economic system must have one or more trusted reserves of value, so that participants can factor time into their calculations. In recent decades the world has offered investors three principal reserves of value:

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Rare Growth Story

    Economic good news stories are almost as rare as hens’ teeth these days—almost, but not quite. On Tuesday Vietnam’s General Statistics Office released its advanced 2Q20 GDP estimate showing 0.36% YoY growth, meaning Vietnam is likely to be one of the very few countries in the world to register any growth at all during the second quarter.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    From Bullish To Neutral

    There has been a lot of talk about how the rally in US markets has been driven entirely by irrational sentiment. We disagree, and have since late March argued that the rebound in risk assets was rational. Our assessment rested on four financial and economic pillars. Today a reexamination of these pillars suggests a moderation of our bullish stance.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What's US$1.6trn More Or Less?

    As three months ago, the prime case for holding US risk assets is the liquidity support provided by policymakers. But while liquidity conditions remain extraordinarily easy, and will continue to do so as long as inflation expectations remain depressed, in one respect at least the potential of surplus liquidity to push asset markets higher may have been exaggerated.

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Please May I Have €10bn Too?

    Indulge me for a moment in a flight of fancy. Last week, the European Central Bank lent out €1.31trn to eurozone banks at a negative interest rate of -1%. Now, I am not a bank, but it is diverting to imagine that I might qualify for a small crumb of this funding, say a modest €10bn—because I know exactly what I would do with the money.

    16
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The US Approaches A Cliff Edge

    As the US starts to resume normal economic activity, a concern is that fiscal support is ended too early and the recovery is snuffed out. While European economies have extended many of their job protection schemes, the US faces a cliff edge at the end of July. If incomes suddenly crater, the worry is that spending plunges and the recovery takes on the feared W-shape.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Club Med’s Cruel Summer

    France, Italy and Spain suffered the deepest contractions in their economic activity in the first quarter and through April. Yet government programs have successfully supported both business cash flows and household incomes. Beyond the immediate bounce-back from lockdown, however, their economic trajectories are set to diverge.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    China Legislates For Hong Kong

    The summary of Hong Kong’s national security law released on Saturday is a tough read for advocates of a common law system. It represents a hybrid of China’s and Hong Kong’s legal systems that effectively ends the separation of powers between the executive and judiciary. How quickly the city changes as a result depends on the severity of enforcement.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    From A Tax To A Subsidy

    There will be some hard bargaining ahead when the European Union’s 27 heads of government meet by video conference Friday in an attempt to thrash out details of the bloc’s proposed €750bn recovery fund. German chancellor Angela Merkel is urging a quick deal. But with the “frugal four” countries led by Dutch premier Mark Rutte holding out for strict conditions, a final agreement could yet take several months, with the fund unlikely to start...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Market’s Perception Of Scarcity

    It is a long-running trope of Gavekal’s research that assets can have value either as tools or as jewels. Tools have efficiency value and jewels have scarcity value. The rule that seemed to govern the relative performance of these over the last 50 or so years appears to have broken down. Louis wonders if this is because investors have reversed their perceptions of what is "scarce" and what is "abundant".

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The US Consumer Has Legs

    Another day, another upside surprise from the US data. For investors, the key question is whether this recovery will continue, or whether May’s bounce-back in consumption will prove a one-off flash in the pan, extinguished by a second wave of infections and long term unemployment. Happily, there are good reasons to expect the consumption recovery to have legs.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Dismal Best Case

    The crowds that Monday swarmed British shops, allowed to open for the first time in 12 weeks, at first sight bodes well for a V-shaped recovery. Yet despite plentiful accumulated savings and considerable pent-up demand, the UK’s consumption-driven economy faces formidable post-lockdown headwinds, with consequences for equities and sterling.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Rotating Into US Small Caps

    Despite some states seeing a worrying rise in Covid-19 cases, a US economic recovery is gaining strength as lockdowns are lifted. Barring unforeseen setbacks, there are reasons to think that the US recovery sustains itself and the equity rally continues. There is, however, a solid macro argument for rotating to a different class of US stocks.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Froth Comes Off

    Recent weeks saw telltale signs of markets getting silly: firms with no sales reaching U$26bn valuations; airline-focused exchange traded funds jumping from US$50mn in size in January to US$1.5bn, and bankrupt firms becoming five and 10 baggers. This kind of activity may lead to one of three conclusions.

