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Gavekal Research
Charles Gave
Jan 12th 2021
The UK After Brexit
Four and a half years after the vote, Britain is properly out of the European Union and moving into a new era. It will surely be a freer nation, says Charles, but in this piece he asks: will it be a richer one? Spoiler alert, he thinks the upshot will be the City of London emerging as the world’s über financial capital.
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Gavekal Research
Louis Gave
Mar 15th 2021
When Currencies Misbehave
In recent days, investors have had to absorb a series of troubling headlines from Europe, yet news that should be either bearish for the euro or bullish for the dollar failed to keep the euro from gaining last week. Meanwhile, the yen continues to grind lower. Why is that, and what does the inability of the dollar to rally tell us about the future?
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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
Nick Andrews
Nov 13th 2020
Biden And Brexit
Despite the UK enduring another Covid lockdown and facing a key Brexit deadline on November 15, its political class spent this week obsessing over a personality struggle inside the prime minister’s office. The real significance of a Brexit-supporting aide to Boris Johnson quitting his post may be that the UK is about to accept a trade deal will leave it as an effective satellite of the European Union. After all, hopes for a plucky Britain going...
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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
Louis Gave
Jan 27th 2021
Robinhood Versus The Sheriff Of Nottingham
A large US hedge fund has received a reported US$2.75bn liquidity injection from Citadel and Point72 after it became subject to apparent short-squeeze attacks organized in internet chat rooms. In this piece, Louis asks why the regulators seem to be standing back from such episodes and wonders where markets are going if even big players can easily fall prey to "flash mobs".
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Gavekal Research
Cedric Gemehl
Jan 18th 2021
Europe’s New Political Cycle
After a six-month respite, European political risk is back on the radar screen. Last Wednesday, ministers from the Italia Viva of former prime minister Matteo Renzi walked out of Italy’s cabinet in a dispute over how EU Covid recovery funds should be spent, leaving the coalition government of prime minister Giuseppe Conte scrabbling to survive. On Friday, the cabinet of Dutch prime minister Mark Rutte resigned over a scandal involving the over-...
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Gavekal Research
Anatole Kaletsky
Jan 22nd 2021
Risks In The Biden Era
In December, Anatole outlined 10 disparate risks that could derail the bull market in 2021. That was before the Democrats won full control of the US government, paving the way for approval of Joe Biden’s new super-size stimulus package. In light of the developments over the last month, Anatole reassesses his 10 risks.
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Gavekal Research
Charles Gave
Jan 20th 2021
The Logos, Idiotes And Demagogues
Charles revisits the idea of the Greek "logos", "idiotes", demagogues and citizens, and how the Greeks believed that those who controlled the logos—the language used to describe the world—ipso facto controlled the political system. Problems arise when a new, competing logos started to emerge.
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Gavekal Research
Anatole Kaletsky
Dec 15th 2020
Deal Or No Deal: Should We Really Care?
As the fifth season of the Brexit soap opera lumbers towards a predictably messy climax, the prospect of a sixth season will probably be enough to discourage international investors from considering British assets and sterling for another year or more. And rightly so. British assets should continue to be avoided because sterling at its present level represents a case of “heads I lose, tails I don’t win”.
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Gavekal Research
Nick Andrews, Cedric Gemehl
Jan 06th 2021
Europe’s New Lockdowns
On Tuesday, Germany followed the United Kingdom by imposing fresh restrictions on activity and movement that in effect amount to a new lockdown comparable—and in some areas even stricter—than the anti-coronavirus shutdown imposed over the second quarter of last year. With infection rates across Europe stubbornly high despite the controls already in place, and with fears mounting about the spread of new viral strains, the risk is high that other...
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Gavekal Research
Anatole Kaletsky
Dec 22nd 2020
Goldilocks And The 10 Bears Of 2021
In recent years Anatole has written a series of articles describing 10 key risks for investors. He readily accepts that this year’s exercise was rendered redundant by the emergence of Covid-19 in January. Next year, however, he believes that a greater range of factors could weigh on markets and in this piece assesses them one by one.
