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Gavekal Research
Udith Sikand, Will Denyer
Mar 19th 2020
The Dollar Squeeze Intensifies
Policymakers in the world’s biggest economic blocks are responding to the current crisis with fiscal and monetary “shock and awe”. Yet even as the much maligned European Central Bank joined the asset purchase party, markets have continued to crater. For all the coordinated economic responses to the coronavirus pandemic, there has been no serious effort to free up the offshore market for US dollars.
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Gavekal Research
Will Denyer
Mar 16th 2020
The Fed’s ‘Whatever It Takes’ Moment
While other US government agencies tackle the coronavirus crisis, the Federal Reserve has promised ample liquidity and functioning credit markets. Its “whatever it takes” plan is to ensure that US dollars are available at home and abroad, US credit markets remain liquid and solvent companies and individuals are not stopped out.
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Gavekal Research
Tan Kai Xian
Mar 12th 2020
What US$35 Oil Means For The US
Much of the commentary on the -30% downward breakout in the price of oil over the last couple of weeks has focused on the negative fallout for the US economy. The demand destruction caused by Covid-19 which initiated the oil price fall is a clear economic negative. Yet cheaper energy also promises positive effects. KX weighs the forces at work.
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Gavekal Research
Tan Kai Xian
Mar 03rd 2020
Buy The Dip, Or Sell The Rally?
When the market falls -10% in a week, and then rallies 5% in a day, investors face a question: Do I buy the dip, or sell the rally? An investor selling the rally would in essence be making a bet that the negative impact of the coronavirus will outweigh the central bank support and G7 finance ministry action that has been promised.
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Gavekal Research
Will Denyer, Tan Kai Xian
Feb 28th 2020
Still Dollar Bears (Humbly)
The Covid-19 outbreak has sparked a flight to safety, reversing an incipient weakening of the US dollar. This is hardly unfounded, as the US so far has been spared a major outbreak and its economy is decently insulated. Yet most of the factors weighing on the US dollar late last year remain valid. Thus Will and KX advise a negative dollar bias.
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Gavekal Research
Tan Kai Xian
Feb 27th 2020
Video: Still The Safest Port In A Macro Storm
It took a while, but fear of contagion is gripping Wall Street. In the last week, the S&P 500 has fallen -8%, while 10-year US treasury bills have hit a new all-time low. Yet the risk-off move in US asset markets triggered by worries the coronavirus epidemic is turning into a global pandemic is at odds with underlying US fundamentals.
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Gavekal Research
Tan Kai Xian
Feb 20th 2020
The Problem In US Equities
As US equities power to new highs, investors have brushed off geopolitical ructions and fears of a global pandemic. It is less clear that weak earnings are incidental to the US bull market. With 420 firms in the S&P 500 having reported for 4Q19, earnings are only up 1.6% on the previous year.
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Gavekal Research
Will Denyer, Tan Kai Xian
Feb 18th 2020
A Surfeit Of Money
The fruits of the US Federal Reserve’s swing to monetary easing are ripening. In the last couple of months the about-turn in monetary direction has triggered a dramatic rebound in aggregate US money supply growth, which is outpacing GDP growth. This suggests excess cash may be piling up. If so, the excess is likely to further bid up US asset prices.
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Gavekal Research
Tan Kai Xian
Feb 13th 2020
The Dial Moves Against US Growth Stocks
The outperformance of growth over value continues, yet an increasing number of serious US managers are making the case for value. On the macro front the worry is of a strong economy that continues to have an inflationary vibe. Over the last five years, I have taken an equity growth bias. Now I’m shifting towards the value camp.
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Gavekal Research
Tan Kai Xian
Feb 10th 2020
A Sweet Spot For US Jobs
US non-farm payrolls came in stronger than expected in January. Examining more forward-looking data, such as job openings, many observers suspect the US jobs market may be heading for slower job creation and weaker wage growth in the coming quarters. These worries are likely misplaced.
