E.g., 10-08-2020
E.g., 10-08-2020
We have found 4191 results.
View by: Grid List
Sort by: Relevancy Date
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    After Xi’s Coronation

    China’s Communist Party concluded its conclave with a decisive validation of Xi Jinping’s personal leadership, granting him a status and authority unmatched by any Chinese political figure in recent history, and setting the stage for him to exert that power for many years to come.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Corporate Japan’s Cash Mountain

    Shinzo Abe’s thumping victory in Sunday’s Japanese general election set the seal on the local stock market’s unbroken run of gains. AfterAbe’s Liberal Democratic Party and its Komeito coalition partner together secured a comfortable two-thirds majority in Japan’s lower house of parliament, Monday saw the Nikkei 225 close higher for an unprecedented 15th day in a row just whisker short of a 21-year high.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The (Austrian) Empire Strikes Back

    The weekend’s news hardly bolsters confidence that Europe’s technocrats are in competent command of the continent’s political situation. In Spain, hundreds of thousands took to the street to protest central government rule over Catalonia. Meanwhile in unofficial referendums, millions of citizens in two of Italy’s wealthiest regions voted overwhelmingly in favor of greater political and fiscal autonomy from Rome.

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Back Away From Buyback Plays

    From a cyclical peak of US$161bn in 1Q16, US corporate share buybacks fell to US$120bn in 2Q17. But although buyback activity is down, it is not out. In the past few weeks companies including Walmart, HP and Allergan have announced new share repurchase programs. The question for investors is whether they should chase these buyback plays.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The New Era Of Chinese Socialism

    In his first term, Xi Jinping has been nothing if not ambitious. So it is not surprising that, in a speech to mark the start of his second term, he announced a series of ambitious goals. It is more surprising that, in Xi’s “new era” of Chinese socialism, the pursuit of national greatness will no longer be centered around economic growth.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Growth And Yield Dichotomy

    Of the 45 economies tracked by the OECD, all 45 are expanding, and 33 are seeing an acceleration in their rates of growth.Simply put, both official economic data and market prices are pointing the way towards economic growth—which probably explains why a “data-dependent” Federal Reserve is intent on tightening monetary policy.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Japanese Inflation: Hiding In Plain Sight?

    In Gavekal’s latest Strategy Monthly, Charles set out the reasoning that underpins his bullish call on Japan’s economy, currency and equities. In a nutshell, he outlined how Japan is finally emerging from the Fisherian “secondary depression” which followed the economy’s great boom and bust of the 1980s and 1990s. Growth is enjoying its longest sustained run in years. And with the private sector growing faster than overall GDP, corporate profits...

    7
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    MV=PQ And Fed Policy

    It’s probably not advisable for the chairman of a macroeconomic research firm to admit this, but the Federal Reserve has me thoroughly confused. My analysis of the likely outcome from a particular central bank policy is often wrong, but I generally have a fairly clear idea of the objective. In the case of Janet Yellen’s Fed, which is preparing to exit its quantitative easing program, I don’t really understand its ultimate aim.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Why A Jamaican Outcome Is Best

    Electoral math says there is little alternative in Germany to a “Jamaica coalition” and Angela Merkel has made it clear this is her plan. Investors are unimpressed and have pushed the euro lower on worries that a government comprised of Christian Democrats, Liberals and Greens augurs a more nativist Germany that will turn away from its European partners, and in particular a certain eager beaver in Paris. My initial reaction to the election...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Post-Reform China

    The 19th Congress of the Chinese Communist Party will decide whether Xi Jinping emerges as the head of a more “presidential” system of government, or whether the current collective system holds sway. Either way, Arthur argues that hopes for a new burst of reform in the Congress’s aftermath are probably mistaken.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    How To Play A Vertiginous Europe

    Led by Germany, the latest hard European economic data yesterday came in strong pretty much across the board. And with Catalonia’s regional government seemingly stepping back from the brink in its stand-off with Madrid, the euro managed to move higher. So how best to play the European economic recovery—from the inside or the outside?

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Japan’s Fiscal Consolidation Deferred

    Kibo no To, the Party of Hope founded last month by Tokyo governor Yuriko Koike, will not win next week’s general election in Japan. And the chances that it will win enough seats in Japan’s lower house of parliament to be invited to join the Liberal Democratic Party of prime minister Shinzo Abe in forming a coalition government are slight; at this stage probably no more than 25%. Nevertheless, Koike’s upstart party is already having an impact on...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Buying The British Bluff

    You have to admire the British for the hand they are playing with Brussels over Brexit negotiations. Press attention may be focused on infighting within the governing Conservative Party, but the key losers in this game of bluff are European Union negotiators, who face the technocratic horror of not knowing who is calling the shots back in London. Far from leaving the British team emasculated, this stance allows it to effectively duck out of...

