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E.g., 05-08-2021
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    Gavekal Research

    Risks To The Rally

    US equities have ground higher on strong demand, easy monetary policy, and unattractive bond yields. As long as this situation remains, investors should remain moderately overweight US equities. But they should also carefully monitor three key macro risks that could upend this fairly benign investing environment.

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    Gavekal Research

    Strange Times And The Return Of TINA

    Fresh Covid-19 outbreaks, stunning Chinese regulatory actions and worries over global growth are causing US real bond yields to plumb new depths. So what is the humble investor to do? After all, historically tight US credit spreads means corporate credit is unattractive, while equities keep making new highs, pushing the S&P 500 index up 18% year-to-date. The answer may not be that complicated, as current growth data and market pricing...

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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.

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    Gavekal Research

    Did The Equity Rotation And Bond Sell-Off End In May?

    The arrival of Covid-19 vaccines in November sparked a selloff in bonds and significant outperformance of value stocks, at least until mid-May. Having advised a bias to value stocks and keeping duration short in bond portfolios since last November Will was wrong-footed by the market moves of the past two months. Will the new trend last?

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    Gavekal Research

    A High-Pressure Business Cycle

    The US economy may have suffered one of its biggest ever contractions last year, but at just two months, it was one of the shortest due to aggressive policy reactions that spurred an unlikely economic boom. A worry for investors is that late-cycle stresses now emerging cause this expansion to fade as quickly as it started.

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    Gavekal Research

    The Economic Impact Of Delta

    This week saw Gavekal writers address risks to the global reflation trade. Louis explored three reasons for the market shift: (i) the rise of the Delta Covid variant, (ii) tighter-than-expected policy settings in the US, and (iii) China’s tightening measures. My aim is to focus on risks posed by the first of those: another Covid shock to Western economies.

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    Gavekal Research

    Breaking Down US Inflation

    So have hopes that US price pressures are merely a transitory effect faded like a mirage on an Oregon highway? The higher-than-expected jump in June’s consumer price index to a 5.4% year-on-year gain certainly dented investors’ belief that US price pressures will prove fleeting. They are probably right in that view. For while some factors driving US prices higher will abate, new pressures are waiting in the wings. Therefore, in the medium term,...

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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.

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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.

    0
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    Gavekal Research

    Strategy Monthly: Dialing Down Expectations For US Growth

    Growth in the US economy is set to go from great to good. The easy pickings of releasing pent-up demand and re-employing idle workers are almost used up. Growth should stay above trend, but by a smaller margin. Investors should prepare for growth to undershoot expectations that are now too high.

    0
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    Gavekal Research

    Peak US Growth

    The US economy has been on a tear and it could be assumed that a bipartisan Congressional deal to spend US$1.2rn on roads, bridges and tunnels would spur even more growth. Yet, surprising as it may seem, we may have seen the top of the US growth cycle as activity goes from great to good in the second half of this year.

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    Gavekal Research

    Video: The US Housing Sector Rolls Over

    The US housing market has been booming for the past year, with prices setting a record-high in data released this week. However, a decline in affordability, coupled with the potential for higher mortgage rates, is weighing on demand and has started to force a shift from a buyer-led market to a renter-led market.

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    Gavekal Research

    The Dollar’s Temporary Fillip

    Currency markets must process information on many factors impacting an economy and then judge how it stack ups against another economy, yet from time to time the focus switches to just one thing. The Fed's hawkish statement last week sparked a monomaniacal focus on the timing of a taper to asset purchases. Yet there are already signs that this unitary focus is waning.

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    Gavekal Research

    Webinar: The Market Impact Of US Policymakers

    In yesterday’s webinar, our team of US analysts considered what the Federal Reserve's tentative moves to normalize monetary policy means for growth and asset values. They also offered updates on US fiscal policy and anti-trust developments.

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    Gavekal Research

    Fed Talks Of Tapering

    It should not be shocking but the Federal Reserve is getting set to return to a more normal monetary policy. To avert a 2013-style “taper tantrum”, Jay Powell wrapped cotton wool around his “tightening” message on Wednesday but the fact is that the Fed is talking about tapering its asset purchases.

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    Gavekal Research

    Peak Inflation Expectations

    Despite warning signs, it is now clear that investors were too relaxed about US pricing pressures at the start of this year. That much was clear from the consumer price index rising 5.0% year-on-year in May and at an annual rate of 5.9% over the last six months. Yet with the market measure of forward inflation expectations just below a 10-year high, the scope for these numbers to keep shocking has waned.

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    Gavekal Research

    Video: Weighing The Fed’s Unconventional Options

    The Federal Reserve’s next move is likely to be verbal guidance over a tapering of asset purchases, argues Will. That is increasingly a consensus market position, so in this interview he explores other policy options that the Fed could choose to pursue.

    0
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    Gavekal Research

    Here Comes The US Capex Boom

    Amazing as it sounds given all that has happened in the last 15 months, the US economy is already entering a “mid-cycle” phase that should change the drivers of growth. Sectors like housing and durable goods have enjoyed double-digit growth over the last year, but now face head winds. In contrast, firms across the US seem set to go on a capital spending binge.

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    Gavekal Research

    Accomplishing The Fed’s Mission

    Another week, another discourse on US inflation, this time triggered by the personal consumption expenditures index rising 3.6% year-over-year in April, the fastest gain since 2008. Some of that is base effects, but not all: since the Federal Reserve refined its 2% inflation target to an “average” 2% last August, the PCE index has risen at an annualized 3.5%. The point of the Fed’s change was to “make up” for misses and better anchor long-term...

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    Gavekal Research

    A Cooling Market For Cars and Houses

    With stimulus checks having been sent and the jobs market recovering, last month saw the biggest jump in US car sales for at least 35 years. Will Denyer and I have been bullish on autos (and for similar reasons, housing) for the last year. Yet just as the punch bowl fills up, it looks time to get more cautious.

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