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Gavekal Research
Louis Gave, Anatole Kaletsky, Charles Gave
Mar 05th 2021
Webinar: Global Investment Roundtable, March 2021
As Covid-19 vaccinations are cranked up and Congress gets ready to dole out stimulus measures, US growth expectations have risen along with inflation concerns. In response, bonds have sold off and equity markets have shuddered. In our monthly global investment roundtable, Gavekal partners discussed this confluence of events and addressed what it means for risk assets.
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Gavekal Research
Nick Andrews
Mar 03rd 2021
The Problem With Europe’s Inflation
Later this year, eurozone consumer price inflation should hit its highest level in more than a decade. We found out on Tuesday that February’s consumer prices rose by 0.9% year-on-year, and more price hikes are in the works. Alas, this is not the type of inflation that the European Central Bank has been seeking to engineer for the best part of a decade.
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Gavekal Research
Will Denyer
Mar 01st 2021
Strategy Monthly: The Threat Of Rising Inflation And Yields
The roll-out of vaccines in the US is upending the investment environment, as the focus shifts beyond the pandemic to full-throttled economic recovery. With both monetary and fiscal policy set to remain loose, nominal growth could soon rip. Hopes for “normalization” have driven up inflation expectations and freaked out bond investors. Those getting fixed interest are right to be unnerved, as production capacity is fairly tight, inventories are...
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Gavekal Research
Cedric Gemehl, Nick Andrews, Anatole Kaletsky
Feb 26th 2021
Webinar: Europe And The Politics Of Exiting The Pandemic
Europe is at a strange juncture, as governments remain committed to massive fiscal and monetary support and refuse to rush into any economic reopening before Covid vaccinations are deployed. Yet despite this collective risk aversion, Italy has appointed a new technocratic government run by Mario Draghi that looks to have broad political support and a fairly radical plan for change. Our team explored Europe's exit from the pandemic and asked...
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Gavekal Research
Cedric Gemehl
Feb 23rd 2021
No Exit
“We are not here to close spreads,” proclaimed European Central Bank president Christine Lagarde last March. “This is not the function or the mission of the ECB.” After the market took her at her word, Lagarde hastily back-tracked, and the ECB duly spent the following months doing exactly what Lagarde had said it would not.
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Gavekal Research
Anatole Kaletsky
Feb 22nd 2021
Can Covid Vaccines Cure The Pound?
The British pound has been the strongest major currency so far this year, contrary to Anatole’s expectations at the end of 2020. In this piece he outlines three reasons for sterling’s outperformance, but maintains that in the long term the pound will be forced lower.
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Gavekal Research
Cedric Gemehl, Nick Andrews
Feb 19th 2021
Draghi’s Reform Plan And Asset Prices
Newly installed as Italy’s prime minister at the head of a broad coalition, on Wednesday Mario Draghi outlined an ambitious agenda of structural reforms. Notably, the former European Central Bank chief wants to oversee a root-and-branch overhaul of Italy’s tax system, while investing in the education system and streamlining public administration. His first task will be to steer Italy through the pandemic. But beyond that, Draghi’s plans could...
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Gavekal Research
Anatole Kaletsky, Louis Gave
Feb 19th 2021
A Discussion On Treasury Yields
In recent days, long-dated US treasury yields have made a clear move higher. Unless there’s a violent turnaround in the coming days, February will mark the seventh consecutive month of flat-to-negative returns for treasuries This is an important development, with potentially far-reaching investment implications. Anatole and Louis discuss the outlook for yields, and the consequences for asset prices.
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Gavekal Research
Louis Gave
Feb 17th 2021
Optimization And Fragility
I have played rugby for most of my life, but in recent years I have seldom been injured. This is because I have grown heavier and slower. It is the guys who are fast and agile that tear knee ligaments and strain hamstrings. Why do I bring this up? Because investors need to ask whether the global economy is a slow but resistant lumbering beast of burden. Or is it a finely-tuned machine in danger of spinning off its axis? Gavekal has touched on...
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Gavekal Research
Tom Miller
Feb 17th 2021
China Versus The Anglosphere
Beijing’s ability to weaponize its global trade power is concentrating minds from Washington to Canberra. On Tuesday it was reported that China has proposed controls on the production and export of rare earths. This threat is the latest example of why reducing critical dependence on Chinese trade is now a strategic priority for many countries, in particular those in the Anglosphere.
