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E.g., 25-07-2021
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    Gavekal Research

    Webinar: The State Of Global Growth

    The reflation trade has ebbed in recent weeks as investors have gotten more comfortable with the trajectory of US monetary policy and concerns have risen over the Delta variant of Covid disrupting economic opening. At the same time, China continues to crack down on its high-growth internet sector. Our team assessed the market implications of these trends.

    0
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    Gavekal Research

    Low For Even Longer

    On Thursday, the European Central Bank’s decisionmakers sat down for their first monetary policy meeting since they ditched their longstanding inflation target of “below, but close to 2%” in favor of a new symmetrical target centered on 2%. That decision formalized the ECB’s shift away from its Bundesbank-style focus on price stability and enshrined its role as the guardian of eurozone financial stability.

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    Gavekal Research

    Webinar: What's Behind China's Internet Crackdown?

    China's authorities have aggressively tightened regulation of the formerly free-wheeling internet sector. In this webinar, Gavekal RedTech principal Michael Clendenin joined Gavekal Dragonomics's Ernan Cui and Thomas Gatley to analyze the government's motives in the ever-widening crackdown, forecast the next regulatory moves and explain how investors can navigate the risks.

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    Gavekal Research

    Webinar: China's Conflicting Pressures In The Second Half

    China is entering the second half of 2021 with its strong post-Covid economic momentum still intact, despite policymakers staying consistently hawkish on debt and property. In this webinar Wei He, Rosealea Yao and Thomas Gatley outlined how these conflicting pressures will play out over the rest of the year, and discussed the potential for an easing of the policy stance.

    0
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    Gavekal Research

    Bye-Bye Buba

    The European Central Bank on Thursday jettisoned its longstanding inflation target of “below, but close to 2%” in favor of a symmetrical target centered around the 2% mark. The formal adoption of a symmetrical target is significant, because it acknowledges just how far the ECB has traveled from its origins as the institutional offspring of the Deutsche Bundesbank.

    1
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    Gavekal Research

    Not Quite A Wage-Price Spiral

    European companies are hiring again—or at least they would be if they could get the staff. The rebound in eurozone economic activity has fueled employers’ demand for labor. Having languished at about one standard deviation below its long term average through 4Q20 and 1Q21, the European Commission’s index of eurozone businesses’ hiring intentions has risen to over one standard deviation above its long-term average, as of end-June. The number of...

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    Gavekal Research

    Video: How Brexit Britain Shapes Up

    Six months after the UK properly left the European Union, the shape of the emerging post-Brexit economy is becoming a little clearer. Despite distorting effects from the pandemic, the impact on trade from being outside the EU’s single market can be seen, arguments about the UK’s position as a manufacturing hub can be tested and the future shape of Britain’s once super-charged financial services sector is coming into focus. Nick Andrews reviews...

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    Gavekal Research

    Demographics And Prices

    Starting in the early 1980s, the world became increasingly flush with people in their prime working and saving years. That trend, however, has largely run its course and may now be going into reverse. As a result, investors should consider what economic trends have demographic drivers, making them vulnerable to a structural shift occurring.

    8
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    Gavekal Research

    The Inflation Quandary

    Markets seem to be comforting themselves that incipient inflation is, as the Federal Reserve has argued, a transitory phenomenon. Louis is skeptical that this is the case. He sees no evidence of any deflationary shocks that could squeeze price pressure, while at the same time, Western policymakers are doing all in their power to pump up demand.

    1
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    Gavekal Research

    Opec Frays

    Last year, when Opec+ talks broke up without an agreement on setting production quotas, the oil price collapsed. On Monday, when Opec+ talks broke up without an agreement on setting production quotas, the oil price surged. The majority of market watchers see no inconsistency, but they are making some large assumptions, which deserve close scrutiny.

    3
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    Gavekal Research

    Webinar: Can Things Really Keep Getting Better?

    The US economy continues to break growth records as it reopens and other big regions may be set to go the same way, while Asia continues to prosper from a strong export outlook. The question is not whether the world economy slumps back into a funk, but whether growth expectations are now set too bullish.

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    Gavekal Research

    Video: Can Italy Recover?

    In response to the Covid economic shock, the European Union has vowed to adopt more expansive fiscal responses and limited mutualization of national debts. The country where this approach will fall, or rise is Italy. In this interview, Nick offers a view on whether it will be enough for Italy to mount a comeback.

