E.g., 24-10-2020
E.g., 24-10-2020
We have found 313 results.
View by: Grid List
Sort by: Relevancy Date
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Will & KX: Soft Growth And Volatile Markets

    Will and KX present the quick view on the US economy and financial markets

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Knowing Whether To Buy The Dip

    With all the current focus on the Federal Reserve and markets, it’s easy to overlook the increasingly ugly state of the underlying US economy. Throughout the long post-2009 recovery, when any one driver of US growth showed signs of stalling, the others continued ticking over nicely, which meant overall growth averaged out around 2%. Recent data releases signal that has now changed. Although none of our key indicators has shown a dramatic...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Real Yields In The Driving Seat

    Notwithstanding yesterday’s bounce, the stock market is a nervous place just now. After riding a post-Brexit rebound that saw both the S&P 500 and the Nasdaq Composite scale record highs on minimal volatility, investors are increasingly wondering about the extent of the potential near term downside, not just in the US but around the world

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Gavekal Monthly: How Long Can The Rally Last?

    Investors enjoyed a surprisingly upbeat summer with the World MSCI close to an all-time high and emerging markets continuing to benefit disproportionately. Yet with the Federal Reserve sounding increasingly hawkish, earnings looking soft and political uncertainty remaining the order of the day, this Gavekal Monthly focuses on threats to the current benign market mood.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Return Of US Fiscal Policy

    More than three years after the world fretted about the US economy falling off a “fiscal cliff”, there is suddenly much talk of government spending being used to gin up growth. Whatever their many differences, both Hillary Clinton and Donald Trump favour a fiscal expansion, with a focus on upgrading the US’s aging infrastructure stock. At the same time Federal Reserve officials, led by Janet Yellen and John Williams, are arguing for more fiscal...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Fed’s Hawkish Stance

    For those who thought Janet Yellen a dyed-in-the-wool dove, her Jackson Hole speech on Friday gave pause as she endorsed fellow policymakers’ recent statements that the US economy was strong enough to warrant interest rate rises. Markets quickly adjusted. The implication for global asset markets is not altogether encouraging.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Next EM Yield Play?

    With global growth having stabilized and central banks remaining in super-easy mode, the dash for yield is making emerging markets ever more interesting. In recent months a number of our Hong Kong-based writers have advised investors to play this trend through bonds not equities, with Udith chiming in on Monday (see Indonesia: Bet On Stability Not Growth). The question for those who expect this “not too hot, not too cold” phase to persist is...

    7
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Cheap For A Reason

    By most measures, US equities are not cheap. Yet many investors remain overweight, believing that in a world of ultra-low interest rates and negative bond yields, equity valuations should be higher because future cash flows are now discounted at a much lower rate than in the past. At first glance, the equity risk premium—the expected return on stocks over and above the risk-free rate—appears to support this belief. At more than one standard...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Beware The “High Dividend” Lure

    Investors have been piling into US high dividend plays as they offer decent income and a “margin of safety” in an increasingly expensive equity market that, despite soft earnings, continues to make new highs. The chase for yield has been boosted by global central banks’ easing measures which have helped drive bond yields to pifflingly low levels; at the same time the S&P 1500 dividend yield has stayed steady this year at about 2%. Yet any...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Caveat In US Payrolls

    Notions of a US growth scare were apparently banished on Friday with a bullish payroll report for July helping drive US equities to a new high and causing the dollar to rally strongly. Some 255,000 jobs were added—far better than the expected 185,000—while a cycle-high average hourly earnings gain of 2.6% YoY points to strong domestic demand. So how to square this data with the far less cheery 2Q16 GDP report, released last week, which showed...

    2
  • Gavekal Research

    Video: Risks In US High Dividend Stocks

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Baleful Influence of Inventories

    The reason US second quarter GDP growth was so disappointing at 1.2% QoQ annualized was a deep contraction in US business inventories, which knocked -1.16pp off the quarterly growth figure. In itself, a fall in inventories need not be such a bad thing for longer term growth. If inventories get run down because companies are unable to keep up with a surge in demand, then a fall in inventories can foreshadow increased investment to expand business...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Gavekal Monthly: Shall We Dance?

    In a world in which the Fed shows no inclination to get ahead of the curve on inflation and in which both the ECB and the BoJ are in full quantitative easing mode, investors everywhere are on the hunt for yield. But the chase is a nervous one. Investors are all too aware that equities and bonds are sending conflicting signals, and that the favorable trends that have lifted most assets over the last six months could be disrupted by a sudden spike...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    There’s No Need To Fear A Tighter Fed

    While the US Federal Reserve left interest rates unchanged yesterday as expected, it did revise its statement to sound marginally more hawkish. Most notably, it added the line, “Near-term risks to the economic outlook have diminished,” while tweaking its language to reflect recent relatively solid data releases. The market took the announcement in its stride. The S&P 500 ended the day little changed. Yields on 10-year treasuries fell...