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Derating Of The Dollar

    In the last four weeks as market participants have reassessed relative risk premiums, they have found it increasingly easy to identify currencies which at the margin are looking more attractive than the US dollar. As a result, the dollar has weakened both against developed world and emerging market currencies. This weakness is acquiring momentum, and may have further to run.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Accelerating Into Inflation

    Long-time readers will be familiar with Gavekal’s Four Quadrants framework, which describes how the economy alternates between periods of inflation and deflation, and cycles from boom and bust and back again, and which we use to illustrate which asset classes investors should favor and when. Although this is one of Gavekal’s oldest frameworks, it provides an extremely useful way to think about how the macroeconomic environment is set to evolve...

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Fed Reality Check

    Ahead of the FOMC meeting that concludes Wednesday, there has been a growing volume of chatter that the Federal Reserve is moving to scale back its easing measures. The talk has been further amplified by May’s surprisingly strong employment report, with some commentators even warning of an imminent taper tantrum in the markets.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What US Payrolls Do And Do Not Mean

    May’s US payrolls report clearly came as a shock to many. Non-farm jobs climbed 2.51mn month-on-month, and the unemployment rate fell to 13.3%. Wrong-footed by the stronger-than-expected figures, investors rushed to bid up US equities. But while the payrolls are good news at the margin, it should not be taken as a reason to rush into equities.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Europe’s Big Guns

    If the worry was that European Central Bank activism was threatened by German judicial chastisement, Christine Lagarde yesterday showed no sign of being cowed. The Pandemic Emergency Purchase Program was topped up to an almost bazooka-qualifying €1.35trn from €750bn and extended a further six months to June 2021. The move added fuel to the rally in euro assets. Rightly so.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Europe Flexes Its Fiscal Muscles

    Another day, another big fiscal expansion from Germany. Yesterday, Berlin outlined a €130bn stimulus package, representing 3.8% of GDP. If there was any doubt, Europe has clearly ditched its decade-long infatuation with austerity and is back in the Keynesian camp. This situation is bullish for eurozone stocks and in time could yet spur a long-forgotten problem—inflation.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    To Rotate, Or Not To Rotate?

    This week readers have heard a variety of views from Gavekal partners on the outlook for equity markets. What is not in doubt is that since hitting a peak on February 20, US growth stocks have outperformed value plays by a whopping 17%. Wherever one stands on the macro situation, there certainly seems to be an argument for rotating.

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Case For Commodities

    For most of the last decade, we have been in a period of low investment in the commodity sector. Yet, over the next 20 years the global population will grow by almost 2bn—a 25% increase. Migration into cities will continue, with the world’s urban population growing by almost 50%, creating enormous demand for infrastructure.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    As The World Reopens

    A few weeks ago, I outlined three scenarios that could unfold as the world reopened for business. Since then, it looks like the market is starting to tentatively position scenario #3 in which the world economy rips and inflation rises due to pent-up demand, budget deficits, low oil prices and money printing. This makes sense, but the rotation may soon face a number of challenges.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Renminbi As Collateral Damage

    The rise in US-China tensions over the past week is taking a toll on China’s currency, which has weakened to CNY7.15 to the dollar from around CNY7.10, approaching its lows of last September. This has raised a worrying question: is China about to use currency depreciation as a weapon in its widening dispute with the US?

