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E.g., 21-10-2021
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    Gavekal Research

    5C United States: Fed Targets + Weak Global Inflation = Rising Rents

    The US housing market has had a rough time recently—first mortgage rates rose then an extreme winter hit. So don’t expect residential construction to be a positive contributor to first quarter GDP growth (out Thursday). But how will the housing market fare going forward? Our bet is that it won’t be too bad.

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    Gavekal Research

    Five Corners (16 April 2014)

    In the latest bi-weekly review of global economics and investment, Charles Gave explains why it still pays to run a balanced portfolio, despite the market’s rotation. Will Denyer argues that outlook for US consumption remains favorable, even though consumer cyclicals have taken a beating. François-Xavier Chauchat examines the reasons behind the euro’s persistent strength. Andrew Batson looks at Beijing’s new focus on jobs and finds the...

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    Gavekal Research

    Buy The Dip, With A 30y UST Hedge

    Imagine that a colleague has just returned from a one-month holiday and asks for an update. You start by telling him two things: 1) US consumer discretionary stocks have fallen -5% MoM; and 2) the yield on the 30-year US treasury bond broke below 3.5% last night, re-crossing that threshold for the first time since yields rose during the ‘taper tantrum’ last summer.

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    Gavekal Research

    5C US: The Consumer Defies Market Jitters

    Vexed US commentators have been on tenterhooks to see whether soft US growth data really could be blamed on the weather. The worry was that the winter shivers had obscured an underlying deterioration in the US outlook. In fact, an enlivened US consumer tells us that it was a temporary weather-related soft patch.

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    Gavekal Research

    Making Sense Of Fed Talk & Actions

    Is the Federal Open Markets Committee playing games? Should we listen to what it says or watch what it does? Is it easing or tightening, dovish or hawkish? As the Fed moves from “all guns blazing” to a nuanced and gradual exit strategy, these questions are inevitable. We’ll do our best here to make sense of it all and chart the trajectory of US monetary policy.

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    Gavekal Research

    The US Consumer Must Lead

    Back in the depths of winter when the polar vortex was causing daily life in the US to grind to a halt, we looked forward to March and April data and mused that the US economy might rebound like a coiled spring. The hope was that pent up demand would allow the US economy finally to achieve escape velocity. The alternative was another false dawn as companies and households remained hunkered down (see The Ides Of March). This week has seen the...

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    Gavekal Research

    5C US: What To Make Of The Surge In C&I Loans?

    In a surprising turn of events, US bank loan growth has bounced back, posting the strongest growth since 2008. After decelerating from annual growth rates of around 5% in 2012 to less than 2% last year, bank loans jumped in the first quarter of this year at an annualized rate of 9.3%. Leading the charge was a 17.5% annualized rise in commercial & industrial loans. Several clients have asked what we make of it.

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    Gavekal Research

    The End Of The Automobile? Not So Fast

    US auto sales have had a strong run and are nearly back on their pre-crisis trend. This is hardly surprising since Americans have long shown a willingness to scrimp on life’s essentials rather than give up their vehicles—through the 1930s depression they kept on driving even while relying on soup kitchens for nutrition. But how much juice is left in this purring engine of US consumption?

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    Gavekal Research

    Fannie-ing The Flames Of A US Housing Downturn?

    The US housing recovery has had a rough run in the past nine months. First there was the taper tantrum, that drove up mortgage rates. Then the record cold winter interfered with sales and construction, highlighted once again by yesterday’s poor home sales data for February. Between the normalization of housing affordability and the extreme weather in January and February, we can expect housing construction to provide another negative...

    1
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    Gavekal Research

    5C US: What If The Fed's BS Doesn't Shrink?

    The Federal Reserve’s publicly stated exit strategy has one element that is unsettling for any investor who cares to look that far ahead. The Fed calls this element a “normalization” but that mild word does little to mask the harsh reality: we are talking about the biggest contraction of a central bank balance sheet the world has ever seen.

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    Gavekal Research

    It's All Good In America, And All Bad In China

    “By three methods we may learn wisdom: First by reflection, which is noblest. Second, by imitation, which is easiest. And third by experience, which is the bitterest.” - Confucius.

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    Gavekal Research

    5C US: Balancing The Risks On Margin Debt

    US investors have leveraged up their portfolios like never before. Equity margin debt levels exceed the lofty peaks of the 2000 tech boom and the 2007 credit bubble. With more of the market posted as collateral, the risk is ever greater that moderate selloffs become exaggerated by margin calls and forced selling.

    1
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    Gavekal Research

    No Building, No Tapering?

    The main message from the minutes of the January FOMC meeting was summed up yesterday by San Francisco Fed President John Williams, who said in a TV interview that the “hurdle is pretty high on changing the pace of the step-downs in our [asset] purchases.” But if the economic data does not improve soon, we might just find out how high is “pretty high.”

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    Gavekal Research

    5C US: A Little Late For Early Cyclicals

    US consumer discretionary stocks are considered “early cyclicals” because they tend to outperform in the first two or three years of the cycle. This time around, the firms that make everything from iPhones to automobiles have outperformed for nearly five years! Are we really still in the early part of this cycle? Or are we starting to see signs of fatigue in an overextended rally? The sector is down –2.4% year to date, finally underperforming...

    0
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    Gavekal Research

    Continuity-Of Bad Policy

    It was a busy day on Capitol Hill yesterday. In a notable departure from the budget battles of recent years, the Republican-controlled House passed a clean debt ceiling bill to fund the Treasury for the next thirteen months (despite the fact that Paul Ryan voted against funding the budget he himself negotiated). Meanwhile, the House Financial Services Committee gave Janet Yellen her first opportunity as the new chair of the Federal Reserve to...

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    Gavekal Research

    5C US: What Might Lead Yellen To Pause Tapering?

    As capital flees emerging markets, some foreign policymakers have begged the Federal Reserve to go easy with the tapering. Sorry guys. If Janet Yellen is anything like her predecessors such pleas will fall on deaf ears. (Just as foreign pleas a few years ago, to stop fueling global inflationary flames with the same QE programs, cut little mustard). But Yellen will be intently watching the bond market.

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    Gavekal Research

    An Elitist Housing Recovery

    Yesterday’s data spit showed that US existing home sales edged up slightly in December, good news after several months of declining momentum. But it remains to be seen if the US housing recovery can get back on track, and this is worrying for two reasons. The first, obvious one, is that the rebound in house prices since 2011 has been a key support for an otherwise struggling US economy. The second worry is that consumer confidence has been...

    4
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    Gavekal Research

    5C US: The Yield Spread Matters For Profit Margins

    With US corporate profit margins at extreme highs, investors are on high alert for the dreaded “mean reversion.” One concern has been that after years of benefitting from extremely low interest rates, margins are going to fall as rates normalize. We don’t buy it.

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    Gavekal Research

    Deflation In 2014? Not In The US

    Curse words attract attention, as IMF managing director Christine Lagarde knows after dropping the D-bomb yesterday. Amidst her fairly balanced outlook for the global economy in 2014, it was her comments on deflation that attracted all the media attention:

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    Gavekal Research

    5C US: What Is Normal In 2014?

    After years of extremes, we begin this year with many of our indicators back at normal levels. Perhaps most importantly, households have deleveraged. To be sure, income and wealth inequality remain an issue, but a steep decline in debt and a dramatic rebound in asset prices has put aggregate leverage on household balance sheets back to levels seen in the 1990s (see Is The Deleveraging Over?).

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