    7
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    US REITs And The Rush For Yield

    One of the side effects of negative interest rates and central bank asset purchases in the eurozone and Japan has been a reach for yield which has seen foreign investors rush into relatively high-yielding US assets, compressing yields and spreads to an extent that appears at odds with the late-cycle stage of the US economy. Earlier this month the 10-year US treasury yield set a new low of 1.36%, while US Baa-rated corporate bond yields fell to...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Consumer Alone Can’t Avert A US Recession

    With a strong US job market auguring well for income growth, and healthy household balance sheets, many believe the growth of consumer demand will outweigh dismal exports and weakening capital spending, staving off recession. But close inspection of historical data shows the US can tip into recession even though consumption remains broadly stable.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    US Auto Sales: Shifting Down A Gear

    At first sight it was worrying last week when June’s number for US automobile sales came in at a disappointing 16.7mn annualized, well below the street’s expectations of 17.3mn. Auto sales are closely followed as a leading indicator of both US consumption growth and the overall business cycle, so at this stage in the cycle, when consumption is the only remaining driver of US economic growth, the undershoot was especially troubling. Worse,...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Beyond Brexit, A More Hawkish Fed

    After the Federal Open Market Committee yesterday revised down both its growth forecast and its projection for the future trajectory of US interest rates, market expectations of rate hikes have collapsed. Fed fund futures are now pricing the probability of a July rate hike at just 6%, down from 16% immediately before the FOMC’s meeting. In reaction, the yield on 10-year treasuries has dipped further below the 1.6% mark to 1.56%, the lowest since...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Boomerang Kids Won’t Come Back To Hurt US Housing

    Hand-wringing features about “boomerang kids” have become a staple of the US media in recent years. Invariably they tell of a generation that left college with record student debts, only to find themselves looking for work in a depressed post-crisis employment market with little demand for newly-minted graduates. Unable to find jobs matching their qualifications, many ended up serving coffee in Starbucks, or doing other menial work on near-...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Dissonance In Jobs

    This week has seen Gavekal senior partners reach a rare consensus of sorts, with Anatole acknowledging that May’s “pig ugly” US payrolls report upped the chances of Charles’s US recession scenario playing out (see Thinking Dark Thoughts). For me, the report offers a classic mixed signal: on the one hand the slowdown in US employment growth could stem from firms dialing back hiring in anticipation of trouble ahead, or alternatively it could be...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Gavekal Monthly: Risks For Equities—Populism And The Dollar

    Even as markets nudge higher, investors are unnerved by a rising tide of populist politics whose tangible expression will be tested on June 23, when UK voters must choose between Brexit or a less than perfect status quo inside the European Union. Investors are also concerned that the US dollar will strengthen further as the Federal Reserve mulls the question of whether to raise interest rates. In this monthly our writers weigh these big issues...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Next Move In US High-Yield

    At the nadir of the market sell-off in February, the Federal Reserve offered more dovish than expected guidance on its monetary policy intentions and so backstopped the crumbling US high-yield bond market. Since then, high-yield bond prices have rallied back to their early-2015 level with the last month seeing a consolidation. Yet with the chances of a Fed rate hike in June on the up and the fundamentals of the US economy looking less than...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The End Of The US Credit Cycle?

    As a reflection of the US economy’s steady if unspectacular recovery, bank loan growth has averaged a solid 7.8% YoY since early 2015. The biggest recipients of this expansion have been commercial and industrial firms followed by real estate developers, with consumer lending sitting some way back. Since 3Q15, however, the Federal Reserve’s senior loan officer survey has signaled a sharp tightening in standards for both C&I and commercial...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Risk On? Maybe Not

    Equity and oil prices have rallied in true risk-on fashion since the February 11 market trough, and are now back near their highs of late last year. Given this apparent rebound in risk appetite, one might have expected US government bonds to sell off in equally dramatic fashion, with yields climbing back to the 2.2-2.3% levels seen at the end of last year. Instead, there has been no rebound at all. Today, 10-year treasuries yield 1.75%, much the...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    US Homebuilders Hit A Speed Bump

    Homebuilding has been a reliable contributor to US growth over recent years. Now tighter lending standards for new construction projects and commercial real estate loans are threatening a slowdown. But, as KX and Will argue, as long as mortgage rates remain low and demand robust, the sector should only hit a speed bump, not a wall.

    3
  • Gavekal Research

    Is US Manufacturing A Leading Indicator?