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    It’s Looking Hamiltonian

    It wasn’t quite the dawn of a new epoch, but the European Commission’s plan to boost its seven-year budget with €750bn of borrowing certainly ranks as a moment for the European Union. The plan needs unanimous backing from all member states and is far from a done deal. Yet it is likely to pass and in so doing it will change the nature of financial risk in Europe.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Return Of TINA

    All bull markets start as unloved beasts, but the one that began in US equities on March 23 has been especially despised. The news in the intervening two months has been dreadful, and it is still not really clear who is doing the buying, and why. So in seeking to understand if a market that is up 33% from its bottom can go further, KX considers four possible drivers.

    8
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Hong Kong And The Ethic Of Responsibility

    German sociologist Max Weber made the distinction between the ethic of conviction, based on the philosophy of Immanuel Kant, and the ethic of responsibility, based on consequentialist philosophy, a grandchild of Aristotelian logic. The distinction between the two may help investors to determine their response to developments in Hong Kong.

    10
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Death Of Old Hong Kong

    On Monday morning, the streets around Gavekal’s offices in Hong Kong’s Wan Chai district teemed with harried commuters rather than baton-charging police and political protesters. Unfortunately, uncertainty about Hong Kong’s future as a free society will linger longer than the tear gas that had drenched the area a few hours earlier. There is now a fair chance that China’s imposition of a new national security law in Hong Kong will cause a chain...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Boris Will Pile Pelion On Ossa

    No country has matched Britain’s dismal combination of currency and equity losses so far this year. Making matters worse for Britain than other DMs is Boris Johnson's refusal to extend the post-Brexit transition period beyond December, precisely the time when the Covid-19 recession might otherwise be expected to start lifting.

    14
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Saudi's Peso Problem

    Two weeks ago in early May, the Saudi Arabian Monetary Agency issued an unusual statement. Sama, it insisted, is committed to maintaining the Saudi riyal’s exchange rate peg at SAR3.75 to the US dollar, and has the resources to do so. Stress signals don’t come much clearer.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Beware The Charm Of Monopolistic Tech

    An equally-weighted index of monopolistic "tech" companies is up by a whopping 26% in the last year, whereas an active manager running a portfolio with 30 or 40 stocks would be down about -7% over the same period. The difference in performance may be the "cost" of holding a diversified portfolio with lower risk than a concentrated portfolio.

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Europe’s Hamiltonian Moment

    If there was a rational explanation for Monday’s global risk-on rally, it would be the genuinely exciting news from Europe. It is possible—just possible—that the Franco-German proposal for a €500bn coronavirus Recovery Fund announced yesterday will turn out to be the most important historic consequence of the coronavirus.

    14
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A US Full-Court Press Against China

    The US-China relationship has deteriorated rapidly, and the main reason seems to be that Donald Trump has decided that a “tough on China” approach should be central to his reelection campaign. Acrimony between the two countries is likely to get much worse between now and November, and US actions are starting to spread from technology to finance.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Phase Two Beckons

    Europeans have spent big to freeze their economies as if held in suspended animation since mid-March. On the whole, this plan is working quite well but EU member states must now agree to a post-pandemic plan for demand stimulus if they are to avoid an all-too-predictable double-dip downturn. They will get a shot next week, when the blueprint for a “recovery fund” is unveiled.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The World Has Changed, Quick! Buy More Of The Same

    As countries around the world, and some US states, are starting to emerge from their enforced Covid-19 hibernation, investors have to choose between one of three potential outcomes. Either the virus re-emerges and causes new lockdowns, the post-Covid-19 world is not growth friendly, or pent-up demand and supportive policies leads to global growth ripping.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Chinese Bond Rally Is Not Over Yet

    China’s bond market is selling off on rising optimism about the nation’s recovery from the Covid-19 lockdown. But Wei argues that this rise in bond yields looks like a false alarm: China’s economy is not about to begin a V-shaped recovery and its central bank is not yet finished with monetary easing. The bond bull market still has some way to run.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Brazil's Burning House

    As President Jair Bolsonaro fuels anti-lockdown protests, Brazil is having a rough Covid-19 crisis. Its public health response has been weak and investors are horrified at the economic costs of such bungling. Fortunately, Brazil’s federal structure does mean the country can handle the crisis in spite of weak central leadership.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Breasting The Trough