    10
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Trouble With Eurozone ROEs

    Economic sentiment in the eurozone is riding high, probably too high. The European Commission’s industrial and consumer confidence indexes are each close to the peaks they recorded in 2000 and 2007. Such high levels suggest overconfidence rather than rational expectations. Moreover, as far as investors are concerned, there are good reasons to be skeptical about the potential of European equity markets to outperform—largely to do with the...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Rather Lame US Dollar Rally

    The year is far from over but when the time does come to close the books, it seems likely that the sudden weakness of the US dollar this year will count as one of 2017’s biggest surprises. Most investors started the year with a distinct bullish bias on the dollar, and a consequent bearish bias against emerging markets (an outlook we did not share, see for example our January 19 piece Trump’s Declarations On The Dollar). However, instead of...

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Kinder Semiconductor Cycle

    In August, the world’s semiconductor-makers shipped chips worth a record US$35bn, up by more than 20% over a year earlier. That growth has been reflected in stock prices. The PHLX semiconductor index has risen 43% over the last 12 months, and at yesterday’s close was just 11% below its all-time high, set in March 2000.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    India’s Economic Funk

    India’s economy is in a cyclical funk, weighed down by rising bad debt, anemic credit and falling private investment. Growth is at its slowest for three years after weakening for five successive quarters to 5.7%, with little sign of an imminent pick up. Even foreign portfolio investors, who have poured more than US$26bn into India this year betting on its strong macro fundamentals, are beginning to waver. With the general election in 2019 now on...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Catalan Question And The Future Of Europe

    Yesterday the world was treated to the unedifying sight of the national police of a democratic state using violence in an attempt to prevent peaceful crowds of citizens from voting. If any investors still believed that the electoral defeat of the far right earlier this year in the Netherlands and the election of Emmanuel Macron in France had resolved the structural forces working to fragment the European Union, yesterday’s footage from the...

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Return Of Alpha?

    This week’s obsession seems to be whether the big reflation trade is back on, heralding a shift in the investment environment. Louis will address this question in a piece to be sent later today, but it is worth noting another important morphing of the investment milieu: that actively managed funds are handily outperforming passive index funds.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    No Closer To Effective Tax Reform

    The much-anticipated US tax reform plan from “the big six” (officials from the administration, House and Senate) has landed. What a disappointment it is. The ball has barely been pushed forward at all. It thus seems unlikely the US will get major tax reform. And if it does, it is likely to be much less effective than the plans previously proposed by the House Republicans.

    9
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Real Story With US Inflation

    While hardly ranking as a hawk, Janet Yellen yesterday restated her view that inflation remains a worry. The Federal Open Market Committee as a whole may have last week nudged its 2017/18 inflation forecasts lower, but Yellen continues to argue that weak pricing pressures are transitory. The corollary is that the Fed should stick with its gradual monetary tightening plan. This places her slightly at odds with policymakers like Charles Evans, who...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Japanese Stocks Beyond The Election

    Global equity investors could be forgiven for ignoring the Japanese general election announced yesterday as of little importance. After all, many remain underweight the Japanese market, and at first glance there is little prospect of any change of government or policy likely to change their minds. However, such a dismissive attitude would be a mistake.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Better Than It Looks In Germany

    Headline writers seem unsure whether to laud Angela Merkel for winning a likely fourth term as German chancellor, or dub her a lame duck amid a fractured political landscape. With the Social Democratic Party (SPD) polling just 20%, it is clear that the implosion of center-left continental parties continues apace, while the stellar performance of an avowedly far-right party shows that populism remains a potent force. My bet, however, is that the...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Winners And Losers From The German Election

    Whatever the result of Germany’s election on Monday morning, the leaders of the Christian Democratic Union will start preparing for the post-Merkel era. Which is why this German election matters. Indeed, there is a significant spread of potential outcomes, which have different implications for both the European economy and investors in European assets.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    EM Can Handle Fed Fallout

    Yesterday, the “world’s central bank” confirmed that it will reverse its quantitative easing policy and likely raise interest rates in December and then three times in 2018. On the same day, the benchmark emerging market index nudged higher and is only a whisker off a six year high. Ordinarily, Federal Reserve tightening is terrible news for EMs, especially for those economies with the temerity to simultaneously try policy easing. Yet this is...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Sterling And The Brexit Soup

