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Gavekal Research
Will Denyer
Jan 11th 2021
Bitcoin, Gold Or Fiat?
Governments and central banks are giving users of fiat money reason to consider alternative mediums of exchange and stores of value. And it seems entirely possible that Bitcoin can rally even harder than it already has. But are there the makings of a good money? Because if the answer is “no”, then bitcoin is running on fumes.
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Gavekal Research
Arthur Kroeber
Jan 08th 2021
Strategy Monthly: Darkness Before Dawn? The Covid Vaccine Outlook
As a new wave of Covid infections grips major economies, and social restrictions return, the hopes for a return to pre-pandemic normal rest on the rollout of vaccines. With vaccine production ramping up, most developed economies could reach herd immunity by late in 2021. But many emerging economies will take longer, and several risk factors could still derail the rollout.
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Gavekal Research
Charles Gave
Jan 08th 2021
Portfolio Construction Over The Next Two Years
On Thursday, Anatole set out his view that undivided Democratic Party control of both the executive and legislative branches of the US government opens the door for unconstrained Keynesian stimulus, which will be highly positive for the US economy and equities. It will probably come as little surprise to Gavekal clients that I should dispute whether such unconstrained Keynesianism will be good news either for the economy or for US equities
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Gavekal Research
Anatole Kaletsky
Jan 07th 2021
Investors Should Welcome An Undivided US Government
With undivided Democratic Party control of the White House and both chambers of the US Congress now confirmed, the Biden administration will have free rein to pursue stimulus spending. Yet the balance of power in the Senate means tax hikes are off the table for at least two years. Anatole argues this is highly bullish for US equities.
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Gavekal Research
Yanmei Xie
Jan 07th 2021
After The Storming Of The Capitol
The sight of a ragtag army of diehard Donald Trump supporters storming Capitol Hill unopposed and seizing the floor of the US Senate shocked observers to their core on Wednesday. Yet despite widespread fears that chaos and political violence are set to become the norm, there were important indications late Wednesday that US democracy and rule of law will prevail and endure.
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Gavekal Dragonomics
Wei He
Jan 07th 2021
Not As Hawkish As Feared
The People's Bank of China is one of the world’s most hawkish central banks—but just how hawkish will it be in 2021? Bond market investors worry that the PBOC, eager to normalize policy, will be pushed into hiking rates by higher inflation. In this piece, Wei argues those worries are misplaced, and that bond yields have more room to fall.
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Gavekal Research
Nick Andrews, Cedric Gemehl
Jan 06th 2021
Europe’s New Lockdowns
On Tuesday, Germany followed the United Kingdom by imposing fresh restrictions on activity and movement that in effect amount to a new lockdown comparable—and in some areas even stricter—than the anti-coronavirus shutdown imposed over the second quarter of last year. With infection rates across Europe stubbornly high despite the controls already in place, and with fears mounting about the spread of new viral strains, the risk is high that other...
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Gavekal Research
Yanmei Xie, Will Denyer
Jan 06th 2021
The Senate Upheaval
With some trepidation, Yanmei and Will offer their view on the economic consequences of Georgia, assuming that the Democrats have indeed secured a wafer-thin majority in the Senate. While the fiscal restraints will now surely be released and tax hikes are more likely, the real winners of this election will be centrists in the Democratic Party, who in effect wield veto power over its more liberal instincts.
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Gavekal Dragonomics
Wei He
Jan 06th 2021
The Renminbi Races Out Of The Starting Gate
The renminbi gained 1% against the US dollar in the first two trading days of 2021, leading China’s central bank to signal a pushback against appreciation by tweaking foreign-lending limits. In this Quick Take, Wei explains that such moves are likely to slow than stop the currency’s gains, as fundamentals still favor the renminbi.
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Gavekal Research
Louis Gave
Jan 05th 2021
The Asch Experiment We Inhabit
In the 1950s, US social psychologist Solomon Asch conducted a seminal experiment which showed that people were susceptible to conform with the group consensus, even when their eyes told them the answer was wrong. Looking at the Western response to Covid-19, policymakers have badly failed the Asch experiment. The conclusion must be that political risk in the Western world is now as great as it has been for a generation.