    The apparent divergence between the stock market and economic reality continues to widen. Equity investors are focusing on the expected effects of the Federal Reserve’s massive liquidity injections once states emerge from lockdown. The risk to this rosy view is that the easing of restrictions could cause an infection increase so severe that new lockdowns are imposed.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Sovereignty And That German Court Ruling

    Tuesday’s ruling by Germany’s constitutional court on the legitimacy of asset purchases by the European Central Bank hits at the heart of a political project whose ultimate aim has been usurp the sovereignty of historical states in favor of a new super state. I am no lawyer but I have studied political science and the issue now in play is of a fundamental nature.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Threat From Turkey

    Turkey increasingly looks like a basket case that may spark a broader move out of emerging markets. Despite its efforts to squeeze short-sellers by stopping banks from swapping currency with foreign counterparties, the lira is hitting new lows against the US dollar. Efforts to sustain the lira with foreign currency borrowed from Turkey's dollarized banking system can't go on indefinitely.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    ‘No Limits’ Now ‘No, Limits’

    Markets have largely taken in their stride Tuesday’s decision by the German Constitutional Court that the European Central Bank exceeded its mandate by launching quantitative easing in 2015. The euro's move against the US dollar and the 10bp uptick in Italian 10-year yields were modest by the standards of recent volatility. This may be overly complacent.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    US Labor And The New Economy

    US states are moving to end stay-at-home orders and slowly resume activity. With some 30mn workers having been laid off, they will do so in an economy that has been profoundly changed by Covid-19. At a macro level, a fairly swift recovery is likely. Yet it will be a painful exercise as structural changes wrought by the pandemic upend the US labor market.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Down -16% And Still 30% Overvalued

    It seems the world has entered a new era, in which the principal function of central banks is to try to prevent markets from going down. So, after the gold standard and the dollar standard, we now appear to have the S&P 500 standard, in which a desperate central bank tries to manage the financial markets.

    16
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Truth About Banks And Bonds

    As I elucidated last week Knut Wicksell’s key idea was that in any market economy there are not one, but two key interest rates, whose relative position drives the cycle. The theory makes good sense, but computing the two rates is tricky. My insight is that I don’t need to compute these two rates but instead measure the structural performance of bank equities in each market.

    10
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Queen’s Head Remains The Better Long-Term Bet

    In hard times, a nation often feeds off the blood spilled by its martyrs and is re-energized. Undeniably, we now face an unprecedented crisis that is producing heroes and martyrs, especially among healthcare workers who have acted with devotion and honor. But has this created national unity?

    15
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Italy’s Debt Sustainability Question

    In the short term, Italy’s sovereign spreads are unlikely to be greatly troubled by the decision late Tuesday from Fitch to downgrade the country’s debt rating. In the longer term, however, in the absence of some form of eurozone fiscal union, Italy will remain caught in a vicious debt trap, which must call its continued membership of the single currency into question.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Japan's Next Monetary Move

    Yesterday, the Bank of Japan attempted to pull another rabbit out of the hat by announcing plans to turbo-charge its already aggressive monetary easing program, ostensibly to help deliver its fiscal stimulus package without roiling the JGB market. Look closer though, and it appears the BoJ’s real goal is to stop the yen from succumbing to fundamental pressures by appreciating.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Short, Medium And Long Term Outlook

    At the end of March, just after the collapse of global stock markets and non-dollar currencies had reached its climax, I argued that it was too early to buy equities but probably a good time to sell US dollars. The first of these ideas turned out to be wrong, the second irrelevant. But far from admitting defeat, I think it is worth doubling down on both these recommendations.