    There is a commonly held belief that US manufacturing leads the rest of the economy, so it is surely a worry that factory output has been flat since late 2014. And yet the broad economy kept growing—with GDP up 2% YoY in 4Q15, consumption up 2.7% YoY, and home construction by almost 10%. One explanation for this apparent decoupling is the US’s shift to a more service-intensive “knowledge economy” which has rendered metal bashing and more...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Slowdown In Services

    Both the main leading indicators of activity in the US services sector—the ISM services PMI and the Markit services PMI—staged modest rebounds in March. But on the face of it, the pick-up in the headline numbers offers little encouragement for investors. At 54.5 for the ISM and 51.3 for Markit, both measures remain substantially below their 2015 averages of 57.2 and 55.9 respectively. Considering that services make up 70% to 80% of the US...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Why US Imports Are Disappointing

    Given the strength of the dollar, it is not surprising that 2015 generally saw US exports contracting, US imports growing, and the trade balance widening. What is more perplexing is that import growth has started to look shaky in the first part of this year. What gives?

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    US Housing: From Great To Good

    The US housing recovery properly kickedoff in 2011 as a confluence of benign factors converged to favor the sector. Yet while housing continues to provide a much-needed positive contribution to US economic growth, recent data points to reduced momentum. After a weak January, homes sales for February, released yesterday, ticked a little higher. Yet over the last year, sales have been choppy and generally flat. The NAHB index also shows...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Fed Is Falling Behind The Curve

    The Federal Reserve surprised no one yesterday when it decided to remain on hold. But the downward shift in its projection of year-end inflation from 1.6% to 1.2%—and the consequent revision of its dot plot to show two, rather than four, rate hikes in 2016—should have raised a few eyebrows. By adopting such a dovish stance, the Fed is in increasing danger of falling behind the curve on inflation, which in turn implies that the risk of sharper...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The State Of US Profits

    With the US earnings season for 4Q15 done and dusted it is clear that the glory days of this cycle are long gone: aggregate sales for S&P 500 firms fell -4.0% YoY, profits tumbled -7.5% and margins for the period (not the trailing measure) compressed by -2.2pp to 6.5%. The big drivers of profits were (i) the oil price collapse, (ii) the strong US dollar and its crimping of exporters, and (iii) the tendency for rising wages to erode margins....

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Back To Climbing The Wall Of Worry

    Just three weeks ago markets were in full-blown panic mode. The S&P 500 was down -10% YTD, 10-year treasury yields were down to just 1.6%, and credit spreads were close to their cyclical highs. Dark clouds seemed to be rolling in on every front—from China, Brazil, Europe, banks, and the energy sector, all compounded by fears the Federal Reserve had made a grievous policy error. Since then, the skies haven’t exactly cleared, yet the S&P...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Gavekal Monthly: Enter Ursus Magnus?

    January was a hair raising month for investors with a deeply worrying combination of falling oil prices, plunging equities and soaring yields for sub investment grade debt. In this edition of the Gavekal Monthly we seek some answers to the “what next” question, kicking off with Charles and Anatole who take very different views on whether a bear market is upon us.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    High Yield Worries

    Attention may have focused yesterday on the oil price collapse and its knock-on to US equities, but there was also grim price action in the sub-investment grade debt markets—the high yield master index fell back towards its December low, while the CCC-rated index breached that threshold. This pain can be attributed to worsening conditions in the energy sector, where the chance of large scale defaults increases with each lurch lower in the crude...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Gavekal Monthly: The Balance Of Risks

    The new year has been a wild ride so far, with sharp drops in the renminbi, Chinese stock markets, and oil prices leading global markets down. In our first Gavekal Monthly of 2016 we try to make sense of the risks facing investors today. As usual there are some strong differences of opinion: Anatole argues that developed economies are in decent shape, the dollar's rise will soon be over, and equities should post a better performance than...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Shudder In US Credit

    As oil prices tumble and the first US interest rate hike for eight years comes into view, bond investors in the high-yield segment are taking flight. The market was given a foretaste of what a disorderly unwinding of an over-bought US corporate bond market may look like late last week, when two high-yield bond funds suspended redemptions. The worry is that these tremors become an earthquake, making it more costly for all companies to refinance...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What To Make Of Wider Credit Spreads

    US credit spreads are ticking up again, driving the Merrill Lynch US high yield index below its early October low yesterday and bringing total returns for the year to date to -3.4%. This renewed widening of spreads raises some important questions for asset allocators and economy watchers. Has the bond market got itself into an unwarranted flap, providing investors with a good opportunity to lock in some elevated yields? Or has the corporate debt...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Gavekal Monthly: A Cloudy Currency Outlook

    The Gavekal Monthly outlines our highest conviction ideas and summarizes the key economic, market and thematic views held by the firm’s partners and analysts. This report is an attempt to answer a question that we are often asked, but find it hard to answer: "What does Gavekal think?".