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Gavekal Dragonomics
Andrew Batson
Jan 05th 2021
Decoding The Assault On Alibaba
The antitrust investigation into Alibaba, following close on the heels of the cancellation of the Ant IPO, has raised big questions about the changing political environment for Chinese internet companies. In this piece, Andrew considers the best- and worst-case scenarios, and concludes that at a minimum, growth prospects have dimmed.
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Gavekal Research
Louis Gave
Jan 04th 2021
Gravity Or Liquidity? Which Will Win In 2021?
In hindsight, 2020 showed that if three conditions are met, a stock can break free from the earth’s gravity, and lift off for destinations only sci-fi writers could have imagined. Consequently, one of the most important questions for investors in 2021 is whether such inter-galactic travel can continue. Or will the coming year instead see a shift in investor behavior, with gravity once again exerting its downward pull?
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Gavekal Research
Louis Gave
Dec 22nd 2020
A Very Merry Christmas From Everyone At Gavekal
Unless something out of the ordinary happens (and given the year we’ve had, the bar is set quite high) this will be our last Daily of 2020. It is thus a chance for me to wish our readers a very Merry Christmas and to thank you for your support, friendship and interactions over the past year. As we never tire of saying at Gavekal, ideas presented in our research usually originate with our clients; or at least, the better ones do (we come up with...
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Gavekal Research
Anatole Kaletsky
Dec 22nd 2020
Goldilocks And The 10 Bears Of 2021
In recent years Anatole has written a series of articles describing 10 key risks for investors. He readily accepts that this year’s exercise was rendered redundant by the emergence of Covid-19 in January. Next year, however, he believes that a greater range of factors could weigh on markets and in this piece assesses them one by one.
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Gavekal Research
Yanmei Xie
Dec 21st 2020
A “Little” Stimulus For Christmas
Having agreed another fiscal stimulus, the US government is poised to give its population a US$900bn Christmas gift. This revives relief programs set up at the pandemic’s outset, testifying to both their success in keeping consumers and businesses solvent, and their popularity
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Gavekal Research
Louis Gave
Dec 18th 2020
What Will Stop The Dollar’s Decline?
On Thursday night the US dollar index broke below the 90 level and so put an exclamation mark on two months of weakness. This sell-off means that the DXY now trades on a 14-day RSI of 22.8. The dollar is thus about as “oversold” as it has been in recent years. And up until 2020, buying the US currency at “oversold” levels was a winning strategy, if only because it was in a structural bull market. However, in the past year, buying the dips (...
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Gavekal Dragonomics
Rosealea Yao
Dec 18th 2020
A Looming Correction For Iron Ore
Iron ore prices hit an eight year high in early December in response to a tight steel market. Rosealea writes that this uptick in steel demand, likely due to China’s strong steel-intensive export figures, is unsustainable and should subside in the new year—resulting in a correction for iron ore prices in the coming months.
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Gavekal Research
Charles Gave
Dec 18th 2020
The Boom Of 2021
As he gazes into next year, Charles has reviewed some of his most trusted indicators and found that the US is moving towards an inflationary boom that should mean stronger growth, rising inflation and higher bond yields. If the Federal Reserve acts to crimp this adjustment in the price of money, he warns that the US dollar could tank.
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Gavekal Research
Cedric Gemehl
Dec 17th 2020
The Return Of European Inflation
After averaging 1.2% YoY in 2019, the eurozone’s “harmonized” inflation rate went negative and settled at an abysmal -0.3% YoY in the last three months. Other price indicators have underwhelmed, as shown by the eurozone’s Citigroup inflation surprise index wallowing below -20%. In the US, by contrast, the same measure jumped back into positive territory after August. So what gives?
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Gavekal Dragonomics
Wei He
Dec 17th 2020
The Road To Policy Normalization
China’s economy is almost back to normal after Covid-19, and that means economic policy will also normalize: the question is not whether, but how. In this piece, Wei argues that the most likely policy settings for 2021 will be somewhat tighter fiscal policy and a deceleration in total credit growth, but no increase in policy interest rates.