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E.g., 24-06-2021
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    Gavekal Research

    Bernanke Turning Hawkish?

    Fed Chairman Ben Bernanke rattled markets yesterday when he explained why the potential growth rate of the US economy appears to have declined while the structural unemployment rate has risen. The initial reaction from equity markets was negative, for an obvious reason: If the chairman is now raising his target unemployment rate, this implies a shorter shelf-life for extremely easy monetary policies.

    0
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    Gavekal Research

    US Tax Changes In A Brave New World

    It is a common complaint that US corporations are sitting on exceptional piles of cash, while the domestic economy experiences lackluster growth in capital spending and employment. With weak growth comes lower tax revenues. As such, policymakers are looking at new ways to raise revenues from corporates and from individuals (mostly the wealthiest). But we live in a “Brave New World” of global operations, fragmented supply chains, and light,...

    3
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    Gavekal Research

    Four More Years

    The American electorate may share the same national bed, but they have vastly different dreams. Our take on the election’s significance is similarly bifurcated—a cathartic political cleansing allowing for a deal on the fiscal cliff (Anatole) to disaster (Charles). Arthur asks whether the Republican Party can win nationally without reconciling itself to America’s changed demographics and the realities of the new knowledge-intense economy. Will...

    5
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    Gavekal Research

    US Recovery Under New Leadership

    Friday’s 3Q GDP report tells a simple story about the US economy—namely that the recovery has come under new leadership. Step aside manufacturing and exports, enter US housing rebound.

    8
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    Gavekal Research

    US Tech: The Modern Day Safe Haven

    3
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    Gavekal Research

    The Fed's Money Tree

    QE3 has set off a debate not just over whether this is good or bad (most here agree it is bad) but on what are the short– vs long-term effects on economies as well as markets. Louis and Charles make the contrarian argument that open-ended and more aggressive quantitative easing will ultimately take away, rather than add, to global liquidity, and warn that investors should prepare for a dollar crisis further down the line. Anatole and Francois...

    8
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    Gavekal Research

    More Liquidity May Burst The Dam

    Whatever else you may think of Ben Bernanke you cannot accuse him of obfuscation—QE3 was telegraphed in his Jackson Hole speech and yesterday the Federal Reserve delivered with a promise to buy $40bn of mortgage backed securities a month while allowing its curve-flattening treasury purchase program (Operation Twist) to expire as planned in December. The short term impact on risk assets is fairly clear; what worries us is the longer term...

    10
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    Gavekal Research

    QE3: Now Or Later?

    4
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    Gavekal Research

    US Housing: It's The Inventory Stupid

    Here’s a conundrum for any economy watcher. The US housing recovery has gathered steam during 2012, and yet the broad economy remains weak as was highlighted by Friday’s 2Q12 GDP release which put growth at a measly 1.5%. So what gives?

    6
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    Gavekal Research

    The Next American Revolution

    Our little firm has spent much of the last decade telling investors to look east. Asia has thrived on the back of cheap labor which has cemented its status as an industrial powerhouse. But as countries such as China seek the good life, pushing incomes and consumption higher, other economies will be better placed to compete. We are increasingly convinced that the defining comparative advantage of the next decade will be having access to the...

    10
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    Gavekal Research

    ZIRP Goes To Europe

    Central banks have set the bar high for what is now considered “major monetary easing”. A bread-and-butter 25bp rate cut no longer qualifies, at least not usually. But last week the ECB not only cut the rate at which it lends to banks by 25bp to 0.75%, it also chopped the rate it pays on deposits by 25bp—to zero. The move focused attention on Mario Draghi’s assertive approach to policy, especially amid signs that deposits are fleeing the ECB....

    3
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    Gavekal Research

    No Environment For A Rerating

    8
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    Gavekal Research

    A Big Week For US Growth Data

    This week will deliver some potential market-moving data releases from the world’s largest economy. The Institute of Supply Management’s manufacturing PMI is released today, the ISM non-manufacturing PMI and ADP’s private employment estimate Thursday, and official payrolls Friday. Unfortunately, a number of the early signs do not look good, especially in manufacturing.

    1
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    Gavekal Research

    Oil And Equities Part Ways?

    Oil and equity prices have risen and fallen in tandem since the market recovery started in March 2009. This was based largely on changes to the growth outlook and risk appetites (with the turns often marked by monetary or fiscal policy changes). But these two markets have not always exhibited such a strong correlation. This leaves open the question of when this relationship might break down: was it June 2012? After all, oil is now down -12% MTD...

    0
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    Gavekal Research

    Fed's Inflation Complacency Points To More Easing

    While we may not like it, the odds have risen that the Federal Reserve will provide additional monetary stimulus. This could take the form of longer rate guidance, an extension of Operation Twist, or even QE3, and could come as soon as next week’s FOMC meeting. The odds have risen for two reasons: 1) Vice Chair Janet Yellen says so, and 2) medium-term inflation expectations have slipped.

    1
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    Gavekal Research

    Staring Into An Abyss, Tax Rises Stare Back

    0
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    Gavekal Research

    Please-No More Liquidity Fixes--by Will Denyer

    As we hear talk of a global central bank coordinated action to solve Europe’s market malaise, we have to ask, to what purpose? Large liquidity injections once served to keep Europe’s financial system alive until the continent’s economies sputtered back to life. The problem is, this never happened. Now the ECB’s substantial liquidity programs instead serve the purpose of providing leaders more stall time before acting. The monetary union is...

    4
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    Gavekal Research

    US Corporate Profits: On The Roof Or In The Stratosphere?

    One of the biggest weights on US equity prices is, ironically, record profits. Based on the maxim that nothing good lasts forever, the fear is that record margins will inevitably be taken down a peg. A popular way to illustrate the situation is to show corporate profits’ “share” of gross national income (product). As the red line in the first chart below shows, the corporate profits to GNI ratio has gone through the roof recently. Many...

    20
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    Gavekal Research

    US GDP: Soft But Steady As She Goes

    Friday’s US GDP report offered bulls mild disappointment and raised concerns that the recovery is a sub-par affair. First quarter growth was 2.2% compared to expectations of 2.5% and a 3.0% expansion in the last quarter of 2011. The dull economic numbers contrasted sharply with what we are seeing in corporate earnings—75% of reported earnings thus far have beat expectations, with earnings up on average by 6.7% QoQ, or an annualized rate of +27...

    1
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    Gavekal Research

    Fiscal Cliffs And Political Guardrails

    5
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