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Gavekal Research
Will Denyer
Feb 07th 2020
Bad Shocks Can Have Benign Effects
There are few people outside Donald Trump’s administration who think the US-China trade war was a good thing. There are surely even fewer who think the Wuhan coronavirus outbreak has any positive aspects at all. Nevertheless, while both last year’s trade war and this year’s viral epidemic are bad for global economic growth, they are both largely beneficial for US households.
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Gavekal Research
Tan Kai Xian
Feb 03rd 2020
The Threat To US Equities
On Friday the US equity market succumbed to coronavirus jitters, with the S&P 500 sliding -1.77% to wipe out its year-to-date gains for January. The sell-off was accompanied by a surge in the VIX volatility index, which could continue to rise. Happily, however, there are five good reasons to think any such elevated volatility will prove short-lived.
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Gavekal Research
Will Denyer
Jan 30th 2020
Don't Fret About The Fed's Balance Sheet
As if investors didn’t have enough to worry about just now, many have been spooked by this month’s dip in the size of the US Federal Reserve’s balance sheet. Happily the Fed is one thing investors don’t need to fret about. The Fed’s statement and press conference on Wednesday confirmed that US monetary policy remains clear and predictable—and accommodative.
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Gavekal Research
Will Denyer
Jan 20th 2020
The Dark Side Of A Strong US Economy
The US’s growth outlook has been bolstered by easy financial conditions and trade deals being reached with China and its near neighbors. Yet, those prospects are also hampered by a tight labor market that threatens corporate profits. What recent data releases highlight is both the enduring strength of the US economy and niggling late-cycle factors that could yet undo it.
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Gavekal Research
Tan Kai Xian
Jan 17th 2020
Video: US Autos Ride Again
A range of cyclical and structural factors have conspired to hit US auto sales in recent years. But with the US labor market remaining in rude health and US monetary policy being loosened, that may be about to change. The impact could be positive for US growth and for risk assets, argues KX in this interview.
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Gavekal Research
Will Denyer
Jan 13th 2020
A Qualified Bull On US Equities
US unemployment is at its lowest in half a century. Yet for investors, the strength of the US jobs market is far from an unalloyed good. The biggest macro risk to the bull market in US equities this year is a sharp rise in inflation. And such a rise in inflation could have two probable causes: a steep rise in energy prices, or a marked rise in labor costs.
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Gavekal Research
Tan Kai Xian
Jan 10th 2020
Credit Spreads: Not Worth The Risk
US corporate bonds had a great run in 2019, and have started 2020 on a strong note. Both investment grade and high yield indexes rose by around 14% last year, with credit spreads contracting substantially in the fourth quarter to approach their narrowest for this cycle. However, as US corporate leverage has risen, considerable latent risks have accumulated in the system.
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Gavekal Research
Tan Kai Xian, Will Denyer
Jan 03rd 2020
Echoes Of 2017
Global markets began 2020 on a bullish note, with the US S&P 500 climbing to a fresh record close, up a chunky 4.3% over the last month. Indeed, the US monetary backdrop at the start of 2020 is reminiscent of that in early 2017, a year which saw the S&P 500 climb 19.4%. History may not repeat this year, but there are good reasons to believe it may yet rhyme.
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Gavekal Research
Louis Gave, Anatole Kaletsky, Arthur Kroeber, Will Denyer
Dec 19th 2019
Audio — Gavekal Research Call December 2019
In the final Gavekal Research Conference Call of the year Louis-Vincent Gave, Anatole Kaletsky, Arthur Kroeber and Will Denyer reviewed the current investment environment and outlined their expectations for 2020.
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Gavekal Research
Will Denyer
Dec 17th 2019
The Repo Paradox
Following the US dollar liquidity squeeze and repo rate spike in mid-September—an event which went on to trigger hearty liquidity injections from the Federal Reserve—the market has been on the lookout for new stressors in the US dollar money markets. There were concerns of renewed stress on Monday as the Treasury sucked up an estimated US$84bn on the settlement of new debt issues and through the receipt of corporate taxes. US money market rates...
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