-
Gavekal Research
Tan Kai Xian, Will Denyer
Jan 14th 2019
A Good News Story From The US
As the record government shutdown denies Americans vital services and federal workers paychecks, the US has hardly been putting its best foot forward. While we don't expect this political impasse to change the growth trajectory, it does weigh on the market mood. Against such a dour backdrop, we think a good news story from the US economy can be easily missed.
0 -
Gavekal Research
Will Denyer, Tan Kai Xian
Jan 04th 2019
Rollover In The US, Not Recession
This week’s revenue forecast downgrades from Apple and Delta Air Lines and Thursday’s steep dive in the ISM manufacturing PMI only appeared to confirm what market participants already knew: US growth is rolling over. Yet despite the recent sell-off in equities and the further flattening of the US yield curve, we see no recession on the horizon.
-
Gavekal Research
Will Denyer, Tan Kai Xian
Dec 20th 2018
More Half Full Than Half Empty
Despite dovish comments from the Federal Reserve about the future trajectory of interest rates, US equities fell further on Wednesday. The S&P 500 has now fallen -14% since early October. Meanwhile, 10-year treasury prices have risen almost 5%. Momentum traders will therefore find good reason to shun equities and add exposure to long-dated treasuries. We suggest doing the opposite.
-
Gavekal Research
Tan Kai Xian, Will Denyer
Dec 10th 2018
Opportunities Beyond The Death Cross
November’s payroll report gave investors in US equities reason to cheer on Friday as it suggested reduced inflationary pressure, yet they chose to focus on an escalating row over the fate of a top Chinese telecom executive that is intensifying trade tensions with China. A -2.3% fall in the S&P 500 had the technically-inclined scrambling to glean meaning from a “death cross” as the 50-day moving average fell below the 200-day level. We remain...
-
Gavekal Research
Will Denyer
Dec 04th 2018
Don’t Sweat About The Yield Curve
At least as interesting as the 1.1% rise in US equities on Monday, following the weekend’s news of a three-month US-China tariff truce, was the day’s decline in long-dated US treasury yields and the concomitant flattening of the US yield curve. But was this bond market action good news or bad for investors?
-
Gavekal Research
Will Denyer, Tan Kai Xian
Nov 29th 2018
Christmas Comes Early
The most cherished gifts often come in small packets, and investors duly cheered just two small words yesterday by the Federal Reserve chairman. In a speech, Jerome Powell said policy rates were “just below” the neutral level. That was a big change from a month earlier when he said they were “a long way from” the not-too-hot-not-too-cold level. This suggests that the pace of interest rate hikes may lessen, while on the same day data was released...
-
Gavekal Research
Will Denyer, Tan Kai Xian
Nov 21st 2018
The Drag Of US Housing
Despite the overall US growth outlook remaining decent, markets have taken on an ugly tone, with US equities having given back their 2018 gains and credit spreads gapping wider. Adding to grim tidings, yesterday saw weak housing data released, which is a worry as the sector often leads the broader US economy.
-
Gavekal Research
Will Denyer
Nov 16th 2018
GE Is More Fish Than Fowl
There is suddenly a flood of commentary speculating that General Electric is a canary in the proverbial coal mine for the US corporate credit market. With investors focused on the troubled conglomerate’s underfunded pension scheme and ailing power business, GE has seen its credit rating downgraded and become a focal point for broader fears that US corporates have taken on too much debt and bought back too much equity. Without taking a view on GE...
-
Gavekal Research
Yanmei Xie, Will Denyer, Arthur Kroeber
Nov 09th 2018
Hong Kong Seminar — November 2018
At Gavekal’s seminar in Hong Kong this week, Yanmei Xie, Arthur Kroeber and Will Denyer presented their latest views on China's economy, trade war, and how to approach asset allocation in the US.
-
Gavekal Research
Will Denyer, Tan Kai Xian
Nov 07th 2018
Gridlock is Good
The Democrats have wrested back control of the US House of Representatives, while Republicans have expanded their Senate majority. Hence, the US’s bicameral legislature is set for two years of gridlock. This was the most benign result possible from this midterm election. While largely expected, confirmation is probably positive for risk assets.