    Anyone who doubts that interest rate expectations are the main driving force of currency movements, got a wake-up call last week, when sterling surged from US$1.32 to US$1.36 in response to the Bank of England’s bluntly hawkish statement that “there may need to be some [upward] adjustment of interest rates in the coming months”. Nevertheless, I remain a denier.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Reviewing My Calls

    Over the years my research has focused on broad concepts which have been applied in many situations and lots of reports. These include ideas such as the disruptive power of platform companies, assets whose value comes from scarcity rather than efficiency, or the effect of firms running on Schumpeterian, Malthusian or Ricardian principles. Once in a while, however, I do get specific and make investment calls. Having had a little time this week, I...

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Any US Profits Rebound Lacks Legs

    US equities have rallied to new highs on a favorable liquidity tide, buoyed by hopes for coordinated global growth. But they have also been given a leg-up by an apparently improved US profits outlook, as shown in the second quarter national accounts data. There are, however, compelling reasons to think that an uptick in profit margins cannot last. As 59% of value added by US non-financial corporates went to their workers in 2Q17, these center on...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Very British Zombie Apocalypse

    After the Bank of England signaled its intent to raise interest rates yesterday, sterling jumped more than 1% against the US dollar and the international FTSE 100 index fell similarly. With the UK’s latest inflation reading rising to 2.9% and unemployment hitting a post-1975 low of 4.3%, it is increasingly hard to justify leaving the policy lending rate at 0.25%. One argument for deferring hikes is the UK’s lack of wage growth, but such thinking...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Asian Hardware Makers Trump California Engineers

    When Apple launched its new lineup of smartphones a couple of days ago, the loudest cheer may have come not from its new donut ring headquarters in Cupertino, but the factory lands of Taiwan and Korea that house its key component suppliers. Launching a flagship phone whose innards are in short supply represents a subtle shift in power from software engineers in California to hardware makers in Asia.

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    2002 All Over Again For Europe?

    The eurozone’s recovery is speeding up despite the unresolved “original sin” of lumping a single currency on to a heterogeneous economy. Yesterday Charles argued that this conceit meant the next big move for Europe would be back toward crisis, and among other things investors should avoid eurozone banks. I would not dispute this basic analysis, but take a different view on timing.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Disasters, Bond Yields And The Dollar

    In the past few weeks the US administration cut a deal with opposition Democrats to keep the government open, increasing the likelihood of a budget deficit expansion, and a string of natural disasters have roiled North America. In turn, these events seem to have triggered a sell-off in the US dollar and a global bond rally. Louis outlines two scenarios for where things could go from here.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    After The Renminbi Rally

    The last renminbi bears are throwing in the towel: with Chinese corporates unwinding the dollar holdings they have accumulated over the last two years, the renminbi is up strongly. Although the PBOC is for now happy to step back and let appreciation happen, there are still limits to how much it will want the trade-weighted exchange rate to rise.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Don’t Sweat The Euro

    In response to a stronger euro, the European Central Bank yesterday cut its inflation forecasts. Since the ECB’s monetary policy mandate is entirely focused on consumer prices, the disinflationary impact of a stronger currency leaves policymakers with a conundrum: do they go ahead and taper asset purchases as expected, or instead hold back, figuring that the currency markets are doing the “tightening” job for them?

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What Next From Washington?

    Despite all the bickering in Washington, kicking cans is still a bipartisan sport. Yesterday, President Donald Trump sided with the Democrats in a deal to temporarily raise the debt limit and fund the government for three more months. Republican leaders wanted to kick the can further down the road, but will accept the president’s lead. With the issue temporarily parked, Trump jumped on Air Force One and in North Dakota today he is expected to...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A New World Order In The Making

    It’s all too easy to laugh at the BRICS group, a motley crew of five developing nations with little in common other than the fact that they’re (mostly) big and not yet rich. The term has been mocked as a “Bloody Ridiculous Investment Concept”. So why do the BRICS themselves take it so seriously?

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Algo Trading: A Great Opportunity For The Human Brain

    The rise and rise in money management of computerized trading systems which seek out and exploit correlations among assets and markets can have some curious side effects. One of them is that the rise of the machines, far from rendering the human brain obsolete, can throw up some wonderful investment opportunities for those surviving managers who prefer to rely on solid economic principles and good old fashioned common sense.