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Gavekal Research
Nick Andrews
Nov 19th 2020
Video: EU Summit Tensions
European Union leaders are today sitting down for a high stakes summit. Poland and Hungary are threatening to scupper the EU’s budget and grandly-announced Recovery Fund if they are further penalized for becoming authoritarian and eroding the rule of law. The pandemic continues to demand leaders’ attention and Brexit lurks as the ugly beast in the background.
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Gavekal Research
Louis Gave
Dec 15th 2020
The 10 Important Changes Of The Past Year
Two years ago, 10-year treasury yields were falling (and trading below their 200-day moving average), oil prices were falling (and also below trend) and the US dollar was rising (and trading above its trend level). Today, the situation has reversed for all of these anchor prices in the global system. This profound change can be explained with reference to 10 tectonic shifts in the global economy.
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Gavekal Research
Nick Andrews
Nov 27th 2020
Yield Curves, The Euro And The Dollar
The balance of probability points towards a steeper US yield curve over the short to medium term as US short rates remain pinned at zero and long-dated US treasury yields push higher. One might think that higher US long rates should attract capital inflows, but what matters is the relative shift in gradients, notably between the US dollar and euro yield curves.
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Gavekal Research
Charles Gave
Nov 20th 2020
Dear Cedric And Nick, Allow Me To Disagree...
...in Thursday’s Daily you argued that Hungary and Poland’s effort to veto yet another power grab by Brussels represents a mere hiccup in the march towards a European nation state. You can add Slovenia into that basket of recalcitrants. I believe that these three countries are posing an essential question: where does the legitimacy of a government come from?
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Gavekal Research
Cedric Gemehl, Nick Andrews, Anatole Kaletsky
Oct 01st 2020
Webinar: Europe In The Second Wave
Yesterday Cedric Gemehl, Nick Andrews and Anatole Kaletsky joined Tom Holland to discuss what's going on in Europe. Topics ranged from how the economy is fairing in the second wave of the outbreak, what that means for asset prices, and also where Brexit fits into all this.
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Gavekal Research
Cedric Gemehl, Nick Andrews
Nov 13th 2020
After Consolidation, A Further Rerating
Given the violence of Monday’s rotation-driven rally on soaring hopes of an early coronavirus vaccine rollout, it is small surprise that equity markets are now giving back some of those gains. Expectations are still high that developed economies will be able to begin vaccination programs as early as the first quarter of next year. But the intervening days have given investors a keener appreciation of the challenges involved. Meanwhile, the...
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Gavekal Research
Anatole Kaletsky
Oct 22nd 2020
Crisis Averted, Hard Times Ahead
This week, Boris Johnson got what he needed politically: a bromide from Brussels that will allow him to camouflage the compromises he must make to secure a trade deal with the EU before the year’s end. But it will be a minimalist deal that will leave the UK’s service sector out in the cold, increasingly shut out of the EU’s markets.
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Gavekal Research
Anatole Kaletsky
Sep 14th 2020
A British Mad Man
The world’s worst performing major currency, stock market and economy have all been located in Britain since Boris Johnson was reelected last December. This is not surprising. With hindsight, his decision to outlaw any possible extension of the Brexit transition period as soon as he was reelected fully justified the switch from bullish to bearish on sterling assets that I recommended immediately after this announcement.
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Gavekal Research
Anatole Kaletsky
Dec 18th 2019
Boris's Bearish Brexit
We now know why markets reacted so nervously to Boris Johnson’s election landslide last Thursday. The lack of follow-through after that evening’s exit poll and the retreat when trading resumed on Friday morning was suspicious. But there were no clear explanations until Monday evening, when everything became clear. At 10.30pm Downing Street restated Johnson’s promise to finish negotiating a new UK-European Union trade deal within 12 months and...
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Gavekal Research
Nick Andrews
Sep 30th 2020
The UK’s Savings Problem
The British government's new job support scheme to take effect next month offers much less generous subsidies, and job losses are inevitable. Heightened job insecurity will mean increased precautionary savings, compounding the downturn in consumption. But the government faces institutional constraints on how much it is willing and able to borrow to plug the gap.
