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E.g., 26-09-2020
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    Gavekal Research

    US Dipping Into Recession? Not Yet

    US GDP just contracted for the first time since the 2007-09 recession. It was a mere –0.1% decline, but this is still rather unsettling given there is only one example to be found over the last 50 years, in 1977, when US GDP growth dipped below zero without marking the start of a recession. And yet markets shrugged off this shocking news—as they should have. Behind the poor headline number, the components indicate that underlying domestic growth...

    4
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    Gavekal Research

    The Big Cap Effect Is Not About To Ebb

    Small firms, and very often newly formed endeavors, have long fuelled job growth in the US. Indeed, it has become axiomatic in public discourse that the business of America is small business. Hence, a reduction in the number of startups and the tendency for small firms to employ fewer workers has sparked a predictable blame game: those with a “declinist” view contend that the US is losing its innovative edge, mainstream economists point to...

    4
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    Gavekal Research

    A Pulse From US Manufacturing

    Maybe the patient lives. 2013 has already started to deliver early indications that we are indeed at an inflection point in global growth. Canada reported yesterday that its Ivey PMI rebounded to an expansionary level of 52.8 in December, from 47.5; respondents to Germany’s IFO survey of business expectations (highly correlated to German exports) has risen for two straight months. And while less obvious, US data is also beginning to stir. Recent...

    0
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    Gavekal Research

    A New Threat To The US Recovery

    Improvements in the US domestic sector have raised hopes that the US will pull the global economy out of its current funk. But what if the cycle is working in reverse—with weakness beyond American shores feeding back to undermine the nascent recovery at home? After 37 straight months of growth, employment in US manufacturing contracted in November for the first time since 2009, according to ISM. This raises the concern that weak growth in the...

    0
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    Gavekal Research

    Bernanke Turning Hawkish?

    Fed Chairman Ben Bernanke rattled markets yesterday when he explained why the potential growth rate of the US economy appears to have declined while the structural unemployment rate has risen. The initial reaction from equity markets was negative, for an obvious reason: If the chairman is now raising his target unemployment rate, this implies a shorter shelf-life for extremely easy monetary policies.

    0
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    Gavekal Research

    US Tax Changes In A Brave New World

    It is a common complaint that US corporations are sitting on exceptional piles of cash, while the domestic economy experiences lackluster growth in capital spending and employment. With weak growth comes lower tax revenues. As such, policymakers are looking at new ways to raise revenues from corporates and from individuals (mostly the wealthiest). But we live in a “Brave New World” of global operations, fragmented supply chains, and light,...

    3
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    Gavekal Research

    Four More Years

    The American electorate may share the same national bed, but they have vastly different dreams. Our take on the election’s significance is similarly bifurcated—a cathartic political cleansing allowing for a deal on the fiscal cliff (Anatole) to disaster (Charles). Arthur asks whether the Republican Party can win nationally without reconciling itself to America’s changed demographics and the realities of the new knowledge-intense economy. Will...

    5
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    Gavekal Research

    US Recovery Under New Leadership

    Friday’s 3Q GDP report tells a simple story about the US economy—namely that the recovery has come under new leadership. Step aside manufacturing and exports, enter US housing rebound.

    8
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    Gavekal Research

    US Tech: The Modern Day Safe Haven

    3
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    Gavekal Research

    The Fed's Money Tree

    QE3 has set off a debate not just over whether this is good or bad (most here agree it is bad) but on what are the short– vs long-term effects on economies as well as markets. Louis and Charles make the contrarian argument that open-ended and more aggressive quantitative easing will ultimately take away, rather than add, to global liquidity, and warn that investors should prepare for a dollar crisis further down the line. Anatole and Francois...

    8
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    Gavekal Research

    More Liquidity May Burst The Dam

    Whatever else you may think of Ben Bernanke you cannot accuse him of obfuscation—QE3 was telegraphed in his Jackson Hole speech and yesterday the Federal Reserve delivered with a promise to buy $40bn of mortgage backed securities a month while allowing its curve-flattening treasury purchase program (Operation Twist) to expire as planned in December. The short term impact on risk assets is fairly clear; what worries us is the longer term...

    10
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    Gavekal Research

    QE3: Now Or Later?

    4
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    Gavekal Research

    US Housing: It's The Inventory Stupid

    Here’s a conundrum for any economy watcher. The US housing recovery has gathered steam during 2012, and yet the broad economy remains weak as was highlighted by Friday’s 2Q12 GDP release which put growth at a measly 1.5%. So what gives?

    6
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    Gavekal Research

    The Next American Revolution

    Our little firm has spent much of the last decade telling investors to look east. Asia has thrived on the back of cheap labor which has cemented its status as an industrial powerhouse. But as countries such as China seek the good life, pushing incomes and consumption higher, other economies will be better placed to compete. We are increasingly convinced that the defining comparative advantage of the next decade will be having access to the...

    10
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    Gavekal Research

    No Environment For A Rerating

    8
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    Gavekal Research

    A Big Week For US Growth Data

    This week will deliver some potential market-moving data releases from the world’s largest economy. The Institute of Supply Management’s manufacturing PMI is released today, the ISM non-manufacturing PMI and ADP’s private employment estimate Thursday, and official payrolls Friday. Unfortunately, a number of the early signs do not look good, especially in manufacturing.

    1
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    Gavekal Research

    Fed's Inflation Complacency Points To More Easing

    While we may not like it, the odds have risen that the Federal Reserve will provide additional monetary stimulus. This could take the form of longer rate guidance, an extension of Operation Twist, or even QE3, and could come as soon as next week’s FOMC meeting. The odds have risen for two reasons: 1) Vice Chair Janet Yellen says so, and 2) medium-term inflation expectations have slipped.

    1
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    Gavekal Research

    Staring Into An Abyss, Tax Rises Stare Back

    0
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    Gavekal Research

    Please-No More Liquidity Fixes--by Will Denyer

    As we hear talk of a global central bank coordinated action to solve Europe’s market malaise, we have to ask, to what purpose? Large liquidity injections once served to keep Europe’s financial system alive until the continent’s economies sputtered back to life. The problem is, this never happened. Now the ECB’s substantial liquidity programs instead serve the purpose of providing leaders more stall time before acting. The monetary union is...

    4
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    Gavekal Research

    US Corporate Profits: On The Roof Or In The Stratosphere?

    One of the biggest weights on US equity prices is, ironically, record profits. Based on the maxim that nothing good lasts forever, the fear is that record margins will inevitably be taken down a peg. A popular way to illustrate the situation is to show corporate profits’ “share” of gross national income (product). As the red line in the first chart below shows, the corporate profits to GNI ratio has gone through the roof recently. Many...

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