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Difference A Couple Of Years Makes

    In August 2015 the offshore renminbi fell -4.5% against the US dollar, unleashing a global panic as investors fretted that another big deflationary downdraft beckoned. Fast forward to August 2017 and the renminbi rose a little over 2.07%, making it the world’s best performing major currency—it even outstripped rises in the euro and Scandinavian currencies.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Macron Goes To Work On Reform

    The moment of truth is approaching for French president Emmanuel Macron. Four months after he pledged an early reform of France’s overly rigid labor market he is pushing ahead. On Thursday the French government unveiled proposals to the lighten the regulatory burden on employers and clear away the legal uncertainties that have long deterred businesses from hiring.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Deteriorating Market Signals?

    We have a rule of thumb at Gavekal that when the S&P 500 equal-weighted outperforms the “S&P 500 index”, our equity clients are cheery since beating the benchmark is fairly easy. At such times, clients will typically take more risk. The reverse is, of course, true: outperformance by the S&P 500 makes for grumpy clients, tougher meetings, and less appetite for risk-taking. In the latter case, there is a tendency for investors to rush...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Korean Rage And European Angst

    When North Korea fired off another ballistic missile yesterday morning the immediate response of investors in the most directly affected neighboring economies was to shrug. Curiously it took far-away Europe to get in a flap, with the euro soaring and equities falling. Granted, currency players were also reacting to the Texas flooding, especially as London was closed for a public holiday on Monday. Yet it was strange for the region least...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Video: Feeling Insecure — Japan’s Food Problem

    Japan’s late conversion to the cause of free trade owes a lot to the recognition that continued trade protection is no longer sustainable in what historically has been one of Japan’s most rigorously defended domestic sectors: agriculture. Demographics and changing diets mean Japan’s food self-sufficiency rate has fallen to 38%, the lowest among developed economies.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Behind Japan’s Free Trade Drive

    When in January Donald Trump’s administration announced that the US was withdrawing from the Trans-Pacific Partnership, pundits around the world lost no time in declaring Barack Obama’s flagship trade agreement dead in the water. They were premature. In a 180 degree policy U-turn, Japan stepped forward to provide leadership by stressing the attractiveness of access to its own home market.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Bank Deregulation Is Not The Answer

    Janet Yellen nailed her regulatory colors to the mast on Friday. In her speech on financial stability at Jackson Hole, the Federal Reserve chair made plain her opposition to any wholesale roll-back of financial regulations introduced in the aftermath of the 2008 crisis. She didn’t mention by name the Financial Choice Act, the attempt currently before Congress to scrap key provisions of the post-crisis Dodd-Frank regulations. But she did address...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Why Lower Forever Is Good News For Investors In Big Oil

    Suppose you are convinced, as I am, that oil prices will fall to near-zero by the middle of this century, for the reasons I outlined last week. If so, then among the best investments of the coming decades will be the equity of giant international oil companies such as BP, Shell, Exxon, Chevron, ENI and Total.

    7
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Better Tool Required

    Having long advocated that equity managers hedge their portfolios with a US long-bond, I mostly run at a 50:50 weighting. Still, the aim must be to adopt a rules-based mechanism for sliding the bond-equity mix (say between 60:40 and 40:60) and also the average duration of the fixed income piece. I can satisfy this aim by combining market-based measures with my recent valuation work.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Irving Fisher And Japan

    Few papers written by defunct economists have had as much influence on my way of looking at markets as Irving Fisher’s seminal 1933 article The Debt-Deflation Theory Of Great Depressions. In it, Fisher hypothesized the patterns that great depressions go through. In a nutshell, great depressions go through four phases.

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    From A Newly-Minted Gold Bug

    Gold, as we know, is and always has been a hedge against the silliness of central bankers and governments. So when from 2012 onwards the world’s central banks decided to throw all caution to the winds, logically one would have expected gold and gold miners to rise strongly.But instead of going up, both gold and gold miners went down big time, while the price of most other assets went up.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Despite Draghi, Flows Favor The Euro

    All eyes will be on Mario Draghi this week. Last Thursday’s release of minutes from July’s European Central Bank monetary policy meeting highlighted policymakers’ unease at the strength of the euro. The suspicion now is that the ECB president may attempt to talk down the euro when he stands up to make his lunchtime speech this Friday at Jackson Hole. Yet even if Draghi does play down the prospect of an early or rapid ECB exit from either...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Oily Slope Of Hope

    As Louis often points out, a highly-touted stock that fails to rise on good news is often riding for a fall. The best example of such a “tired bull” at present is not the much-despised US equity market, which has continued making higher highs and higher lows since February 2016, despite a pretty terrible news flow. It is crude oil.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    In Work But Out Of Pocket

