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Gavekal Research
Anatole Kaletsky, Simon Pritchard
Nov 15th 2018
The Winding Road To Vassalage
No one much likes Theresa May’s compromise deal that would leave Britain as a rule-taking, semi-detached appendage to the European Union. That, however, is the most likely outcome after the UK cabinet yesterday approved an exit deal that sets up a November 25 summit, where EU leaders will be asked for their assent. Shortly afterwards, the UK parliament will have its say, and despite challenging math in the House of Commons a “national interest”...
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Gavekal Research
Simon Pritchard
Nov 20th 2017
Who Needs A Government?
What would it take to make you put more risk on the table in the final month of a year that has generally produced decent investment returns? It helps to have a synchronized global economic recovery that relies on multiple engines of growth and a US-tested monetary policy framework that seems to work as advertised. Yet the potential for disappointment, starting with US tax reform, appears to be growing. Add to that list an outbreak of political...
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Gavekal Research
Nick Andrews, Simon Pritchard
May 19th 2017
A Less Flexible Britain
Yesterday saw the release of robust UK retail sales data for April that reversed a weakening trend and pointed to still strong consumers. So it was notable that on a day that confirmed British economic resilience despite attendant uncertainties, Prime Minister Theresa May effectively renounced free market policies that long have been core tenants of the Conservative Party credo.
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Gavekal Research
Udith Sikand, Simon Pritchard
Oct 14th 2016
Thailand’s Transition
Perhaps the one thing that Thailand’s polarized political tribes have agreed on in recent times is that the passing of their (generally) popular king would mark a pivotal moment of transition. King Bhumibol Adulyadej, 88, who died yesterday was a steady presence who stopped violent political struggles from morphing into a general civil conflict. The concern is that this restraint now goes out of the window, as opponents to the royalist...
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Gavekal Research
Udith Sikand, Simon Pritchard
Oct 04th 2016
Staring Into The Abyss
Since Rodrigo Duterte became president of the Philippines in May, he has sanctioned the extra-judicial killing of some 3,600 petty criminals and drug users, graphically insulted the US president, favorably compared himself to Hitler, and threatened to switch his country’s allegiance to China and Russia. As he has ripped up behavioral norms for democratic heads of state, investors have yanked out at least US$500mn of capital over the last two...
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Gavekal Research
Nick Andrews, Simon Pritchard
Sep 28th 2016
The German Banking Problem
These are not happy times for Europe’s commercial bankers. The adoption of negative interest rates may have averted the slide into a deflationary abyss, but the policy has hit lending margins, and with them profits. Exhibit A is Deutsche Bank, the dominant financial institution in Europe’s largest and most dynamic economy. Deutsche, whose market value has shrunk to just US$14bn, has problems of its own making in the US, yet its plight has been...
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Gavekal Research
Tan Kai Xian, Simon Pritchard
Aug 31st 2016
The Return Of US Fiscal Policy
More than three years after the world fretted about the US economy falling off a “fiscal cliff”, there is suddenly much talk of government spending being used to gin up growth. Whatever their many differences, both Hillary Clinton and Donald Trump favour a fiscal expansion, with a focus on upgrading the US’s aging infrastructure stock. At the same time Federal Reserve officials, led by Janet Yellen and John Williams, are arguing for more fiscal...
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Gavekal Research
Louis Gave, Simon Pritchard
Jul 22nd 2016
The Flow Through To EM Equities
These are strange times for investors with bond yields in big developed markets plumbing new depths on dark concerns about never ending deflation and stagnation. Yet in a clearly related development, US equities are making new highs while corporate- and emerging market-bonds continue to rally.
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Gavekal Research
Will Denyer, Simon Pritchard
Jan 22nd 2015
Australia, The Next Shoe To Drop
Central bankers are ditching managerial gradualism in their monetary policy communication and are getting serious. Switzerland, Denmark, India and now Canada have all made surprise interest rate moves in recent days—okay, the European Central Bank continues to drip-feed its every thought to friendly journalists, but the sheer scale of the adjustment taking place in relative global prices means that policymakers must respond swiftly to events....
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Gavekal Research
Simon Pritchard
Dec 16th 2014
Europe Not EMs At The Vortex
In the summer of 1998, Russia’s financial crisis stemmed from the oil price plunge that followed the Asian financial crisis. Today the worry is that Russia’s fall is causing a cycle of contagion which could pull down even decently managed emerging economies. Unusually, this collapse is happening just as the world’s biggest asset allocators prepare to effectively shut up shop. It is rare to get a full blown crisis over year-end simply because...