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Brace For Lower US Margins

    As the end of the 3Q15 US earnings season comes into view, what stands out is how little things have changed from the last quarter. Alas, corporate America’s financial performance is stabilizing at the weakest level seen since the 2008 crisis—with more than 90% of S&P 500 firms having reported, both revenue and profits came in about -4.5% lower compared with a year ago. This grim performance is partly explained by the ongoing bloodbath in...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The US Inventory Problem

    The US business inventory-to-sales ratio (in real terms) is one of our key recession indicators. We have been uneasy ever since it broke to a new cyclical high in May. Since then it has continued to inch higher, and in September, the latest data-point available for the total business sector, it reached a level typically seen only in recessions. Even more worrying, the rise in the inventory-to-sales ratio cannot be blamed on the travails of the...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Gavekal Monthly: A Possible Return Of US Inflation

    The Gavekal Monthly outlines our highest conviction ideas and summarizes the key economic, market and thematic views held by the firm’s partners and analysts. This report is an attempt to answer a question that we are often asked, but find it hard to answer: "What does Gavekal think?".

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Positioning For A Hawkish Fed

    What have we learned from the world’s largest economy in recent days? It would seem that a fairly hawkish Federal Reserve is ready to raise interest rates in December, while for all its dysfunction Washington has done a deal to keep the US government running for the next two years without threats of a debt default. Considering that two months ago the concern was that the global economy was about to tip into a China-induced death spiral, this...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Ominous Signal In Inventories

    One of the characteristics of a recession is an overhang in inventories, which must then be sold off or written down before growth can recover. The overhang results from overproduction during the final stages of the preceding boom, an unexpected collapse in demand, or both.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Position For A Pick-Up In US Inflation

    Everyone agrees that US inflation, if not actually dead, is unlikely to gain a new lease on life any time soon. With oil prices down -48% over the last 12 months and the US dollar up 11%, inflation as measured by personal consumption expenditure is just 0.3%, while core inflation (ex-food and energy) is down to 1.3% year-on-year. What’s more, investors expect no acceleration in price rises over the medium term. The implied breakeven inflation...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Does Slower Job Growth Signal A Coming US Recession?

    There’s no getting away from it: last week’s US employment report was unequivocally weak. According to the latest estimates, the US added only around 140,000 jobs in each of August and September—a marked slowdown from the average growth rate of 260,000 in 2014. So what is going on? There are three possibilities:

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Wrong End Of The Fed’s Stick

    Friday’s market action spoke volumes about the jitteriness of investors. After the Federal Reserve decided on Thursday not to raise US interest rates, at least for the time being, the S&P 500 sold off -1.6% in the following day’s trade. The reaction in Europe was even more extreme, with the Euro Stoxx 50 falling -3%. Rather than taking the Fed’s dovishness as a positive sign, it seemed that equity investors instead asked what bad news...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Has The Fed Missed The Boat?

    It is decision week at the Federal Reserve. At its meeting this Wednesday and Thursday, the Federal Open Market Committee must decide whether the US labor market has now tightened enough to warrant the first interest rate increase since mid-2006, even though inflation is subdued and financial market sentiment remains fragile following the summer’s bout of heightened volatility. It is an unenviable decision—all the more so since the recent...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The US Current Account Deficit And World Markets

    Spotting turning points in the US current account is central to Gavekal’s research method, as such shifts impact all other economic relationships. When the US dollar is strong the US tends to run a big current account deficit, providing the world with lots of “earned dollars.” Conversely, a weak dollar eventually leads to a shrunken US current account deficit and more incentive to borrow in dollars. Big moves in the dollar exchange rate create...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Bright Spot In The US Market

    Even though US home prices have risen by more than a third in the last three years, the residential construction sector has been a persistent disappointment, showing little meaningful recovery. That is finally changing. On Monday the National Association of Homebuilders’ Housing Market Index hit its highest level since 2006, while July data released yesterday showed housing starts closing in on an eight-year high at an annualized 1.2mn rate....

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    More Cautious Than Ever On US Stocks

    Exactly six months ago, we declared we were Turning Cautious On US Equities. At the time we noted that while US domestic demand was healthy, US stocks no longer looked cheap, the US dollar was no longer competitively valued, and the Federal Reserve was moving unambiguously towards tightening monetary policy. Half a year later, the S&P 500 has risen 4.3% and the Nasdaq Composite 9.2%. On the face of it those look like respectable returns; not...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Three Risk Factors For US Growth

    In the run-up to the meeting this week of the rate-setting Federal Open Market Committee and the release on Thursday of second quarter gross domestic product data, confidence in the strength of US economic activity is deteriorating. It is not just that most market participants now expect 2Q growth to be modest relative to last year, with the consensus looking for an annualized QoQ figure of 2.7% compared with 4.6% for 2Q14 (see Not Déjà Vu Again...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: Who Gains From The Widening US Trade Deficit?