    Data released yesterday showed that the UK’s unemployment rate fell to 4.4% in the second quarter, its lowest since the second quarter of 1975 (when Britons voted by a 34pp margin in favor of membership of the precursor to the European Union). Yet despite the lowest unemployment in generations, wage growth in the UK remains for the most part missing in action. Workers’ total earnings rose by a muted 2.1% in 2Q. With CPI inflation running at a...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Strangulation Of Enterprise

    Zero interest rates have made a great many people a great deal richer. But paradoxically they have strangled wealth creation. The reason for this is that enterprise is overwhelmingly a phenomenon found among smaller companies. Among big companies it is a rare and ailing quality. Quite simply, the overriding goal of every big company is to transform itself into a monopoly, so it can move away from having to earn its profits towards collecting...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    China’s Slow Exit From Reflation

    China’s first monthly data for the second half of 2017 showed growth momentum softening. While reflation peaked in the first half of 2017, the story is still that the exit from reflation will be very slow and gradual. Economic policy will be largely on hold in this period: tightening has peaked, but the switch to easing is still a long way away.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Limits Of Magical Thinking

    A persistent American fantasy of hardliners is that threats of force will magically cause other countries to abandon their interests and cave in to US demands. The current occupant of the White House is taking this magical thinking to new heights in his approach to Asia. But thankfully, despite the dire headlines, the real-world impact is small.

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Resurgence Of Walmart Man

    In July 2014, I wrote a piece looking at the fallout from poorer Americans getting poorer (see Poverty Matters For Capitalists). My basic point was that the consumer price index understated the loss of real income being suffered by non-supervisory workers. I showed this using my Walmart index, which is weighted 50% food, 30% shelter and 20% rent to reflect this group’s true consumption basket. Three years ago this population cohort faced a...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Finding Outperformance In Japan

    On Monday, the cabinet office in Tokyo is expected to announce that Japan’s economy grew at an annualized rate of around 2.5% in the second quarter. If it does, it will mark Japan’s sixth consecutive quarter of economic expansion, the longest period of uninterrupted growth since the mid-2000s, when prime minister Junichiro Koizumi was in power.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Most Important Change And Its Natural Hedge

    I don’t usually quote mass murderers, but when I do, I usually fall back on Lenin’s quip that “there are decades when nothing happens, and weeks when decades happen”. Lenin was referring to the Russian Revolution which took place a hundred years ago and to this day still casts a long shadow. To some extent, the Russian Revolution, itself a bastard child of the first world war, crystallized the end of an era for Europe. Thereafter the world’s...

    8
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Is The Whale Breaking Surface?

    Charles has often said that the impact of a market shock shows up with the same sort of delay as the effects of dynamite fishing. First the small fry float to the top, then the mid-size fish. Only later does the dead whale break surface. With that analogy in mind, Louis has long maintained that investors will not be able to call the end of the oil price slump with any confidence until they have seen major bankruptcies and/or consolidation among...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Beijing’s New Renminbi Strategy

    Since 2016 China has pursued an opportunistic currency strategy, taking advantage of periods of US dollar weakness to steer a depreciation of the renminbi’s trade-weighted exchange rate. But over the last couple of months that policy has shifted, as it looks as if the authorities are satisfied with the renminbi’s current trade-weighted value.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Leading Europe Into Reflation

    The Czech National Bank has become the first central bank in Europe to raise interest rates in this cycle. Yesterday the CNB lifted its policy rate from 0.05% to 0.25%, its first rate hike since 2008. Where the Czechs are leading, others, including the European Central Bank, will follow—but in the case of the ECB, likely not for another two years or more.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Energy Stocks, If Only As A Hedge

    A quick glance at our Gavekal TrackMacro application illustrates how the global equity environment remains benign: modest but accelerating growth, low inflation, solid corporate profits and low interest rates. In such an environment, why not load up on equities? Investors have clearly done just that in recent quarters. As one seasoned client put it in a recent meeting: “If central banks are not going to raise rates with German consumer...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Misleading Signal In US Auto Sales

    Trying to tease economic trends out of recent US data releases is a frustrating business. Take yesterday’s figures. Although the ISM manufacturing PMI ticked down a shade in July to come in a fraction below expectations, at 56.3 the number remained firmly in expansionary territory. On the other hand, two classic cyclical indicators of US economic health—construction spending and automobile sales—both came in weak.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Fade The Latest Commodity Rally

    China’s property market is once again running hotter than expected, pushing prices of iron, steel and coal up by 15%-40% over recent weeks. But the gradual downward trend in property has not changed. And with high prices and government intervention both stimulating more commodity supply, the potential for further price gains is limited.