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Gavekal Research
Anatole Kaletsky, Cedric Gemehl
Oct 18th 2019
Europe's Brexit Booster
Boris Johnson has secured a revised Brexit deal and the stage is set for a key Saturday vote in the House of Commons. On balance, there is a 70% chance of the vote passing as Labour leader Jeremy Corbyn seems unable to control his Brexit-supporting rebels, while Johnson looks to have persuaded his Brexiteer wing that it could be now or never.
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Gavekal Research
Anatole Kaletsky
Oct 14th 2019
Sizing Up The Brexit Risks
The pound surged after Boris Johnson and Irish Prime Minister Leo Varadkar achieved a negotiating breakthrough on Thursday over arrangements for the Irish border. The question is: What next? Anatole argues that while these moves still point to a multi-pronged set of outcomes, at least there is now a measurable set of permutations.
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Gavekal Research
Anatole Kaletsky
Mar 13th 2019
The Brexit Impasse
Political commentators and European leaders are bewailing Britain’s descent into ungovernability after the UK parliament again rejected the new and supposedly improved Brexit deal. But markets reacted calmly. In fact, for investors, the seemingly chaotic Brexit saga is unfolding roughly along the bullish lines suggested here since early January.
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Gavekal Research
Charles Gave
Jan 17th 2019
Musings On Brexit
With the UK’s elite intent on frustrating the democratically-expressed will of the British people to quit the EU, the lesson for the rest of the continent is that there can be no legal or peaceful exit from the technocratic super-state. As Charles argues here, this increases the probability of disorderly exits in the future, and therefore greatly heightens European political risk.
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Gavekal Research
Anatole Kaletsky
Nov 23rd 2017
Fake Brexit? Or No Brexit?
The British economy since the Brexit referendum is often likened to the suicide jumper who leaps off a 20-storey building, shouting “so far, so good” as he falls past the 10th floor. This comparison is unfair to suicides. The real message about economic performance from the government’s annual budget statement yesterday was “so far, so bad”. While a minority of economists and investors—plus a large majority of Conservative politicians—share...
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Gavekal Research
Louis Gave
Sep 15th 2020
Death, Taxes And Covid-19: Things That Cannot Be Avoided
Six months after the first western countries went into lockdown, data suggest that unless imposed very early on, lockdowns did little to avert excess deaths. With weekly death rates in many western countries now running close to decade lows, Louis argues that this leaves politicians in an awkward spot, with one of three possible policy paths.
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Gavekal Research
Louis Gave
Dec 13th 2019
Is Brexit The Midwife To A New Investment Environment?
With the confirmation of a conservative victory in the UK election, and a long awaited trade deal between the US and China, the pieces are falling into place for a weakening of the US dollar and a continuation of the global reflation trade. Already, both sterling and the euro have strengthened in response to the reports of a Tory victory.
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Gavekal Research
Charles Gave
Jul 16th 2019
Brexit And The UK Trade Deficit
The UK has long run a large goods trade deficit with its main trading partners. However, Charles argues that this ”deficit” should really be seen as two different deficits; one is with the world excluding the eurozone, and the other with the eurozone itself. Splitting them makes sense as they have different origins and react to different forces.
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Gavekal Research
Charles Gave
Apr 08th 2019
And The Brexit Winner Is...
With the Brexit deadline in the rear view mirror, Britain's leave voters have are left with the impression that they have been taken for a ride by the UK’s political class, and in particular by their representatives in parliament. So who is the real sovereign power in the UK? The people or parliament? Charles sees three possible outcomes.
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Gavekal Research
Anatole Kaletsky
May 22nd 2020
Boris Will Pile Pelion On Ossa
No country has matched Britain’s dismal combination of currency and equity losses so far this year. Making matters worse for Britain than other DMs is Boris Johnson's refusal to extend the post-Brexit transition period beyond December, precisely the time when the Covid-19 recession might otherwise be expected to start lifting.