    After four years of US dollar real effective exchange rate appreciation, the US trade deficit is finally showing signs of widening. Both exports and imports have slumped heavily in value terms, largely because of a combination of weak oil prices and US dollar strength. Trade volumes paint a clearer picture, with exports down -0.5% year-on-year in May, while imports rose by 3.5%. As a result, the US trade deficit has expanded from 2.5% of GDP in...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What Price US Growth Stocks?

    Ever since US equities bottomed in March 2009, glamour stocks such as Google, Amazon and Netflix have been at the forefront of the rebound, leading the Nasdaq composite to an all time high this week. While we continue to prefer other markets over the US (see Turning Cautious On US Equities), recent moves in mega-cap US growth stocks have set us wondering how long the outperformance of growth stocks over value stocks can last. After all, even...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: The Divergence In Inflation Rates

    Following last year’s collapse in oil prices, US inflation declined from 2.1% in May 2014 to zero in May this year. Close followers of the US economy will know, however, that this zero rate masks a sharp bifurcation in prices. The slowdown in headline inflation has been propelled entirely by goods prices, which slumped -9.6% YoY in May thanks to modest international price pressures and the strong US dollar. In contrast, services prices, which...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    US Payrolls Are Running Out Of Juice

    Later today we will publish our Growth & Markets Monthly, updating Gavekal’s dashboard of essential economic and risk indicators. The markets side of the equation is relatively straightforward this month: although investors have not switched into full risk-off mode, with the outlook for Greece’s eurozone membership as uncertain as ever ahead of this weekend’s referendum, there has been a clear diminution in their appetite for risk. What of...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: Will Weak Manufacturing Derail Growth?

    Marching into the second half of 2015, the US economy is gradually recovering after another weak start to the year. The majority of forecasters are now expecting a rebound in the US second quarter gross domestic product growth. This makes sense as domestic demand remains strong, supported by lower oil prices, a strong job market and deleveraged household balance sheets. However, while we have seen a robust rebound in most economic data series,...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Don’t Fret (Yet) About US Housing

    In the summer of 2013, a sharp rise in US bond yields driven by the taper tantrum derailed the US housing market. Will the upward spike in 10-year treasury yields from 1.7% in February to 2.4% today do the same? So far, the market is showing no signs of fear. Despite a 40bp increase in mortgage rates, monthly housing sales and prices remain highly encouraging, as do the weekly numbers for mortgage applications. Meanwhile, US homebuilder stocks...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Fed And Dollar Depreciation

    So no surprises. A slightly more dovish Federal Open Market Committee stuck to the script of future monetary policy moves being data dependent. Since the US central bank yesterday scaled back its 2015 GDP growth forecast to 1.8%-2%, the implication is that rate increases, even if they start in September, will be a gradual affair. Investors liked what they heard as this suggests that Goldilocks lives, and a “not-too-hot, not-too-cold” scenario...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Switch In Favor Of US Multinationals

    In recent weeks the US dollar has grown increasingly sensitive to changes in expectations for US interest rate hikes, with the currency’s DXY index fluctuating daily in response to every shift in sentiment about the precise timing of the US Federal Reserve’s first upward move. But while the exact date of the lift-off is crucial to the short term trajectory of the foreign exchange market, over the longer run the US dollar’s upside looks limited.

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: Treasury Yield Normalization

    The trigger for the recent jump in 10-year treasury yields from 1.9% to 2.4% was leveraged investors unwinding long positions on European government bonds. This is not surprising as a “deflating” eurozone was a key reason for last year’s decline in global bond yields. Today, the outlook has improved as the single currency area looks to be enjoying a modest recovery. Absent a Greek-inspired contagion, Europe is likely to be less of a factor...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    To Cheer Or Fear US Wage Growth?

    Is the US equity market merely taking a breather before the next upward leg of the bull run? Or has it reached a worrying plateau, marking US stocks out for a protracted period of underperformance? With domestic profit margins facing a squeeze between the strong US dollar on one hand, and stirrings of wage growth on the other, we are worried it is the latter. As we argued on Tuesday, the US dollar’s strength means that any rewards US firms...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Will The Buyback Craze Ever End?

    Scientists tell us one of the things that sets us humans apart from other mammals is our relatively large prefrontal cortex, the part of our brain that allows us to resist the lure of instant gratification and instead sacrifice ephemeral pleasures for solid long term gains.