    0
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    Gavekal Research

    The G7’s Rival To The Belt And Road

    With the launch of “Build Back Better World,” the world’s rich democracies want to take on China’s Belt and Road Initiative. The G7 sees the initiative as a chance to re-energize international development finance. The plan is worthy, but the nuts and bolts of providing such projects in poor countries suggests that China does not face serious competition.

    1
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    Gavekal Research

    The First To Normalize

    The Bank of Mexico last week joined a growing number of emerging-market central banks that have hiked policy rates this year. Developed markets, in contrast, have stayed dovish as they are not overly worried about inflation and fret about chocking off their recoveries. But there is a good chance that the BoE will be the first big Western central bank to normalize policy in 2022.

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    Gavekal Research

    Webinar: Can Europe Normalize?

    In yesterday's webinar, Cedric and Nick assessed the risks and opportunities associated with Europe's economic reopening, the effectiveness of the new Recovery Fund backed by mutualized debt, and the signs heading into a new political season in which Euroskeptic parties stand to do well.

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    Gavekal Research

    The Morphing Of European Political Risk

    On both sides of the Rhine, celebrations were afoot on Wednesday night after France and Germany managed to earn spots in the knockout phase of the Euro 2020 football tournament. But once a winner is finally decided on July 11, the citizens of both countries will be forced to focus some attention on politics. After a summer of fun, the specter is being raised of European political risk.

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    Gavekal Research

    The Peril Facing Northern Europe’s Savings Industry

    Between 1966 and 2012 investors did better in German bonds than US equities on a total return and common currency basis. That changed in 2012, and Germany’s managed savings institutions are now in peril, along with those in other parts of Northern Europe. In this piece, Charles shows how much trouble these institutions face and offers a view on how this exercise concludes.

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    Gavekal Research

    Europe’s Battery Boom

    A few years ago, European carmakers and auto parts firms raised white flags and ceded the market for electric vehicle batteries to mostly Asian competitors. Today, they are back in the fight. If European companies’ development plans come to fruition, writes Cedric, their share of the continent’s manufacturing capacity will rise from 5% in 2020 to 67% by the middle of the decade.

    9
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    Gavekal Research

    Flabbergasted

    When you write in a language that you didn’t learn from your mother, it is easy to fall in love with new words and then overuse them. In the 1970’s, I came across “flabbergasted” and, truth be told, I ended up being flabbergasted in that decade rather more than I actually was. Today, however, I am again flabbergasted, but am fairly confident that it is for good reason.

    6
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    Gavekal Research

    What’s Your Linchpin Made Of?

    Writing here on Tuesday, Louis argued cogently that energy prices will be the “linchpin” that decides the future direction of inflation. But, in asking whether governments can successfully engineer a green energy transition, it’s fair to say he was thinking in terms of years ahead. Energy prices also have a major influence on inflation and inflation expectations on the scale of months.

    1
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    Gavekal Research

    The Energy Question

    Over the last 20 years, China has been the biggest buyer of most commodities. For investors, this meant that when China was tightening, easing up on commodity exposure made sense. That has not been the case in 2021, and in this piece, Louis seeks to explain why. He also raises the possibility that this cycle ends not with an inflationary blowout, but rather a whimper.

    7
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    Gavekal Research

    Living In A Dual Currency World

    Let’s begin with the basic principles underlying any currency, at least according to economics 101: it should be a medium of exchange, a standard of value and a store of value. I have long argued that central banks’ determination to pursue the “euthanasia of the rentier” rather than protecting money as a store of value would lead to big problems.

    0
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    Gavekal Research

    Financial Stability Über Alles

    Even as headline consumer inflation pushes higher across the developed economies, hitting a 13-year high of 5.0% in the US over the 12 months to May, the European Central Bank served notice on Thursday that it has zero intention of scaling back its asset purchases in the near term. In the statement released following Thursday’s meeting, the ECB governing council declared that in the coming quarter, it will continue to buy assets under its...

    2
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    Gavekal Research

    Webinar: The Risk To Emerging Markets

    In yesterday's webinar, Udith Sikand, Vincent Tsui and Tom Miller weighed up the risks of capital flight from emerging markets as the Federal Reserve again starts talk of tapering. They focused on the different outlook for Asian exporting powerhouses and commodity producers, and discussed India, which is emerging from a severe second wave of Covid-19.

    0
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    Gavekal Research

    The One For All Problem

    Now that a deal has been done on corporate taxation, this weekend’s Group of Seven summit will focus on helping low-income countries roll out Covid-19 vaccination programs. Given inevitable production and distribution problems, the world is unlikely to be fully vaccinated before the end of 2022.

