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Gavekal Research
Anatole Kaletsky
Apr 06th 2021
Who’s Afraid Of The Big Bond Wolf?
For the past two months, financial analysts all over the world have been obsessed by two closely related questions: (i) How much further will US bond yields rise, and how fast? (ii) Will rising bond yields kill the bull markets in global equities and other risk assets?
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Gavekal Research
Anatole Kaletsky
Mar 11th 2021
Stop Worrying About Bond Yields And Buy Equities
Is it time to buy or sell global equities? I think investors should be adding exposure for four broad reasons. As argued in February, during the last mini-correction the global bull market that began on March 20, 2020, is still in its early stages and the cyclical economic problems that usually provoke bear markets are not yet on the horizon.
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Gavekal Research
Anatole Kaletsky
Feb 02nd 2021
The Real Effect Of The Vaccine Row
The fiasco of Europe’s vaccination plan and Brussels’ retreat from its standoff with the UK and AstraZeneca have has caused the euro to weaken. While this reaction makes sense, the euro is, in fact, unlikely to fall much more against sterling, while the euro-dollar exchange rate will depend on how politicians behave in Washington, more than bureaucrats in Brussels.
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Gavekal Research
Anatole Kaletsky
Dec 15th 2020
Deal Or No Deal: Should We Really Care?
As the fifth season of the Brexit soap opera lumbers towards a predictably messy climax, the prospect of a sixth season will probably be enough to discourage international investors from considering British assets and sterling for another year or more. And rightly so. British assets should continue to be avoided because sterling at its present level represents a case of “heads I lose, tails I don’t win”.
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Gavekal Research
Anatole Kaletsky
Nov 09th 2020
Pricing The Post-Election World
For once, everything went according to plan. The US election has passed without any big surprises—and the initial market reaction has been exactly what would be predicted in any textbook of finance, when a centrist and predictable conventional politician replaces an extreme and erratic populist as US president.
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Gavekal Research
Anatole Kaletsky
Sep 14th 2020
A British Mad Man
The world’s worst performing major currency, stock market and economy have all been located in Britain since Boris Johnson was reelected last December. This is not surprising. With hindsight, his decision to outlaw any possible extension of the Brexit transition period as soon as he was reelected fully justified the switch from bullish to bearish on sterling assets that I recommended immediately after this announcement.
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Gavekal Research
Anatole Kaletsky
Sep 03rd 2020
Why I Was Right To Turn Bullish
Previously, Anatole tried to explain why he had abandoned the bearish view on equities. We will not know for a long time whether any of his explanations make sense, but Jerome Powell’s speech about the Federal Reserve’s new operating philosophy bolstered his confidence in a once-in-a-generation economic regime change.
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Gavekal Research
Anatole Kaletsky
Jul 03rd 2020
Time To Run With The Herd?
When a herd of cattle is being hunted by a pack of wolves, the worst thing any cow or bull can do is show individualism and originality by running off in a different direction from the rest of the herd. In financial markets, “the trend is your friend” expresses the same evolutionary logic. Are markets now displaying non-rational herd behavior?
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Gavekal Research
Anatole Kaletsky
May 22nd 2020
Boris Will Pile Pelion On Ossa
No country has matched Britain’s dismal combination of currency and equity losses so far this year. Making matters worse for Britain than other DMs is Boris Johnson's refusal to extend the post-Brexit transition period beyond December, precisely the time when the Covid-19 recession might otherwise be expected to start lifting.
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Gavekal Research
Anatole Kaletsky
May 19th 2020
Europe’s Hamiltonian Moment
If there was a rational explanation for Monday’s global risk-on rally, it would be the genuinely exciting news from Europe. It is possible—just possible—that the Franco-German proposal for a €500bn coronavirus Recovery Fund announced yesterday will turn out to be the most important historic consequence of the coronavirus.