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Get Selective Over Eurozone Stocks

    Emmanuel Macron’s political honeymoon proved short-lived, but the new French president’s honeymoon with eurozone equity investors was over before it began. In a classic case of buy the rumor sell the fact, the euro Stoxx index peaked on May 5, the last trading day before the second round of the French presidential election. That run-up had been driven by receding fears of deflation, as investors embraced the idea of eurozone reflation, coupled...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    An Interesting Configuration

    When the market is suffering from doubts, it pays to start with the facts. And clearly the market is having a few doubts right now. After setting the latest in a series of record highs in intraday trading yesterday, US equities succumbed to the jitters. In the space of an hour, the S&P500 fell -1% and the Nasdaq -2%, as investors questioned the underpinnings of the current run-up in stocks. So, let’s begin with some facts:

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    US Bear Flattening Ahead

    The miniscule change of wording in yesterday’s Federal Reserve statement appears to confirm that the Fed will go ahead and begin to shrink its balance sheet from September. June’s statement said balance sheet normalization would begin “this year”, implying the process would start by December at the latest. Yesterday’s statement altered that to “relatively soon”—and relatively sooner than December suggests September, as the only other meeting...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    When Smoking Pays

    Baseball cards, Beanie Babies, bitcoins... For the last eight years, governments have regarded them as much the same sort of thing, taking a broadly tolerant attitude to the proliferation of crypto-currencies. Not anymore. Yesterday the US SEC declared that blockchain-based digital tokens such as bitcoin are in fact securities and thus subject to the full panoply of SEC regulation.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Big Tech Is Not Standard Oil

    Back in May, Louis warned that the regulatory knives were coming out for Big Tech. In the worst case scenario for the dominant technology giants that have done so much to drive the stock market to new highs, Louis argued that they could even face the same treatment that Standard Oil received at the hands of the US government in 1911. Investors were forcibly reminded of this tightening regulatory squeeze yesterday when Google parent Alphabet...

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Draghi Can’t Lean Against The Euro’s Rise

    After the euro broke out of its three-year trading range last week, it is reasonable to assume that the European Central Bank would much rather see a big correction than a further move to the upside. But central bankers can’t always get what they want—and their powers to control the currency markets are much more limited than generally assumed by day traders and media headline writers.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Life’s Certainties And The Euro

    There are very few certainties in life. Death, taxes, US consumers living beyond their means, and Italian central bankers talking down their currency are pretty much the only things I have learnt in my career to be inevitable. Sure enough, Mario Draghi came out yesterday doing his best to sound as dovish as he possibly could. That did not stop the euro from surging past its ceiling of US$1.15 to reach US$1.1620.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Reading Trump’s Trade Signals

    Donald Trump came into office six months ago today promising to rip up the rules of global trade in order to put America’s narrow interests first and cut its trade deficit. So far, though, his administration’s trade policies have been more smoke than substance. Global trade volume has accelerated smartly since the US election. Threats of a trade war with the main target, China, fizzled in the face of US business interests, Beijing’s ability to...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Watch US-Eurozone Rate Differentials

    Interest rate differentials between the US and eurozone are wide by historical standards. This is no surprise. The US has enjoyed uninterrupted growth (at least in year-on-year terms) since 2010, and today the Federal Reserve stands as the most hawkish big central bank in town. In contrast, the eurozone slumped back into recession in 2012, and the European Central Bank remains in full-blown easing mode. As a result, interest rate differentials...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Who’s Afraid Of The ECB?

    Mario Draghi’s hint last month that the European Central Bank’s bond buying may not continue forever unleashed a storm of panic among the perma-bears who still dominate the media and market commentariat. But its actual effect on markets themselves has so far been close to minimal. So should investors worry—or relax—about a repeat of the “taper tantrum” in May 2013, when Ben Bernanke first hinted that the Federal Reserve would eventually start to...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Signs China’s Tightening Has Peaked

    Official statements following the conclusion of Beijing’s National Financial Work Conference signal that the recent tightening cycle has now peaked and that market interest rates are likely to fall from current levels, argues Chen Long. The story remains that while Chinese reflation has peaked, the ensuing slowdown will be moderate and gradual.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Making Sense Of Mario Draghi

    Mario Draghi got people scratching their heads last month. “As the economy continues to recover, a constant policy stance will become more accommodative,” declared the European Central Bank president. “The central bank can accompany the recovery by adjusting the parameters of its policy instruments—not in order to tighten the policy stance, but to keep it broadly unchanged.”