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Gavekal Research
Nick Andrews
Feb 16th 2021
The Long Bond Bait And Switch
Ultra-long bond issuance is back in vogue in Europe. This month Spain has sold €5bn of 50-year bonds at a yield of 1.45%, while Belgium snapped out a 50-year issue at 0.69%. In January it was France, which sold a 50-year at 0.59%. Next up is likely to be Italy, which is expected to take advantage of the tightening in spreads following the appointment of Mario Draghi as prime minister (see Draghi’s Return) to come to market with a 50-year of its...
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Gavekal Research
Arthur Kroeber
Feb 11th 2021
Vaccines, Efficacy And Variants
Despite volumes of new information and the lightning creation of vaccines promising a path out of the pandemic, uncertainty remains. Almost daily we are bombarded with a mix of good news (the vaccines work really well!) and bad (new mutations resist vaccines!) that make it hard to know whether we should rejoice or despair. This note provides a framework for assessing these persistent uncertainties.
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Gavekal Research
Nick Andrews
Feb 10th 2021
A Canary Chirps
In late January, just as the GameStop squeeze was beginning to attract attention, Louis advised investors “to keep European banks on their screens.” As the canary in the coal mine of global financial markets, eurozone banks would signal broader trouble ahead if they continued to fall. But if they rebounded, it would be a sign the global inflation trade was back on (see Third Time The Charm?).
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Gavekal Research
Charles Gave, Didier Darcet, Louis Gave
Feb 05th 2021
Webinar: Uncharted Territory And Portfolio Construction
Charles has sought to codify his many investment rules into a rigorous portfolio construction framework, which includes identifying periods when returns stop being normally distributed and move into the "tails". Right now markets could be going through a phase change, and in this webinar, he explained why. He was joined by Didier, who who heads the quant team in Paris, and Louis.
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Gavekal Research
Anatole Kaletsky
Feb 04th 2021
Six Reasons To Stay Bullish
Is the recent speculative mania the beginning of the end of the post-2009 bull market in stocks? Or is it only the end of the beginning? Anatole argues that today’s speculation is reminiscent of the later stages of dot-com bubble, but he remains a confirmed bull on global equities. In this paper he offers six reasons why this is no contradiction.
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Gavekal Research
Anatole Kaletsky
Feb 02nd 2021
The Real Effect Of The Vaccine Row
The fiasco of Europe’s vaccination plan and Brussels’ retreat from its standoff with the UK and AstraZeneca have has caused the euro to weaken. While this reaction makes sense, the euro is, in fact, unlikely to fall much more against sterling, while the euro-dollar exchange rate will depend on how politicians behave in Washington, more than bureaucrats in Brussels.
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Gavekal Research
Nick Andrews, Cedric Gemehl
Feb 01st 2021
Strategy Monthly: Europe’s Troubled Trajectory
For the eurozone, it seems everything went wrong at the end of 2020—and things have only got worse at the beginning of 2021. Unfortunately, hopes for recovery are pinned on a vaccination program which has been late to start, slow to gather speed, and beset by problems. Nevertheless, despite this gloomy prognosis, there will still be opportunities for investors.
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Gavekal Research
Arthur Kroeber
Feb 01st 2021
Vaccine Slippage
It is looking likely that most countries will miss their Covid-19 vaccination targets for 2021. This creates a risk of slower than expected economic growth, especially in Europe which take half a year to emerge from its double-dip recession. Moreover, any activity dependent on international travel or large-scale gatherings will remain severely depressed until well into 2022.
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Gavekal Research
Charles Gave
Jan 28th 2021
What The VIX Spike May Mean
On Tuesday, Louis noted that among ill tidings for global equity markets was a rollover in European bank stocks. I want to build on this idea using portfolio construction work done by our Paris team and specifically the insight that when the VIX exceeds a critical threshold, markets globally tend to seize up.
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Gavekal Research
Nick Andrews
Jan 28th 2021
Video: The UK — At The Center Of The Maelstrom
It’s been an especially stormy start to the year for the United Kingdom, which finds itself at ground zero for the spread of a new and highly infectious strain of the coronavirus, even as it struggles to cope with withdrawal from the European Union’s single market and customs zone. Yet the UK’s financial markets are performing relatively respectably year-to-date as investors focus on the UK’s strong vaccination performance and look ahead to the...
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