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Gavekal Dragonomics
Thomas Gatley
Aug 06th 2020
Leading The Way In Export Recovery
Chinese exports have outperformed expectations due to booming sales of goods related to Covid-19 and Chinese manufacturers staying open when their international counterparts were forced to suspend production. In this report, Thomas explains why China's export growth will continue to flatten in H2 as global trade catches up.
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Gavekal Research
Nick Andrews
Jul 10th 2020
Buy Europe, Sell The UK
In past crises the UK has emerged more quickly than the eurozone. In 2008-09, it restructured its banks, slashed interest rates and embraced quantitative easing before European policymakers had eaten breakfast. As a result, UK domestically-focused stocks outperformed those in the eurozone. Don’t count on a rerun in the aftermath of the Covid-19 crisis.
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Gavekal Research
Charles Gave
Jul 30th 2018
No Exit From Brexit
On Friday, Anatole set out his view that a second Brexit referendum is likely, and that in all probability it will reverse the original 2016 vote. Exercising his right to reply, today Charles explains why no second referendum is possible, why a no-deal, hard Brexit is increasingly likely, and why this will present a great buying opportunity in UK assets.
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Gavekal Research
Anatole Kaletsky
Jul 27th 2018
The Arithmetic Of Brexit
If a country votes to make two plus two equal five, that “democratic decision” will eventually be overwritten by the rules of arithmetic. Anatole reckons this is what’s playing out in Britain, as Theresa May’s government struggles to get a parliamentary majority for any realistic Brexit plan. If the situation persists, the only alternative will be another referendum—only this time the choice would be between remain and a far less attractive, but...
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Gavekal Research
Anatole Kaletsky
Dec 11th 2018
The Brexit Game Of Chicken
The Brexit roller coaster seemed to come off the rails on Monday with Theresa May’s effort to prevent parliament voting on what looked like her doomed plan to leave the European Union. May’s decision, which had been denied by her most trusted senior ministers right up to the moment it was leaked to the BBC, initially looked like a typical case of the can being kicked down the road. Yet by the time she had finished her parliamentary statement,...
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Gavekal Research
Anatole Kaletsky
Oct 22nd 2018
How The Brexit Stalemate Breaks
As the Brexit negotiations enter their endgame, a stalemate has become the most likely outcome. Theresa May’s Conservative Party is now in open rebellion against her leadership, with Britain’s weekend press reporting that her government is just 72 hours from collapse. And a “No Deal” Brexit “car crash” is now described as a 50-50 probability by many politicians and commentators in both Britain and Europe. Yet the pound has maintained its value...
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Gavekal Research
Nick Andrews
Jul 16th 2020
From Temporary To Permanent
“Nothing,” Milton Friedman famously declared, “is so permanent as a temporary government program.” He was right, which is one reason Wednesday saw the euro climb to its highest against the US dollar since the first days of the international Covid outbreak in early March, while 10-year Italian government bond yields fell to their lowest. Investors are betting that the European Union’s €750bn “Next Generation EU,” proposed as a temporary facility...
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Gavekal Research
Tom Miller
Jul 15th 2020
Pick Your Side
The British government’s decision to block Huawei from the UK’s 5G mobile network, confirmed yesterday, is further evidence that the post-Covid world is splitting into two opposing security blocs. International distrust of China is hardening along ideological lines, spurring liberal nations to prioritize national security over economic growth.
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Gavekal Research
Anatole Kaletsky
Jul 09th 2018
Time To Buy Brexit Britain
“Will the Brexit agony never end?” Anatole asked in mid-June. It now seems that the agony may end much sooner than expected. Following last Friday’s decision by prime minister Theresa May to blur all her “red lines” in negotiations with the EU, and—paradoxically—the subsequent resignation of hard-Brexiteer cabinet minister David Davis, the time to start buying cheap British assets may have come.
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Gavekal Research
Cedric Gemehl
Jul 08th 2020
Germany's Moment
Could this be Germany’s moment? The prospect of a disgruntled Italy walking away from the European Union spurred a German move towards new burden-sharing arrangements, but the conditions have been brewing within Germany for a few years as it became clear that its old export-led development model was cooked. Such existential fears are driving a newly creative approach to Europe at a time when the EU’s biggest economy may be set to benefit from...