    0
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    Gavekal Research

    Thin End Of The Corporate Tax Wedge

    Counterintuitively, the agreement on a global minimum corporate tax rate struck at the weekend by G7 finance ministers may in the near term prove positive at the margin for global equities in general. In the longer term, however, the weekend’s agreement is likely to prove the thin end of the corporate taxation wedge.

    0
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    Gavekal Research

    Webinar: Global Investment Roundtable, June 2021

    The big question is still about how durable the current burst of inflation will prove to be. Anatole and Louis joined Arthur to debate this—and everything else going on in the world economy—at our monthly global investment roundtable.

    0
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    Gavekal Research

    Supply Squeezes ≠ Consumer Inflation

    As the eurozone’s economy reopens, supply squeezes are intensifying at the same time that producer price inflation is rising rapidly, sparking fears that pandemic-induced supply chain disruptions at a time of booming demand will soon feed through into a sustained rise in the consumer inflation rate. These fears are overstated.

    0
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    Gavekal Research

    Strategy Monthly: Tapering Without The Tantrum?

    The US Federal Reserve’s April minutes revealed that some policymakers are keen to begin talking about tapering the Fed’s assets purchases. In 2013, talk of Fed tapering triggered a traumatic sell-off in emerging market assets and currencies. So how great is the risk of a similar emerging market rout this time around?

    0
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    Gavekal Research

    When Money Becomes Spending Coupons

    Something is changing in the way our capitalist systems create money. For at least 200 years, Charles argues, money-creation began with a request for credit by an economic agent. In the new system, we are seeing the issuance of what amount to “spending coupons”. These coupons will never be retired, and he worries that over time their numbers will rise exponentially.

    6
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    Gavekal Research

    A Resounding “Nein” To European Inflation

    Inflation rates are popping higher all over the world. Even in the eurozone, consumer inflation is set to exceed the European Central Bank’s target in the coming months. Yet like previous spikes in European inflation over the last two decades, this one too is set to prove short-lived. In the eurozone’s largest economy, powerful disinflationary forces are at work.

    0
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    Gavekal Research

    The Odds Of Oil Breaking Out On The Upside

    Since January, most commodity prices have ripped higher, with materials and energy among this year’s best performing sectors. So where do we go from here? Obviously, the price of energy marks the spot where current supply meets current demand. And when looking at oil prices today, there are both bullish and bearish arguments to be made on either side.

    4
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    Gavekal Research

    Webinar: The Commodity Spiral

    Global commodity prices have been on a tear in recent weeks due to strong global growth prospects and constricted supply. The macro picture, however, is murky, with China simultaneously being the driver of soaring iron ore prices while moving to tighten controls over property and infrastructure spending. Rosealea and Louis explained the overall outlook for metals and energy.

    0
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    Gavekal Research

    Further Upside For Eurozone Equities

    Year-to-date, the MSCI EMU index has recorded a total return of 15% in US dollar terms. The MSCI US has managed only 12%. Go back to the beginning of November, when hopes for Covid vaccines began to boost markets, and the performance differential is even more pronounced. Eurozone equities have returned 44%, compared with 31% for US equities. The eurozone has outperformed even though it was late to start vaccinating and slow to bring vaccination...

    0
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    Gavekal Research

    Video: Buy The Crypto Dip?

    Crypto-currency prices have plunged in the last two weeks on a bad brew of news. Will wants to believe in crypto-currencies as an alternative form of money. However, he has struggled to see how such tokens make the jump to being “money”, with all that entails. The question is whether after such a big price drawdown, this skepticism is now discounted into the price.

    0
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    Gavekal Research

    Webinar: Inflation And Its Global Impacts

    Markets have been roiled by rising US inflation that seems to be returning sooner than expected, and similar inflationary dynamics are starting to be seen in Europe. Our team of analysts addressed the inflation outlook in the US, Europe and emerging markets, and offered views on what it means for asset prices in these markets.

    0
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    Gavekal Research

    Is It Gold’s Turn To Shine?

    Over the last year, the bubbles have just rolled on from one exciting asset to the next, with investors wondering which will follow. In this note, Louis explains why he thinks gold may be the next one.