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Trouble With Eurozone Banks

    European leaders trod a fine line on Thursday, opening the way for a hefty “recovery refund”, but not committing to one and not saying how the money may be spent. Eurozone capital markets—except for bank stocks—have been fairly calm, and so do not need a hasty bailout. That exception, however, is a problem that may end up consuming a big part of any rescue fund.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Whale Watching In The Gulf

    Gavekal’s dynamite fishing analogy maintains that the biggest impact of a market shock only shows up after a delay, much like the effects of an underwater explosion. First the small fry float to the top, then the mid-size fish. Only much later does the dead whale break surface. After the oil price shock investors are asking if the Saudi riyal's peg to the US dollar could be that whale.

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Fiscal Fix

    Barely a month after launching a US$2trn rescue package, the US is poised to release yet more fiscal stimulus to tackle the economic fallout of the Covid-19 crisis. The Senate has passed legislation to top up funding for a small business loan program and the House should follow suit on Thursday. Will this latest cash injection be enough to stop massive bankruptcies? Probably, but the program will remain a messy work in progress in need of more...

    10
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Of Cows And Negative Oil

    A friend has a sizable dairy farm in France. He usually sells his cows’ milk to local makers of yogurt and cheese for anywhere between €250 and €350 per 1,000 liters. Today, with most local cheesemakers shut down, buyers are offering just €1 per 1,000 liters for his milk. It could be worse, though. He could be in oil.

    11
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Modest Proposal For Europe

    A month ago, with the world economy just beginning its lockdown, I presented a modest proposal which seemed impossibly far-fetched to the point of madness. Four days later, the British government announced almost exactly those policies. This week a different crisis is looming: an intensified rerun of the 2012 euro crisis. So here is another modest proposal.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Asia Goes Unconventional

    China just unveiled a -6.8% year-on-year fall in 1Q20 output and the ricochet effect is being felt beyond its borders. Neighboring economies face shrunken demand and are being forced to ditch fiscal rectitude and other economic orthodoxies. In some cases, monetary responses look a lot like quantitative easing. These emerging economies’ capacity for such action varies greatly.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    When Dead Cats Bounce

    The S&P 500 has now rallied 24% in a little over three weeks, making back almost half of its losses over the previous four weeks. The vigor of this rebound even as corporate earnings are collapsing naturally raises the question whether the market has really formed a bottom, or whether we are seeing a classic bear market rally, as Anatole has argued.

    10
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Heading In The Right Direction, Slowly

    The Covid-19 epidemic now seems firmly under control in most major economies, and the direction of the disease data is consistently positive. From an infection-control perspective, the outlook is much more positive than when we did our last major review. The path to economic recovery, however, still looks slow and rocky.

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    An Anti-Fragile Beauty Contest

    Following the 2008 crisis, the S&P 500 bottomed on March 9 2009. Since then, an investor in physical gold would have gained 82.2% while an investor in 10-year US treasuries would have made gains of 65.6% (with coupons re-invested). But with both assets testing their pre-crisis highs, there are several reasons to believe that gold is now set to outperform structurally.

    9
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    This Is Not A New Monetary Era

    Central banks across the developed world are cranking up their printing presses to buy huge amounts of public debt that is being issued to support companies and individuals. The worry is that this causes high inflation down the track, or that it means the fiscal and monetary management functions of governmens are merging. The way I approach this issue is through two simple questions.

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Destroying The Economy To Save It

    Remember the American military officer in Vietnam who explained US tactics by saying “it became necessary to destroy the town to save it?” Well in the not too distant future, we may have to accept that our economic policymakers have adopted the same tactics in the battle against the Covid-19 pandemic.