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Gavekal Research
Anatole Kaletsky
Dec 02nd 2019
Learn To Stop Worrying And Love The Pound
Sometimes, markets just get things wrong. Since early January investors have been panicking about a “no deal” Brexit, and I have been urging clients to buy sterling. Not because I became less gloomy about the damage that will be done to Britain by any form of Brexit, but because a “no deal” rupture is the one version of Brexit that can be confidently ruled out.
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Gavekal Research
Anatole Kaletsky
Mar 26th 2019
The Hard Logic Of A Long Brexit Extension
By removing the hard deadline for Brexit negotiations the EU has avoided the disaster of a 2008-style sudden stop in business with its second largest trading partner. This decision reinforces the bullish momentum for sterling, which remains undervalued especially against the US dollar. Ending the risk of a “No Deal” Brexit should also improve the dismal economic outlook and help stabilize political conditions in Europe as a whole.
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Gavekal Research
Charles Gave
Sep 25th 2017
May’s Misguided Brexit Speech
Listening to Theresa May’s speech last week in Florence, Charles thought the British prime minister sounded like an unfaithful wife attempting to achieve an amicable separation from the husband she cuckolded. Her approach is mistaken. May’s interlocutors in Brussels cannot be mollified with promises of continued affection. They are ideologues, and they are out to punish the UK for daring to challenge their ideology.
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Gavekal Research
Anatole Kaletsky
Sep 24th 2018
No Deal Could Mean No Brexit
After European Union leaders rejected Theresa May’s Chequers deal, the UK government is left with only two alternatives, argues Anatole. If Parliament in November is confronted with No Deal or No Brexit, the most likely outcome would be a new referendum and a vote to remain. The result will be a massive appreciation of sterling and a rally in many UK domestic assets.
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Gavekal Research
Charles Gave
Jun 13th 2016
Fear Not Brexit
The UK political class is all in a flutter as the latest European Union referendum polls show an apparent rising tide of support for “Leave”. Having orchestrated the great and good into warning of catastrophe should a Brexit materialize, it would seem that “project fear” is not cutting through. I tend to have strong political convictions and perhaps for this reason I have a lousy record of guesstimating election outcomes. Since the UK referendum...
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Gavekal Research
Anatole Kaletsky
Mar 11th 2020
Another View Of The Bond Bubble
How should we think about the unstoppable journey of all OECD bond yields towards zero, including 10-year, 50-year and even 100-year maturities from governments not noted for multi-generational predictability, such as Italy, Greece, Austria and post-Brexit Britain? On Monday Louis offered two explanations. Today, Anatole presents a third.
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Gavekal Research
Nick Andrews
Dec 06th 2015
Video: On Brexit
Nick Andrews discusses the possibility of a "Brexit"
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Gavekal Research
Nick Andrews
Jun 16th 2020
A Dismal Best Case
The crowds that Monday swarmed British shops, allowed to open for the first time in 12 weeks, at first sight bodes well for a V-shaped recovery. Yet despite plentiful accumulated savings and considerable pent-up demand, the UK’s consumption-driven economy faces formidable post-lockdown headwinds, with consequences for equities and sterling.
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Gavekal Research
Charles Gave
Dec 19th 2019
Nonsense Anatole, Boris Deserves Three Cheers
In 2017, as the Brexit negotiations between London and Brussels got going in earnest, I wrote a paper explaining why the European Commission’s officials and their counterparts across the continent were going to do everything in their power to make the United Kingdom’s departure from the European Union as difficult as they possibly could (see May’s Misguided Brexit Speech). And over the next two years, they did just that.
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Gavekal Research
Tom Miller
Jun 23rd 2020
A Friendlier Supply Chain Required
Covid-19 has revealed reliance on Chinese supply chains as a serious national security risk. But shifting manufacturing of vital goods to other parts will be no easy task, especially when alternatives like Vietnam remain so dependent on imports from China themselves. Meanwhile, the pandemic has made other potential locations—notably India—less attractive.