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Gavekal Research
Charles Gave, Louis Gave, Pierre Gave, Will Denyer, Andrew Batson, Tom Miller, Rosealea Yao, Research Team, Simon Pritchard, Thomas Gatley, Tan Kai Xian, Nick Andrews, Tom Holland
Dec 12th 2014
Our Holiday Reading List
For the third year we are publishing a year-end books round-up. The topics covered by the 17 books in our compendium include hardy Gavekal perennials such as economics, politics and the effect of technological transformation on modern life. In addition Charles considers ancient Rome’s decline due to its apparent embrace of socialism over liberalism. Louis kicks us off with a look at the roots of our most basic human urges.
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Gavekal Research
Simon Pritchard
Dec 11th 2014
Oil And Contagion
So much for the gentle year-end that looked to be in store after the swift recovery from October’s sell-off. Investors now face an acute dilemma as oil demand estimates get scaled back and the energy complex howls: does the effective tax cut delivered to oil consumers outweigh the effects of capital destruction and rising bad debt that must result from a 40% fall in prices? US equity investors have mostly cheered the onset of $2 a gallon...
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Gavekal Research
Simon Pritchard, Nick Andrews
Sep 26th 2014
An Irish Outlier?
The Irish economy looks to be making a faster than expected recovery from its grim 2010 nadir. Growth is running at an annualized 6.5% which is more reminiscent of the “Celtic tiger” era than the grinding recession conditions still typical in Southern Europe. Ireland seems sure to emerge as a paradigmatic case study between the rival policymaking camps of so called Austerians and those advocating more conventional Keynesian responses. But for...
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Gavekal Research
Simon Pritchard
Jun 09th 2014
5C Overview: Volatility RIP
Having weathered fears of depression, a systemic euroland failure and most recently the specter of deflation, investors can be excused for their insouciant attitude to risk. We may not be in sunlit uplands, but for the first time since 2008 the global growth trajectory looks fairly secure and the big central banks have their monetary policy settings in sync. Hence, it is not surprising that volatility across most asset classes is making new lows...
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Gavekal Research
Simon Pritchard, Udith Sikand
May 23rd 2014
Why Thailand Is The Odd Man Out
In the mid-1990s Thailand’s over-built and excessively geared economy provided a clear early warning signal for the troubles about to engulf the rest of emerging Asia. But having now suffered two military coups in eight years Thailand is less a bellwether than a regional outlier that seems to have given up serious development in favor of a struggle to subdivide existing wealth and power. The good news from Asia is that ascendant political...
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Gavekal Research
Will Denyer, Simon Pritchard
Apr 29th 2014
What Ails The Dollar
A curious brew of cheap money, a grinding cyclical recovery and “new economy” verisimilitude has helped drive Wall Street to new highs. And yet even as equity investors have scaled the wall of worry, the dollar has remained uninspired. The unit arguably started a structural upswing in 2008 but the recent performance has been lackluster with the DXY index at the bottom of its trading range.
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Gavekal Research
Simon Pritchard
Feb 19th 2014
Asia Ducks The EM Crisis
Janet Yellen’s first proper outing on the international stage is set for this weekend when she attends the G20 finance ministers shindig in Australia. She will encounter grumpy emerging market counterparts who blame fickle US monetary policy for capital outflow that has sent growth tumbling. This is likely all the EMs will agree upon since it is increasingly clear that this is not a generalized crisis of big developing economies, but a shake-out...
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Gavekal Research
Simon Pritchard
Aug 01st 2013
Shoot The Fed Watchers
Fed watchers have rarely been in such demand as the art of divining the language, tone and likely psychological motivations of the actors on the stage reaches new levels of silliness. In contrast to his oblique and strategically ambiguous predecessor, Ben Bernanke promised a transparent, plain speaking and supposedly rather dull Federal Reserve. As things turned out, we are back pondering the etymological distinction between adjectival forms....
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Gavekal Research
Simon Pritchard, Udith Sikand
Jul 17th 2013
The Other Emerging Markets Story
Investors have had a harsh reminder of the risks presented by high growth developing economies with rudimentary financial systems. And yet for every manager who tells us that they will never again take the call of a Singapore or Sao Paulo-based equity broker, we cannot but feel that the current gloom is overdone. Indeed, we are seeing encouraging signs of reforms that could serve as the basis for the next phase of EM growth.
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Gavekal Research
Anatole Kaletsky, François-Xavier Chauchat, Will Denyer, Simon Pritchard
Jul 05th 2013
Europe’s Control Engineers
“Words are, of course, the most powerful drug used by mankind,” so said Rudyard Kipling. When central bankers meet next month for the annual Jackson Hole shindig, they can ruminate on their success being increasingly dictated less by what they do, than what they say. Take the European Central Bank and Bank of England which in recent months have been fairly taciturn next to a loquacious Federal Reserve. Yet, by yesterday verbalizing forward...
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