-
Gavekal Research
Anatole Kaletsky, Will Denyer
Nov 01st 2018
Strategy Monthly: Yes, We're Still In A Bull Market
Anatole and Will believe that continued exposure to US equities makes sense, since underlying corporate profitability remains strong. So long as one avoids the most rate-sensitive sectors, US portfolios should be 70-75% in stocks, with the rest mainly in cash. Moreover, they argue that the period of EM underperformance is now done, and emerging markets are poised for a significant rally.
-
Gavekal Research
Will Denyer, Tan Kai Xian
Oct 29th 2018
US Macro And The Market
Coming after another bruising week in the market, which saw the S&P 500 flirting with correction territory, down -9% from its late-September high, Friday’s third quarter US GDP report is heartening. Although 3Q’s quarter-on-quarter annualized growth rate of 3.5% was slower than the 4.2% rate recorded in 2Q, it was still strong relative to the expected 3.3% and compared with the US economy’s structural growth rate. While US growth will...
-
Gavekal Research
Will Denyer
Oct 25th 2018
Buy The Dip
“Things are fine now, but they are going to get worse.” This is what I hear from commentators on US growth, from corporate managers talking about profit margins, and from Chinese exporters discussing the impact of the trade war. The same could be said of US financial conditions—they are fine now, but as interest rates rise they will deteriorate.
-
Gavekal Research
Will Denyer
Oct 12th 2018
Time To Rebalance Into Equities
The S&P 500 is down almost -7% in six days, the biggest drawdown since the -10% decline in the first quarter. It is now below its 200-day moving average, for the first time since April 2nd. Will it bounce back, or is a US equity bear market now upon us? I would bet on the former, but not too aggressively.
-
Gavekal Research
Will Denyer
Oct 04th 2018
Still Not Interested In US Bonds
Wednesday saw the second biggest sell-off in US bonds since November 10, 2016, immediately after the US presidential election. The 10-year treasury yield jumped 11bp to 3.16%, its highest since 2011. However, investors should be wary of treating this as a buying opportunity, for a number of reasons.
-
Gavekal Research
Will Denyer
Sep 14th 2018
Audio & Transcript — Gavekal Research Call September 2018
In this month’s research call, Will Denyer explains why he is still recommending a 75% equity exposure in a dedicated US portfolio. His call is based on an asset allocation method with three key components, namely, Wicksellian spreads, relative valuation tools, and a duration tool which shows how to divide a fixed income portfolio between bonds and cash.
-
Gavekal Research
Will Denyer, Tan Kai Xian
Sep 04th 2018
Strategy Monthly: A Simple Guide To US Asset Allocation
We synthesize four years of work on asset allocation and present a model portfolio built around analysis of the cost of and return on capital; the real rate of return on equities, bonds and cash; and the ideal duration of fixed-income holdings. Today we recommend that US portfolios hold 75% in equities, 25% in cash, and shun bonds.
-
Gavekal Research
Will Denyer
Aug 28th 2018
The State Of The US Consumer
Despite cyclical headwinds and the threat of a welfare-sapping trade war, the US consumer has stayed fairly upbeat. The worry has been that rising tariffs change that situation and hit growth. Hence, news of a trade deal between the US and Mexico is to be welcomed (Justin Trudeau may feel differently). Still, at the end of the day the effect will still be to push up costs that someone must cover. For this reason, as the economic cycle matures...
-
Gavekal Research
Will Denyer
Aug 22nd 2018
Sound, Fury, Fear And Markets
Regardless of political affiliation, there seems to be a consensus that yesterday was a bad day for the Trump administration. It is almost impossible to predict the chain of events that will unfold in the coming days and weeks, but the political fallout from Paul Manafort’s fraud conviction and Michael Cohen’s guilty plea will be unabashedly ugly. Whether this latest twist in the drama gripping Washington has broader ramifications for markets is...
-
Gavekal Research
Will Denyer
Aug 17th 2018
The Meaning Of A Flat Yield Curve
Every US recession since the mid-1950s has been preceded by a flat or inverted yield curve. The fact that the curve is now fairly pancake-like in form and the Federal Reserve is ratcheting up interest rates has investors on edge. On balance, I conclude that the time is right to get out of US banks, but not to be rushing the exits of the US equity market.
Home