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Gavekal Research
Anatole Kaletsky
Apr 27th 2020
The Short, Medium And Long Term Outlook
At the end of March, just after the collapse of global stock markets and non-dollar currencies had reached its climax, I argued that it was too early to buy equities but probably a good time to sell US dollars. The first of these ideas turned out to be wrong, the second irrelevant. But far from admitting defeat, I think it is worth doubling down on both these recommendations.
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Gavekal Research
Anatole Kaletsky
Apr 20th 2020
A Modest Proposal For Europe
A month ago, with the world economy just beginning its lockdown, I presented a modest proposal which seemed impossibly far-fetched to the point of madness. Four days later, the British government announced almost exactly those policies. This week a different crisis is looming: an intensified rerun of the 2012 euro crisis. So here is another modest proposal.
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Gavekal Research
Anatole Kaletsky
Mar 30th 2020
Too Early To Buy Equities, But Time To Sell Dollars
After the biggest weekly gain in the Dow and with the US government having just approved the biggest-ever fiscal stimulus, how should investors react? While unrepentantly bullish in the long term, Anatole still believes that it is too early to buy equities. But for two other asset classes conditions do seem to be more propitious to call a bottom.
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Gavekal Research
Anatole Kaletsky
Mar 16th 2020
A Modest Proposal To Avert Economic Catastrophe
Contrary to initial expectations, the spread of the coronavirus around the world is not following the relatively benign trajectories experienced in China outside of Hubei, and in Korea, Singapore and the rest of Asia. Instead, across Europe—and likely in the US—the spread increasingly resembles the path it took in Hubei. This threatens both medical and economic disasters.
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Gavekal Research
Anatole Kaletsky
Mar 11th 2020
Another View Of The Bond Bubble
How should we think about the unstoppable journey of all OECD bond yields towards zero, including 10-year, 50-year and even 100-year maturities from governments not noted for multi-generational predictability, such as Italy, Greece, Austria and post-Brexit Britain? On Monday Louis offered two explanations. Today, Anatole presents a third.
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Gavekal Research
Anatole Kaletsky
Mar 02nd 2020
When To Catch A Falling Knife
Now that the Federal Reserve has hit the panic button, is it time to try to catch the falling knife on Wall Street? Technical analysis and investor sentiment suggest that equity prices may still have somewhat further to fall before they find a sustainable floor, even if the viral threat is probably overstated and stimulus by major governments will eventually outweigh the temporary economic collapse.
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Gavekal Research
Anatole Kaletsky
Feb 14th 2020
The Downing Street Putsch
Ever since turning negative on sterling and the UK economy when Boris Johnson dropped his post-election bombshell announcing a new “No Deal” deadline of December 2020, I have been waiting for a chance to double-down on this bearish position. On Thursday, Johnson provided such an opportunity to extend short positions in sterling.
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Gavekal Research
Anatole Kaletsky
Dec 18th 2019
Boris's Bearish Brexit
We now know why markets reacted so nervously to Boris Johnson’s election landslide last Thursday. The lack of follow-through after that evening’s exit poll and the retreat when trading resumed on Friday morning was suspicious. But there were no clear explanations until Monday evening, when everything became clear. At 10.30pm Downing Street restated Johnson’s promise to finish negotiating a new UK-European Union trade deal within 12 months and...
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Gavekal Research
Anatole Kaletsky
Dec 02nd 2019
Learn To Stop Worrying And Love The Pound
Sometimes, markets just get things wrong. Since early January investors have been panicking about a “no deal” Brexit, and I have been urging clients to buy sterling. Not because I became less gloomy about the damage that will be done to Britain by any form of Brexit, but because a “no deal” rupture is the one version of Brexit that can be confidently ruled out.
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Gavekal Research
Anatole Kaletsky
Nov 04th 2019
Behind The Risk-On
In recent months, economic data has improved or stabilized, and political risks have receded. But now that equity prices on Wall Street have hit new records and US treasury yields have rebounded from the bottom of their post-2011 trading range, it is worth asking if the move to risk-on conditions is a temporary mood swing, or one supported by economic fundamentals.