    2
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    Gavekal Research

    Not So Much Inflation, More Fiscal Dominance

    So far, the great inflation debate has centered on the United States. Europe has barely figured. That’s not surprising; although inflation and bond yields are both ticking higher in the eurozone, the levels are modest and the increases moderate compared with those in the US. Nevertheless, there is a debate in Europe concerning the European Central Bank’s policy priorities.

    0
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    Gavekal Research

    Q&A On The Inflation/Deflation Debate

    Last week Louis argued that each time inflation looked set to rear its head over the last 35 years, the global economy encountered a deflationary event. Yet today it’s not clear where a countervailing deflationary hit might come from. His report triggered some interesting back-and-forth with clients, and in this piece he replies to the key points raised.

    15
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    Gavekal Research

    Heading For The Med

    “Sell in May and go away,” has long been a popular adage in Europe, a continent renowned for its predilection for long summer holidays by the Mediterranean. Last year, however, “sell in May” would have proved disastrous as an investment strategy. This year too investors should treat the old saw with circumspection.

    0
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    Gavekal Research

    Webinar: The Semiconductor Endgame

    It is increasingly clear that shortages of semiconductors are both more widespread and intractable than first thought. In the near term, the fear is of cascading disruption along the Asian electronics value chain. In the medium term, however, it is possible that massive supply responses create a glut of chips that causes prices to eventually crater.

    0
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    Gavekal Research

    The Future Of Chips Is Overcapacity

    Semiconductors are tough to come by these days, and the shortage will be deep and long-lasting. Yet chips are about to turn into more of a commoditized product, just as companies make huge investments in production capacity and governments spend big to achieve self-sufficiency on national security grounds. This will lead to permanent excess capacity.

    7
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    Gavekal Research

    Video: The Chill In EU-China Relations

    Hailed as a breakthrough when it was struck back in December, the EU-China Comprehensive Agreement On Investment is in trouble, with little chance the deal will be ratified in the European Parliament amid a deep deterioration in bilateral relations. Nick examines what the political frost means for the earnings of European companies operating in China.

    0
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    Gavekal Research

    Ricardian Growth Is Fragile, Schumpeterian Growth Is Anti-Fragile

    Capitalism works well when activity is undertaken using David Ricardo’s law of comparative advantage and Joseph Schumpeter’s process of creative destruction. Charles argues that an era of Ricardian growth for many countries and industries is running out of road and the drivers of Schumpeterian economic transformation are shifting.

    10
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    Gavekal Research

    A Post-Brexit Britain

    Some long-term investors do seem to be worried that a breakup of the United Kingdom could add another element of uncertainty to what I described last year as the “triple whammy” of Brexit, Covid and the British Treasury’s surprising flirtation with tax increases and premature fiscal tightening. It now appears, however, that only one of these concerns is really justified.

    5
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    Gavekal Research

    The Global Pivot To The Indo-Pacific

    The Indo-Pacific is at the heart of global geopolitics today. The US, UK, and European Union are all shifting their attention east. Tom argues that the new treatment of the Indian and Pacific Oceans as a single, connected space reflects a key shift in managing China’s regional power. The impact will be felt in both strategic and economic terms.

    0
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    Gavekal Research

    Webinar: Global Investment Roundtable, May 2021

    Joe Biden's enormous fiscal initiatives mark a potential sea change in the US government’s role in the economy. They may yet get watered down as the US president negotiates with more conservative members of his party, but tax and spend is clearly the new mantra in Washington DC. The question for investors is what this means for assets in the US and around the world.

    0
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    Gavekal Research

    Webinar: French-Language Webinar, May 2021

    As the US and Europe begin to emerge from the pandemic, Louis assesses the key relationships in global markets, Cedric asks whether Europe will have a summer this year and what the economic effects will be and Didier presents the “Yellow Jacket” multiplier, as he introduces a new asset allocation tool.

    0
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    Gavekal Research

    Fighting Europe’s Headwinds

    Last Thursday, Nick Andrews and I argued that Europe’s economic recovery is set to defy dire predictions. The fly in the ointment, we argued, was a weakening in Europe’s hitherto robust manufacturing sector. Such concerns deepened on Friday, as more evidence emerged of slowing industrial activity. So does this headwind need to be taken more seriously?

    0
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    Gavekal Research

    Europe Surprising On the Upside

    Europe may not yet have the pandemic in the rear-view mirror but infection rates in most countries are falling, vaccinations are surprising on the upside and a full opening of most services this summer seems likely. Since expectations for the eurozone remain constrained, there is a good chance that its yield curves soon steepen and the single currency strengthens.

    0
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