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    End Of The Line For EM Dollar Debt?

    As if alarmed by the realignment in global financial markets over the last few weeks, Janet Yellen struck a slightly more dovish note in her Congressional testimony yesterday. Yet the Federal Reserve chair’s more nuanced words are unlikely to temper by much the developing skepticism among investors towards the US dollar bonds of emerging markets.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Wile E. Coyote Moment

    Sometimes financial markets can look a lot like Wile E. Coyote. So intent was the old Looney Tunes character on chasing the Road Runner, that he somehow never realized when he had shot over the cliff’s edge. For a few moments he would continue in thin air, legs a blur, supported by momentum and incomprehension. Only when he looked down... In much the same way, financial markets often continue their trend after the underlying conditions change,...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Payrolls Paradox: Tight Labor But Weak Wage Growth

    As usual the market focused closely on the headline number in last Friday’s employment report, which saw non-farm payrolls come in at a stronger than expected 220,000 in June. As usual, we caution against reading too much into any one month’s figures, for the reasons Anatole has explained so elegantly (see Beyond The March Payrolls Soft Patch). Instead we prefer to take a step back and to attempt to answer the two big questions currently hanging...

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Don’t Give Up On Eurozone Equities

    When a market fails to rally further on successive rounds of good news, investors can be forgiven for feeling a tad nervous about the outlook. It is little surprise, therefore, that many portfolio managers are expressing skepticism about the near-term sustainability of the bull market in eurozone equities. Since the election of Emmanuel Macron as French president two months ago, the macro headlines from the single currency area have been...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What Could Turn Around The US Business Cycle? Hint: Not Much

    As often happens, US data is sending mixed messages. Yesterday’s ADP report showed weak job growth in June, despite the latest ISM service sector PMI being decidedly perky. Investing according to the latest high-frequency growth data is a good way to get whiplash. Instead, let’s take a step back and review the US economy’s overall positioning.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Sweden’s Secret Sauce

    Sweden is a high-growth economy with competitive firms in everything from retailing to metal bashing to software. Yet, there is a time to be in Sweden—or at least overweight—and there are times to be out. Sweden and the US had two of the 20th century’s best performing equity markets and I will simplify this decision by measuring their relative attractiveness. Spoiler alert: this report has a positive recommendation.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The North Korean Tail Risk Just Got A Whole Lot Fatter

    Despite the protestations of some of the less temperate US news media, North Korea did not cross a US “red line” yesterday. However, with the successful test launch of an intercontinental ballistic missile that could, in theory, drop a nuclear warhead on the US state of Alaska, Kim Jong Un’s rogue state has brought North Asia a big step closer to the critical point at which investors can no longer rule out military action. A shooting war on the...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Should Investors Chase Defense Stocks?

    Aside from health care, the other “Trump trade” that has worked wonders since November 9 has been defense stocks. After all, with the Dow Jones sector index up some 22% in the period, what’s not to like? On taking office, Donald Trump cranked up military spending, and during his state visit to Saudi Arabia in May secured weapon sales worth US$110bn. On Friday—just hours before Xi Jinping took the stage in Hong Kong to celebrate the 20th...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Trump And Xi: The End Of The Bromance?

    Last week Washington soured its relationship with China by imposing sanctions on some Chinese companies and individuals that do business with North Korea and announcing a big arms sale package for Taiwan. Rumors also continue to percolate that Trump is preparing for more aggressive trade action. Arthur discusses whether it is time to worry.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Indian Summer

    Tomorrow India will roll out its most important economic reform since the early 1990s. The Goods and Services Tax will transform the country’s 29 states, which run semi-autonomous fiscal systems, into a single market. Backed by strong fundamentals, Modi’s reform agenda is playing well with investors: MSCI India is up 19% this year, foreigners are piling into Indian bonds, and FDI is at record levels. Yet, look closer and a weaker economy emerges...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Draghi’s Two Ps And The Euro

    When choosing three adjectives to describe the ECB’s evolving monetary policy stance, Mario Draghi this week alighted on confidence, persistence and prudence. Yet judging by the big reaction in currency and bond markets, traders ignored the two Ps and heard only about Draghi’s confidence in Europe’s strengthening recovery. Markets treated the speech as a unambiguous signal that the ECB is turning more hawkish.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Change In The Investment Environment?