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Not Déjà Vu Again For The US

    With the mid-point of 2015 approaching it looks to be a case of “déjà vu again” for a US economy suffering early year blues. As with other “soft patch” periods, there are plausible explanations for this stodginess that don’t just involve beating up on statisticians for their seasonal adjustment techniques. The US indeed had a cold winter and the West Coast port strike disrupted trade flows. But the real question for investors is whether the US...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: The Rising Supply Of 'Earned' US Dollars

    The US dollar is the world’s reserve currency, which means the US can settle its current account deficit by issuing more US dollars. As Charles says, this means any contraction in the US current account deficit means fewer US dollars flowing abroad (see The US Current Account And Vanishing Global Liquidity). Naturally the reverse is also true. Following the strengthening of the trade-weighted US dollar index over the past four years, the...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: Why So Calm After The Oil Price Collapse?

    After oil prices halved, profits in the sector look to have followed suit—S&P 500 energy firms in 1Q15 saw an eye watering -55% YoY plunge in earnings. Given this backdrop, it was to be expected that gory tales would emerge from the oil fields of Texas and North Dakota of bankruptcies, mass layoffs, forced sales and shotgun marriages. To be sure the oilfield services space has seen a bit of this, but generally an eerie calm prevails.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    New York Seminar May 2015 - Anatole, Louis, Joyce & Will

    We held our US spring seminar in New York on May 11, with Anatole, Louis, Joyce & Will offering their views on the most important developments in the global economy.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Embrace The Asian Deflation

    The specter of deflation continues to threaten big chunks of the global economy and the alarm has even spread to China after the GDP deflator was revealed to have slipped into negative territory in 1Q14. Our starting point is that deflation does not have to be some grizzly beast that must end with soup kitchens, for as Charles has forcefully argued, periods of falling prices have in the past been associated with rapid capital formation and...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Whither US Manufacturing

    US economic data has started to surprise on the downside, and much of this can be attributed to the manufacturing sector. This is worrying since the sector often leads the general economy. Hence, the $64,000 question is whether we should be bracing for an unscripted recession? Our answer is no, but investors should underweight the US manufacturing sector. In the near term, price adjustments, largely stemming from the energy and commodity price...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: Competitiveness Lost

    We must be in a global recession! At least that is the conclusion an investor might draw if looking only at US trade data. US import and export volumes both collapsed by an annualized –25% in the first two months of the year, something not seen since the 2008 recession, and 2001 before that. An assessment of trade values would result in an even worse conclusion being drawn—a deflationary depression is underway. The truth is that the situation...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Turning Point For Eurozone Bank Lending

    Is it too early to celebrate the green shoots of a eurozone recovery? Most recent data has been positive with retail sales expanding at the fastest rate since the early 2000s, PMIs signaling a broadening of growth to the struggling periphery and unemployment in most economies continuing to decline. Green shoots can easily wither in response to shocks or bad policy choices, but there is one good reason to think this recovery may have legs: bank...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Who Gains When The Fed Hikes?

    The Fed has lost patience in words only, not in deeds. In its statement yesterday the Federal Open Market Committee dropped its linguistic backstop—the word “patient”—indicating that the first rate rise since 2006 could come as early as June (remember, Fed chair Janet Yellen defined “patience” as meaning there would be no rate hike for at least two meetings after the word’s use). But the underlying message the market took away yesterday is that...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The US Corporate Profit Paradox

    The US equity market is richly valued and faces a buffeting headwind in the shape of the soaring dollar. Our recommendation in recent months has been to dial back exposure, but committed investors should stay concentrated in domestic plays rather than firms with a big reliance on international earnings (see Turning Cautious On US Equities). Such a portfolio orientation was borne out by generally weak 4Q14 corporate earnings. But a key part of...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Sense Of An Ending

    In yesterday’s congressional testimony, Federal Reserve chair Janet Yellen did not indicate that she is backing away from her tentative plan to hike interest rates later this year. Sorry markets. But investors may take comfort in the fact that she has made it crystal clear that rate hikes will not come as a surprise. There will be ample warning.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: The Stars Have Aligned

    The 2013 “taper tantrum” sent mortgage rates up and so put the housing market recovery on hold for a few quarters. But then rates came back down, and the US housing recovery resumed—albeit modestly. We must admit that this “recovery of the recovery” has been weaker and narrower than we expected. And now, a key housing market indicator has rolled over; existing home sales in January fell –4.9% MoM, the biggest decline in more than a year....

