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Gavekal Research
Nick Andrews
Mar 25th 2020
Video: What's Up With The Pound
Along with other second-tier currencies the British pound fell steeply between early and mid-March as investors dashed to get their hands on US dollar cash. That US dollar liquidity squeeze has now eased, and sterling has found a near-term bottom. But the outlook for the British currency remains clouded amid the UK’s coronavirus lockdown.
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Gavekal Research
Nick Andrews, Cedric Gemehl
Mar 25th 2020
Why Europe Can Survive The Storm
Economic activity indexes in Europe have collapsed to never-before-seen levels, yet markets have rallied as investors have become persuaded that policy responses are enough to avoid a full blown euro crisis from unfolding. Europe for once appears to be more decisive in managing a crisis situation than the US and it is possible it may manage a swifter pick-up once the public health situation stabilizes.
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Gavekal Research
Louis Gave
Mar 24th 2020
Four Baskets For Four Quadrants
As investors survey the shattered remnants of the past decade’s bull market, they can reasonably assume that the winners of the future will not be those who dominated in the last decade. Louis applies the Gavekal Four Quadrants framework to address the question of which asset class will emerge victorious in a new macro environment.
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Gavekal Research
Arthur Kroeber
Mar 23rd 2020
Lockdowns Loom; What’s The Exit Strategy?
We are heading into another difficult week. Covid-19 case numbers and fatalities outside China continue to grow rapidly. Social lockdowns are spreading to more US states and European countries. In the short run, fiscal support is on the way. Longer term, governments will have to start asking the uncomfortable question of when the economic pain outweighs the public health gain.
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Gavekal Research
Louis Gave
Mar 20th 2020
After The Perfect Storm
While most media attention is focused on the Covid-19 outbreak, the energy industry simultaneously faces a solvency crisis and a liquidity seizure of epic proportions is unfolding before us. In short, these events have created a perfect storm. What comes next depends on how this three factors driving markets play out
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Gavekal Research
Charles Gave
Mar 20th 2020
Money, Value And The Markets
Above all, economics is the study of why goods and services have value and why these values are constantly changing. This study is greatly complicated by the fact that there are two different sources of value. In Gavekal-speak, we call these “scarcity” value (think jewels) and “efficiency” value (think tools). So the key question becomes not only “why do things have value?” but also “why do the relative values of scarcity and efficiency change...
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Gavekal Research
Arthur Kroeber
Mar 19th 2020
A Bad Prognosis
The US and Europe are moving towards Hubei-style societal lockdowns. Arthur sifts through the latest epidemiological research, and concludes that while the worst case public health scenarios will be avoided, the coming lockdowns will be severe and last long enough to have an economic impact possibly more damaging than in China.
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Gavekal Research
Tom Holland
Mar 18th 2020
Fiscal Intubation
“This is not a time for ideology or orthodoxy,” said UK chancellor Rishi Sunak on Tuesday. Policymakers across Europe and in the US agree. They have now thrown orthodoxy out of the window in an all-out attempt to support economies hammered by Covid-19 countermeasures. In the US, the administration announced fiscal support worth as much as US$1.2trn, or 6% of GDP, complete with the immediate mail-out of a US$1,000 check to each and every member...
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Gavekal Research
Louis Gave
Mar 17th 2020
Solvency Crisis Or Liquidity Crisis?
Collapsing equity markets, rising bond yields, widening spreads, falling gold—in recent days, there have been few places to hide. When markets act so sick, it usually pays to take a deep breath (in a socially distant manner) and ponder whether we are facing a solvency crisis, or a liquidity crisis.
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Gavekal Research
Nick Andrews
Mar 17th 2020
Video: Time For A Fiscal Union?
The coronavirus pandemic, with its calls for a coordinated European Union-wide fiscal stimulus to counter the inevitable economic ill-effects, would appear to be the ideal opportunity to press forward with the next big step towards European integration by forging a eurozone fiscal union. But things are not so simple.
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Gavekal Research
Anatole Kaletsky
Mar 16th 2020
A Modest Proposal To Avert Economic Catastrophe
Contrary to initial expectations, the spread of the coronavirus around the world is not following the relatively benign trajectories experienced in China outside of Hubei, and in Korea, Singapore and the rest of Asia. Instead, across Europe—and likely in the US—the spread increasingly resembles the path it took in Hubei. This threatens both medical and economic disasters.
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Gavekal Research
Charles Gave
Mar 13th 2020
What I Know
In fraught times, Charles has decided to keep it simple and focus only on what he knows. In this piece, he considers changing relationships between oil prices, long-bond rates, US equities and the dollar and offers various approaches that could help investors survive the bear market.
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Gavekal Research
Tom Holland
Mar 13th 2020
The Conditions Needed For A Bottom
Financial markets are now in full-blown panic mode. For investors, the key question is: What will it take for markets to form a bottom, and when will this happen? No one can answer with any precision. However, it is possible to discern the broad conditions needed to allow the markets to find a bottom. We are nowhere near them yet.
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Gavekal Research
Cedric Gemehl, Nick Andrews
Mar 12th 2020
Europe In The Eye Of The Storm
After the US slapped a 30-day travel ban on visitors from Continental Europe the world’s three biggest economic areas are now effectively cut off from most human contact. As China sees its infection rate level off, the growth dynamic of this pandemic has shifted to Europe. Economic effects will depend on government responses.
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Gavekal Research
Arthur Kroeber
Mar 10th 2020
Six Degrees Of Uncertainty
World markets are in full-on panic mode, thanks to a cloud of unknowing that has settled over two topics of broad importance: the spread and economic impact of the coronavirus, and the outcome of the oil-price war between Saudi Arabia and Russia. The topics are related, and so we are grappling with the problem of pricing epidemic-related uncertainty.
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Gavekal Research
Louis Gave
Mar 10th 2020
What Goes Around Comes Around
Amid the Covid-19 outbreak and the Saudi-Russia oil price war, markets are essentially priced for a scenario in which the US government does little in response, leaving the policy reaction to the Federal Reserve. While this may be the most plausible scenario, other possible US government actions, at home and abroad, have different implications for markets.
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Gavekal Research
Tom Holland
Mar 09th 2020
A Hand Grenade In A Bloodbath
If you ever wondered what would happen if someone lobbed a hand grenade into a bloodbath, now you know. Markets were always going to be shaky on Monday, as it became increasingly clear that the US is set to see a sharp rise in recorded coronavirus cases. Then, on Friday Russia walked out of the Opec+ oil producers’ cartel, initiating an all-out price war in the oil market.
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Gavekal Research
Louis Gave
Mar 09th 2020
The Bond Blow-Off Top
The freakout in markets spurred by the coronavirus outbreak has seen US treasuries deliver one of their strongest two-week performances in the post-Cold War era. Louis argues that these moves leave investors with a stark choice to make: either we are seeing a “blow-off top”, or alternatively the world is facing an impending economic ice age.
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Gavekal Research
Louis Gave, Andrew Batson, Cedric Gemehl
Mar 06th 2020
Audio & Transcript — Gavekal Research Call March 2020
In Thursday’s conference call, Louis-Vincent Gave, Andrew Batson and Cedric Gemehl discussed the policy and market reactions to the Covid-19 outbreak.
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Gavekal Research
Louis Gave
Mar 06th 2020
The Unfolding Rotation
Last Friday, the markets rallied hard into the close as investors anticipated a coordinated policy move over the weekend. With policy responses in the rear view mirror, this weekend will likely prove different. Markets will continue to be choppy in the immediate future. Even so, amid all the volatility, some interesting developments are emerging.
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