    A couple of weeks ago, Louis asked if the downside breakout in bond yields (touching 2.10%) could foster a stable investment environment. At the time he foresaw three possible scenarios. After yesterday's hawkish pronouncements by multiple central banks, he is not so sure and is focusing on a narrower range of possibilities which may herald a new investment environment.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Not Getting Paid To Take Credit Risk

    When things cannot get any better, they rarely do. Credit spreads for both high-yield and investment-grade corporate bonds are back near lows last seen just before the onset of previous financial busts. Will the calm soon give way to another perfect storm? Worryingly, corporate fundamentals are already deteriorating.

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Common Sense Prevails In Italy

    The European Union authorities bowed to the inevitable yesterday. They agreed to let Rome spend as much as €17bn in Italian taxpayers’ cash to prevent losses among the senior bondholders and depositors in two Italian regional banks that the European Central Bank declared on Friday to be failing.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Should Investors Chase Health Care Stocks?

    Years ago, when Charles attempted to retire, my mother promptly decided that retirement was the “worst of both worlds”: more husband and less money. She quickly put the kibosh on the idea. The US government is a little more complicated to run than the Gave household, yet health care policy also offers a “worst of both worlds” outcome—profligate spending and rising bureaucracy (from government interference) and eye-watering prices (from the...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Saudi, The Oil Price & Capital Markets

    It says a lot about the dynamics currently at work in the oil market that the king of Saudi Arabia yesterday promoted his firebrand young son to crown prince, yet the price of oil still fell -2.7%. The question now is whether Saudi will double down on its current policies in a fresh attempt to goose up the oil price, whether Riyadh will be forced by its rapidly eroding finances to change direction entirely and devalue the riyal, much as Russia...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Slow Motion Game Changer

    After three years of teasing, MSCI has agreed to include Chinese domestically-listed stocks, or A-shares, in its main equity indexes. Yet, hopes that MSCI inclusion will quickly spur huge capital inflows and a sustained domestic bull market, are almost certainly wide of the mark.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A British Rebalancing?

    Last week the Bank of England left interest rates unchanged, but three out of eight policymakers voted for a hike. In the past any weakness in UK consumption has been met with a soothing monetary response. The fact that the consumer looks increasingly forlorn, yet the BoE is hanging tough suggests the game has changed.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The French Reset

    French voters have handed President Emmanuel Macron a clear parliamentary majority after his La République en Marche party yesterday secured an estimated 360 out of 577 seats. He will also get support from many of the 170 or so Republican and Socialist party deputies who were just elected. After a record low turnout, critics may question his moral authority, but there is no doubting that Macron is now the master of French politics. Hence, he is...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Keeping It Simple

    Three prices have a disproportionate impact on global financial prices: the oil price, the price of the US dollar, and US interest rates. Often the rest is just noise. In the long term, it is shifts in these three prices that drive economic cycles and determine the performance of almost any investment strategy. Take this year as an example. The investment environment has been dominated by:

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Fed's Balance Sheet Contraction

    As universally expected, the Federal Reserve raised interest rates by another 25bp yesterday. It also published details about its plan to start shrinking its balance sheet before the end of this year. While this too was widely expected, there remain plenty of questions about how the markets will respond. With no precedents for the Fed’s impending move to contract its bloated balance sheet, no one can be entirely confident how the market will...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Goldilocks Beds Down

    Headline attention today is clearly focused on the car-crash general election result for UK prime minister Theresa May. At the time of writing, it was still unclear whether May would be able to form a viable government after the vote. Unsurprisingly, the uncertainty triggered a steep 1.6% sell-off in sterling (see Trading The UK Election).

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    EMs And A Chill Trade Wind

    The Asian trade cycle, having perked up notably since mid-2016, shows worrying signs of rolling over. Korean export growth in May halved from a month earlier, while Taiwan has seen the same measure steadily slow since February. Today, China reported a reduction in export growth to single digit levels, while import demand growth for May fell to 15% YoY, compared to 38% in February. To an extent, this can all be explained by flattering base...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Trading The British Election

    Anyone who claims to be confident about the outcome of tomorrow’s UK election is really just guessing, which is why we have advised against taking big positions in sterling assets—either long or short—before the exit polls are released. But from 10.01pm onwards, the currency markets could start to see major moves that are very tradeable in one direction or another. So for clients who got hooked on overnight currency trading after profitable (or...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Figuring Out Where The Ball Will Be

    Rugby players fall into one of two categories: the forwards, who typically go where the ball is (and in the process put their heads in places most sane people wouldn’t put their feet), and the backs, who try to go where the ball will be, which enables them to look good and keep their kit clean, but earns them the scorn of the forwards. Peter FitzSimons, the first Aussie to play for a French club (Brive), once remarked: “Come the revolution, the...

    2
Show me: results