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Gavekal Research
Will Denyer
Jul 05th 2019
Video: What Is Libra, And Will It Work?
Facebook will have an uphill battle trying to convince consumers to adopt its announced digital currency, libra. As it will be backed by a basket of assets denominated in different currencies, the prices of goods and services will be more volatile in libra than in existing local currencies, even in emerging markets. This volatility will deter consumers from making the switch.
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Gavekal Research
Will Denyer
Jun 25th 2019
Libra's Monetary Challenge
Facebook has 2.7bn users and 90mn companies operating on its various platforms. Perhaps more than any other non-state player, it has the resources, reach and data trove to launch a global currency. Will is not convinced and tackles the issue by asking what benchmarks the new Libra currency will need to hit if it is to become a widely-used medium of exchange.
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Gavekal Research
Will Denyer
Jun 20th 2019
How To Play The Fed Tease
After the Federal Reserve’s two-day policy meeting, chairman Jay Powell told the market what it wanted to hear. Policymakers see rising risks and stand ready to cut interest rates, but there is no reason to panic—just yet. Real growth is solid, which is good for earnings, but inflation pressures are muted, allowing the Fed to be more accommodative.
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Gavekal Research
Will Denyer
Jun 04th 2019
Trump's War And Our Problem
In the seven decades after World War II, the most powerful nation in the world could be relied on to defend and promote free trade among nations. Then came President Donald. J Trump. Now it’s conceivable that Trump’s goal is to shake up the old rules-based system.
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Gavekal Research
Will Denyer
May 30th 2019
An Ugly Trade War And An Inverted Yield Curve
Will a trade war boost US growth and inflation, or instead cause a deflationary recession? The bond market is basically saying that a trade war will dent US growth and force the Federal Reserve into easing. Bear with my two-handed explanation, but there are also good reasons why it could also boost nominal growth.
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Gavekal Research
Tan Kai Xian, Will Denyer
May 06th 2019
How Long Can Productivity Contain US Inflation Pressure?
April’s US payrolls report showed job creation was stronger than expected and unemployment lower, yet wage pressures were softer. This suggests weaker unit labor costs will allow the Fed to remain dovish, at least for now. All else being equal this is positive for equity investors. The question is: How long can this benign combination persist?
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Gavekal Research
Will Denyer, Tan Kai Xian
Apr 29th 2019
Managing Today’s Biggest Risk
The US first quarter GDP data released on Friday proved consistent with the picture of slower—but still positive—growth through 2019, and a continuation of the Goldilocks tailwind for asset markets. But after a strong run-up in equities this year, it might be time to ask what the greatest risk is to the current environment, and how to position for it.
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Gavekal Research
Will Denyer
Apr 15th 2019
Inflation Is The Real Risk
Happy days seem to be here again as risk assets soar on a dovish Federal Reserve and better growth outlook. Yet, investors should take note. The Fed has three official mandates; namely, to keep inflation low and stable, keep unemployment down, and keep interest rates low and stable. Yet among those “equals”, the first is thought to be bearing down on inflation.
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Gavekal Research
Tan Kai Xian, Will Denyer
Apr 10th 2019
A New Look At The Housing Market
When the US slides into recession, it generally does so because of a contraction in investment, either in the corporate sector or in the housing market. Today, returns on capital invested in housing exceed the cost of capital, signalling a positive outlook for US residential investment, construction, house prices, and the shares of homebuilders.
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Gavekal Research
Will Denyer, Udith Sikand
Apr 05th 2019
Audio & Transcript — Gavekal Research Call April 2019
In yesterday’s Gavekal Research Conference Call, Will Denyer and Udith Sikand addressed the changing US dollar liquidity environment, and its impact on markets.
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Gavekal Research
Will Denyer, Udith Sikand
Apr 01st 2019
Strategy Monthly: A New Liquidity Environment
The prospect of easier liquidity conditions helped make 1Q19 one of the best ever quarters for US equities. Confirmation of the Federal Reserve’s newly dovish policy stance means that US equities should continue to do well through 2019. Other big winners in this environment may be equities in northeast Asian emerging markets that do not rely on Chinese commodity demand.
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Gavekal Research
Will Denyer, Kai Xian Tan
Mar 21st 2019
Gather Round The Punch Bowl
US monetary policy tightening is over, at least for now. While the Federal Reserve is not adding any more hooch to the punch bowl, chairman Jay Powell has promised to stop cutting his serving sizes. Although not much of a surprise, the Fed’s guidance is broadly positive for just about everything but US dollar cash—especially equities and real assets.
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Gavekal Research
Will Denyer
Mar 15th 2019
Video: The Fed's Potential Paradigm Shift
The Federal Reserve is debating a fundamental shift in its inflation targeting. Right now it's targeting 2% inflation no matter what it has been in the past, a so-called "bygones" policy. In this video interview Will discusses the consequences of switching to price-level targeting, where the aim is to keep average inflation over time at 2%.
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Gavekal Research
Will Denyer
Mar 07th 2019
An Investor's Rough Guide To Modern Monetary Theory
Modern Monetary Theory—the idea that governments can spend as much as they want, free from funding constraints—is attracting more and more attention. Will examines the precepts of the theory, explores whether it really brings anything new to the table, and outlines some of the implications for investors should it ever be applied as practical policy.
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Gavekal Research
Will Denyer
Mar 06th 2019
Video: Shifting Sands At The Fed
The US Federal Reserve has said it is likely to end its process of balance sheet “normalization” sooner than previously planned. This sounds like an obscure monetary technicality, but it has important implications for investors. In this video interview Will explains why.
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Gavekal Research
Will Denyer, Tan Kai Xian
Feb 27th 2019
The Trouble With Price Level Targeting
The Federal Reserve is talking about changing the way it targets inflation. Currently it tweaks policy in an attempt to zero in on a specific inflation rate: 2%. Under the framework it is discussing, instead it would aim to hit a price index level consistent with a particular long term average inflation rate. The distinction might sound subtle, but by targeting a price level, the Fed would compensate for any undershooting by attempting to...
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Gavekal Research
Will Denyer
Feb 15th 2019
The QT Endgame
A voting member of the FOMC said yesterday that the Federal Reserve should quit shrinking its balance sheet later this year. This was the clearest indication yet that the US central bank will end quantitative tightening one or two years sooner than the 2020-2021 estimate put forward by Chairman Jay Powell last July. I suspect Brainard will get her wish.
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Gavekal Research
Will Denyer
Feb 05th 2019
A Looser Fed And Tighter Banks
News flow from the US and beyond over recent months has pointed to an easing of financial conditions. A notable exception has, however, emerged: US commercial banks have stopped loosening lending standards and have started to tighten them—just a touch. I remain constructive, but have gotten more cautious about US risk assets.
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Gavekal Research
Will Denyer
Feb 04th 2019
Video: Conflicting Signals From The US Labor Market
The US labor market is sending apparently contradictory signals. On one hand the unemployment rate ticked higher in January. On the other, job creation was much stronger than expected. Will looks behind the latest data points to examine the labor market’s underlying trends, and concludes they spell relatively bullish news for the US economy and risk assets over the coming months.
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Gavekal Research
Will Denyer, Tan Kai Xian
Jan 30th 2019
Don't Fear Corporate Leverage (Yet)
With Brexit, the US-China trade war and a synchronous global slowdown, these are anxious times for investors. But apparently, all these concerns pale in comparison with worries about US corporate leverage. According to a BofAML survey this month, corporate indebtedness is the biggest single worry among fund managers. We beg to differ.
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