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E.g., 25-05-2019
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    Gavekal Research

    A Change In The Market Mood

    Thursday was an ugly day for global equity markets, with losses that brought total returns on US equities almost back to their January 2018 level, and non-US equities to the brink of bear market territory. It is hard to shake the feeling that the investment environment has changed. What lessons should we draw from the tumultuous trading session?

    5
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    Gavekal Research

    Trump's Trade War Calculus

    Keeping track of all the pieces of the US-China confrontation has become a full-time job. But the chaos and uncertainty of the past couple of weeks has begun to resolve itself into fairly clear patterns, even if the outcomes remain in doubt. Three main conclusions emerge from last week’s activity, and none of them are particularly reassuring.

    10
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    Gavekal Research

    Oil Market 1, Commentariat 0

    As if the macroeconomic impact of a full-blown US-China trade war weren’t enough to worry about, over the last couple of weeks investors have also had to contemplate the risk of a real shooting war between the US and Iran, the effect it would have on the price of oil and the threat that would pose to a fragile global economy and jittery world markets.

    0
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    Gavekal Research

    One Reduction Of Risk At The Margin

    By putting off for six months its decision whether or not to impose a 25% tariff on all imports of passenger cars and car parts on national security grounds, the US administration bowed to expedience on Wednesday. In theory, the threat of auto tariffs remains on the table. In practice, the six month delay has robbed the proposal of much of its credibility.

    1
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    Gavekal Research

    A Less Than Bonza Outlook

    Australian politics has been a psychodrama for more than a decade, but for investors it barely mattered. The country has grown rich on selling ever more rocks to China and following smart, evidenced-based policy at home. That, however, looks to be changing as this weekend voters go to the polls after an election campaign that may come to be seen as a watershed.

    1
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    Gavekal Research

    The Case Of The Missing Inflation: The Changing Demographic Picture

    Demography, it is said, is destiny. If so, then the finger of destiny may be pointing at a more inflationary future for the world economy. Louis reviews the slow shifts in demographic profile which govern trends in consumption and savings, and so propel the forces of inflation and deflation over the very long term.

    6
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    Gavekal Research

    Gauging The EM Collateral Damage

    After Donald Trump’s weekend tweets, trade war is once again the center of attention for investors. The perceived probability of an escalation has risen sharply, and risk assets have sold off. Asian emerging markets have not escaped the rout, but it would be a mistake for investors to treat all Asian emerging markets equally.

    3
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    Gavekal Research

    Series: The Case Of The Missing Inflation

    As the Federal Reserve launched the second round of its quantitative easing, the fear was that the Fed’s unorthodox monetary policy would ignite a new round of inflation throughout the world, with dramatic effects on asset prices. After all, most asset prices are driven by the interaction of inflation and economic activity. But inflation failed to materialize, and even fell from more than 3% globally in 2010 to negative territory in 2015. These...

    0
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    Gavekal Research

    Inflation And The Gold Fix

    When the market rate of interest for a long period has been held abnormally low relative to returns on invested capital, financial engineering takes off with huge debt issuance, making a chaotic denouement of the credit cycle unavoidable. To prepare for such an event, an equity portfolio hedged with gold can reduce volatility and raise returns.

    4
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    Gavekal Research

    Iran Waivers And The Oil Price Spike

    US Secretary of State Mike Pompeo has announced that the US will not roll over waivers on its sanctions on Iranian oil exports when they expire in May. The question for investors is this: If Washington does make good on its threat, to what extent are other oil producers able and willing to increase output in order to make up any supply shortfall in global markets?

    5
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    Gavekal Dragonomics

    Stabilization Confirmed

    The raft of economic data released by China on Wednesday morning suggests the world’s second largest economy is proving more responsive than expected to the authorities’ supportive policy measures. The question is no longer whether the government will hit its 2019 growth target, but whether the apparent success will make Beijing halt its easing.

    12
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    Gavekal Dragonomics

    An Epidemic That Can No Longer Be Denied

    The world’s deadliest pig disease is now established in the world’s largest pork market. The spread of African swine fever in China has been more severe than the government has admitted, and as a result pork prices are spiking and imports are surging. But as Ernan argues in this report, the impact of this epidemic is still only in its early stages.

    0
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    Gavekal Research

    Europe's Export Problem

    Europe is the world’s most export-dependent big economic region. In such a precious position, the effect of external weakness can be debilitating, as shown by the eurozone manufacturing PMI having just fallen to its lowest in nearly six years at 47.5. The question is whether any respite can be found in overseas markets.

    0
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    Gavekal Research

    Good News For Goldilocks

    Last Thursday, with the price of oil approaching a four-and-a-half month high, Donald Trump took to Twitter. “Price of Oil getting too high.” Trump’s tweet had little effect, with Brent crude hitting US$69/bbl on Monday. Prices are likely to continue to push higher over the coming months towards 2018's highs—a troubling prospect.

    0
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    Gavekal Research

    Beyond The Yield Curve Inversion

    The current yield curve inversion and softness in growth data are curious developments, given that the four prices that matter most for the global economy—long bond yields, corporate credit spreads, the oil price, and the value of the US dollar—are all relatively favorable. Louis and Charles weigh five different explanations for what may be going on—from bullish to highly bearish—and examine the investment implications.

    2
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    Gavekal Dragonomics

    The Industrial Policy That Dare Not Speak Its Name

    The Made In China 2025 initiative was omnipresent after its launch in 2015, but it has now become officially invisible, a casualty of the vocal concerns expressed by the US and others. In this piece, Lance explains how China will pursue industrial policy in the aftermath: with less transparency, but also, perhaps, with less discrimination.

    5
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    Gavekal Dragonomics

    Springtime For Steel

    It’s looking like a good spring for China’s steel industry. In this piece, Rosealea reports on her findings from a recent visit to the steelmaking capital of Tangshan. Steel and iron ore prices are being supported by a combination of stable demand from property, recovering demand from infrastructure and supply constraints from scrap shortages.

    0
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    Gavekal Dragonomics

    It’s Not 2015 All Over Again

    The profits of China’s industrial sector are turning down—but as Thomas argues in this piece, a repeat of the traumatic downturn of 2014-15 is not in the cards for 2019. Heavy industry will hold up better this time around, but consumer-facing sectors will do worse. This downcycle will be more broad-based, but less severe, than the last one.

    0
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    Gavekal Research

    The Four Prices That Matter

    It is Gavekal’s longstanding mission to develop simple principles that investors can use to navigate complicated financial markets. In this vein, one of our core tenets is that four prices matter more than all others, and together these determine the level of global economic activity and of investor risk appetite. Let us see where they stand as we head deeper into 2019.

    12
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    Gavekal Dragonomics

    The Incredible Shrinking Current Account

    China once had the world’s largest current-account surplus, but that surplus headed rapidly toward zero in 2018. In this piece, Chen Long unpacks the structural and cyclical factors behind this shift. He doubts China is headed for a persistent current-account deficit just yet, but thinks the smaller surplus will make the currency more volatile.

    6
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