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Resolute US Motors On

    January saw the oil and gas industry fire more workers than in any period since the 2008 recession. Viewed in this context the overall pace of job growth in the US is remarkably robust. The January jobs report saw non-farm payrolls grow by 257,000, far ahead of the expected 228,000 and confirming 11 straight months of job gains above 200,000. It also reinforces the point that the energy sector is a fairly small part of the US economy, and the...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: An Earnings Season Divided

    Having passed the halfway stage of the 4Q14 earnings season there is a hint of disappointment in the air. On a median basis, sales and earnings grew 4.0% YoY and 6.0% respectively, down from 5% and 10% in 3Q. Unsurprisingly, the misses have mostly come from energy firms and those players which rely on overseas markets, and so suffer from a strong US dollar.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    US Housing Gets Interesting Again

    You’d think the US housing market should be humming along nicely. Economic growth is decent even as worries of deflation in overseas markets help push long-dated bond yields to record lows, so cutting the cost of home finance. The collapse in oil prices has given households money to spend and pushed consumer confidence readings for January to a post-crisis high. Last week’s GDP report for 4Q14 showed personal consumption growing at an impressive...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Turning Cautious on US Equities

    Given their remarkable performance over the last four years, can US equities really continue to outperform global peers? Recent developments give cause for concern as market technicals look weak and earnings announcements for bellwether stocks have come in lackluster. Earlier this week Louis asked some basic questions about US equity market leadership (see Does It Still Make Sense To Overweight US Equities?). We share his concern not because we...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: The Economic Ripple Of Cheaper Oil

    Some worry that while US consumers are today benefitting from lower fuel costs, this will be trumped by mass layoffs as the shale energy boom goes bust. We don’t buy it. The shale boom is certainly going to bust, but the size of the US energy sector should not be over-estimated and nor should the positive effects that tend to follow oil price declines be underestimated.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Oil And US Contagion Risks

    Oil prices are 50% lower than last summer and it is not clear that the rout is over. Such a dramatic price adjustment in what is arguably the most essential commodity to modern life will inevitably shape the economic and investment landscape in 2015. In the case of the world’s largest oil consumer, our view has been that lower oil prices reinforce the case for a sustained US recovery. Our proviso to this fairly cheery prognosis is that the...

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Our Holiday Reading List

    For the third year we are publishing a year-end books round-up. The topics covered by the 17 books in our compendium include hardy Gavekal perennials such as economics, politics and the effect of technological transformation on modern life. In addition Charles considers ancient Rome’s decline due to its apparent embrace of socialism over liberalism. Louis kicks us off with a look at the roots of our most basic human urges.

    8
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Sources Of US Purchasing Power

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C US: United States: Capital Spending Is Picking Up

    Corporate America has been extraordinarily profitable through the post-2009 recovery, with the latest earnings season once again surprising on the upside. Yet, economy watchers have been frustrated that companies have not used this profitability to fund a capital spending spree. Instead, they have opted to buy back shares and pursue mergers and acquisitions. Our view—considering the economic circumstances—is that this was rational behavior. But...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Global Central Banks Are Driving Appetite For US Cyclicals

    The rebound in US equities since their mid-October trough has been impressive. After giving up almost all its year to date gains in just four weeks, the S&P 500 snapped back even more quickly, ending October at a new record high. Since then, it has extended its advance to notch up a YTD gain of 12%. Yet, until just a few days ago, the relative performance of sectors within the index indicated a degree of caution on the part of investors....

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Most Reliable Source Of Demand

    The strong third quarter growth in US gross domestic product announced yesterday—a 3.5% annualized rate—not only suggested that the American economy is on a sustainable upward trajectory; it also confirmed that the Federal Reserve’s decision to end quantitative easing is appropriate. Although the faster-than-expected headline growth figure was partly driven by government spending, the two key engines of the economy—business capital spending and...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Is The Shale Boom Turning To Bust?

    America’s shale bonanza has been one of the great success stories of the last ten years. Since the mid-2000s, the US energy industry has transformed itself, as rising international energy prices and advances in horizontal drilling made it feasible to exploit vast hydrocarbon resources locked away in the shale beds which underlie much of the country east of the Rockies. As companies drilled new wells by the thousand, domestic production soared,...