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Rearranging The Deckchairs For Profit

    When everything is falling apart around you, the urge to do something—anything—becomes irresistible. A good solution is to start rearranging the deck chairs on the Titanic. It may not change the bigger picture, but it keeps you busy and does no harm in the longer term. In this spirit, allow me to suggest a little rearrangement that should do no harm, and could even be very profitable.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Atlantic Divide

    Second order economic effects from the Covid-19 outbreak are ripping through industrialized economies, with soaring unemployment, shuttered industries and a fall in corporate profits. While China has eschewed large-scale government support, Europe and the US have adopted massive fiscal and monetary responses. These Western initiatives do, however, differ in key respects and when lockdowns finally end, one or other approach will likely have...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Truth In Trump’s Tweets

    Oil market pundits were quick to dismiss Donald Trump’s tweeted claim Thursday that Saudi Arabia and Russia are ready to agree crude production cuts of 10-15mn bpd as “absurd” and “incredible”. But oil production cuts of the magnitude flagged by Trump are certainly in the pipeline—whether as the result of a new Opec+ agreement or not.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    When To Get Back Into The Market

    As usual in a market crash, there has been a lot of chatter over the last 10 days about whether the stock market has already formed a bottom, and if now is the time to get back in and pick up some “bargains at special prices”. Clearly what is needed is a decision rule to tell us whether the conditions are favorable yet or not. Happily, some of the research we have recently been doing at Gavekal Intelligence Software allows me to create just such...

    11
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Another Crisis, Another Euro-Fudge

    “Europe will be forged in crises, and will be the sum of the solutions adopted in those crises,” wrote European Union “father” Jean Monnet in his 1976 memoirs. Today Europe is once again facing a crisis. And once again the solution adopted by Europe’s fractious leaders is likely to be a short term fudge that defers hard decision-making to another day.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Chinese Equities As A Safe Haven

    Chinese equities are likely to outperform in the short term as the global outbreak worsens and China adds more detail to its latest set of stimulus measures announced on Friday. However, once the outbreak shows signs of peaking in the US and Europe, Thomas argues that China is expected to return to its status as a relative underperformer.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Too Early To Buy Equities, But Time To Sell Dollars

    After the biggest weekly gain in the Dow and with the US government having just approved the biggest-ever fiscal stimulus, how should investors react? While unrepentantly bullish in the long term, Anatole still believes that it is too early to buy equities. But for two other asset classes conditions do seem to be more propitious to call a bottom.

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What You See, And What You Don’t

    In economics there is what you see and what you don’t see, and “there is no such thing as a free lunch.” As the world economy suffers a spasm the likes of which has rarely been seen in peacetime, it may help to go back to first principles to figure out what we are not seeing about this crisis, and who is going to end up paying for it.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Case For Corporate Bonds

    Although the US spread of Covid-19 continues to accelerate, in the near term markets have been encouraged by promises of heavy fiscal support for the US economy and the Federal Reserve’s plans to take risk off private sector balance sheets, including by buying corporate debt. Is now the time to increase exposure to risk assets?

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Why Europe Can Survive The Storm

    Economic activity indexes in Europe have collapsed to never-before-seen levels, yet markets have rallied as investors have become persuaded that policy responses are enough to avoid a full blown euro crisis from unfolding. Europe for once appears to be more decisive in managing a crisis situation than the US and it is possible it may manage a swifter pick-up once the public health situation stabilizes.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Importance Of The Fed’s Big Guns

    On Monday, the US Federal Reserve rolled out some of its heaviest artillery. In a move reminiscent of the moves in March 2009 which finally succeeded in stabilizing markets, it both relaxed accounting rules for banks and launched a whole suite of programs designed to take risk off private sector balance sheets, including by buying corporate bonds.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Lockdowns Loom; What’s The Exit Strategy?

    We are heading into another difficult week. Covid-19 case numbers and fatalities outside China continue to grow rapidly. Social lockdowns are spreading to more US states and European countries. In the short run, fiscal support is on the way. Longer term, governments will have to start asking the uncomfortable question of when the economic pain outweighs the public health gain.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Money, Value And The Markets

    Above all, economics is the study of why goods and services have value and why these values are constantly changing. This study is greatly complicated by the fact that there are two different sources of value. In Gavekal-speak, we call these “scarcity” value (think jewels) and “efficiency” value (think tools). So the key question becomes not only “why do things have value?” but also “why do the relative values of scarcity and efficiency change...

    0
Show me: results