    15
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Buying The Dip? Choose Asia

    Markets remain jittery, but the last week has at least seen a break in the downward momentum. Hence it may be worth taking stock of relative performance by the big regions. Looking across the MSCI benchmarks, the All Country World index is down –4.7% since its peak in early September, while the US, Eurozone, Emerging Markets (ex-Asia) and Emerging Asia declined respectively by –3.9%, -5.2%, -8.4% and –5.4%.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Five Corners (October 15): The Equity Rout

    Overview: François Chauchat asks whether a US recovery is enough to drive global equity markets or has the world changed.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C US: Domestic Plays Beat Multinationals

    The current sell-off has left few places to hide, but some areas have done worse than others. Small caps have underperformed large caps; cyclicals have fallen versus defensives; and foreign markets have done worse than the US (especially in US dollar terms). While our clients have surely given a lot of thought to these trends, today we suggest dividing the US equity market another way: between ‘domestics’ and ‘multinationals’.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C US: Beware The Small Cap Energy Effect - Will Denyer & Tan Kai Xian

    The US hydrocarbon industry continues to suffer weak natural gas prices and must wait until 2016 before new LNG export terminals allow more gas to be shipped overseas. Hence, active production rigs in areas such as Texas and North Dakota are increasingly being used to extract oil. The expansion of US crude production has seen output reach 8.6mn barrels per day, back to levels seen in the 1980s; and the rig count continues to rise. But if this is...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Cutting Through The Noise: A New Inflation Indicator

    The outlook for US inflation and monetary policy was already cloudy, even before the Federal Reserve further muddied the waters yesterday with its conflicting signals. To help clients pierce through the haze, Will and KX have developed a new composite diffusion index to provide a reliable leading indicator of US consumer inflation, which they are publishing for the first time in today’s Chartbook. Based on five components from both the money and...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C US: Cutting The Slack

    Federal Reserve chair Janet Yellen opened her speech in Jackson Hole with the fairly obvious assertion that the labor market has made major improvements but has yet to recover fully. We agree. Our preferred cyclical labor market indicator, the employment-to-population ratio for core working ages 25-54, has risen to 76.6% from the trough of 74.8% in late 2010, but it is still way below its pre-crisis peak of 80.7%.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Hello US Capital Spending?

    The US has managed a steady but sub-par economic recovery with the crucial missing ingredient being a sustained pick-up in capital spending. There is some evidence this may be changing since yesterday’s second revision for 2Q14 GDP pointed to the main two engines of investment spending starting to fire simultaneously. It may be too early to declare the start of a new capital spending cycle, but for pretty much the first time since the post-2009...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Shifting Sands Under US Homes

    The US housing market seems to be coming off the boil with the latest national price measures pointing to significantly reduced gains. The worry is that professional investors are pulling back from the market as the share of home purchases made with cash fell to 37.9% in 2Q14 from a high of 42% the previous quarter (see report). Private equity firms such as Blackstone Group, the largest private landlord in the US, have bought an estimated 200,...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The US Consumer Lives, Really

    Even as US real wage growth has picked up over the last 18 months, consumption spending has been slow to respond. The relatively weak state of the US consumer, once the irresistible force pulling along the global economy, has emboldened those advocating a ‘secular stagnation’ thesis. But is this really a fair analysis? The answer has a particular relevance as central bankers gather for the Federal Reserve’s annual Jackson Hole shindig and...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    US 2Q Earnings Favor Industrials

    As the second quarter US earnings season winds up, the dominant picture is of stronger sales and faster earnings growth. That’s handy. In the early stages of this five year bull market, it was central bank liquidity that pushed equity prices higher. Then over the last two years, multiple expansion took over. Now, with valuations back in line with fair value, top and bottom line growth are emerging as the market’s main driving force (see The...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The US Growth Engine Sparks Into Life

    Second quarter US GDP growth came in encouragingly strong at 4% quarter-on-quarter annualized, much better than the expected 3%. At the same time the 1Q number was revised up to -2.1%. That’s up from -2.9%, but it’s still a contraction; so a strong 2Q reading was crucial to show the previous GDP number was just a blip and not the start of a slide into recession. But looking past the headlines, was this really a strong report?

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Emerging Asia's Leverage Problem

    Aggregate debt levels in Asia (ex-China) are back to levels seen just prior to the 1997-98 Asian Financial Crisis. This does not pose a near term macro-economic risk since most Asian economies have large foreign currency reserves and run flexible currency regimes. Indeed, this was the mercantilist lesson most Asian economies learnt from the late '90s crisis. Still, Joyce and KX show in this chart book that the likes of China, South Korea...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    US Construction: Once More Into The Breach

    Having been a key driver of the US economic recovery, the residential property sector has had a tough year. Ructions in the bond market last summer forced up mortgage rates and gave a shock to both buyers and builders of property. And just as markets calmed down, severe winter weather meant that construction workers were more likely to break their tools than break ground on fresh projects. The onset of warmer weather has inevitably produced a...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C US: Profits: Past The Peak Or Just A Blip?

    US statisticians recently provided a far more shocking view of the first quarter than the benign picture we got from the S&P500 earnings season, reinforcing concerns that the exceptional US profit story is peaking and that margins are finally going to mean revert.

    0
Show me: results