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Gavekal Research
Anatole Kaletsky
Sep 20th 2017
Sterling And The Brexit Soup
Anyone who doubts that interest rate expectations are the main driving force of currency movements, got a wake-up call last week, when sterling surged from US$1.32 to US$1.36 in response to the Bank of England’s bluntly hawkish statement that “there may need to be some [upward] adjustment of interest rates in the coming months”. Nevertheless, I remain a denier.
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Gavekal Research
Louis Gave
Jun 29th 2020
Towards More Of The Same?
Investors looking at the impressive rally in global equities since mid-March have been forced to come to one of three conclusions: (i) the Covid-19-induced halt to our economies will soon fade away like a bad dream, (ii) equity investors are crazy, or (iii) a growing number of investors think the cash they hold is bound to become worthless.
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Gavekal Research
Anatole Kaletsky
Aug 23rd 2016
A Brexit-Induced Recantation
Exactly two months have now passed since the Brexit referendum. It is now an appropriate time to review what has happened, and what hasn’t, since June 23. As a quintessential member of the elite that was angrily repudiated by a majority of British voters, this referendum was a profound emotional trauma. Therefore, my initial reaction turned out to be completely wrong.
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Gavekal Research
Charles Gave
Aug 04th 2017
The Brexit Talks Don’t Matter
The details of the Brexit talks between the British government and Brussels are far less important, argues Charles in this paper, than the blow Britain’s referendum vote has dealt to the technocratic principles which underpin the European Union’s power structure. The pillars of the temple are crumbling, and sooner or later the edifice must fall.
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Gavekal Research
Nick Andrews
Jan 31st 2020
Britain’s Soggy Prospects
Despite a worsening coronavirus situation and worries that a Brexit bounce could be short-lived, the Bank of England defied the expectations of many by not cutting interest rates. The UK’s weak medium term growth outlook and difficult impending trade talks with the EU means that policy will remain dovish and sterling’s upside prospects are likely capped.
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Gavekal Research
Anatole Kaletsky
Jun 12th 2017
May Day For Hard Brexit
After the Conservative government of UK prime minister Theresa May lost its parliamentary majority in last week's general election, Anatole argues that the "hard Brexit" strategy formerly pursued by May no longer looks politically viable. That means a Norwegian-style soft Brexit is more likely, which makes sterling assets look relatively attractive.
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Gavekal Research
Nick Andrews
May 15th 2017
Video: How Brexit May Work
The consensus is for a tortuous few years of negotiations between the UK and the European Union over the terms of Brexit and any subsequent free trade agreement. Following up on today’s Daily, Nick argues in this video interview that a deal may be easier than most people think. Moreover, the template for an FTA may already be in place.
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Gavekal Research
Charles Gave
Nov 14th 2017
Brexit, The Pound And UK Stocks
When it comes to Brexit, I suspect that one of the few things about which Anatole and I agree is that the negotiations between London and Brussels have so far bordered on the farcical, and that the internal squabbling within the UK’s governing Conservative Party has hardly been conducive to raising the tone. Beyond that we part company. Anatole believes the Brexit talks are approaching a critical juncture for investors in UK assets—a view he...
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Gavekal Research
Anatole Kaletsky
Jan 18th 2017
Hard Brexit Means Soft Sterling
Since the June referendum the only real choice for Britain has been Hard Brexit or No Brexit. The No Brexit option disappeared as soon as Theresa May became prime minister under the slogan “Brexit means Brexit”. Barring some deus ex machina that swept May out of power, that left only one possibility: a rock-hard Brexit.
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Gavekal Research
Louis Gave
Apr 30th 2020
The Queen’s Head Remains The Better Long-Term Bet
In hard times, a nation often feeds off the blood spilled by its martyrs and is re-energized. Undeniably, we now face an unprecedented crisis that is producing heroes and martyrs, especially among healthcare workers who have acted with devotion and honor. But has this created national unity?
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Gavekal Research
Anatole Kaletsky, Nick Andrews
Nov 04th 2016
Heaping Uncertainty On Brexit Doubt
Markets and media were shocked by yesterday’s High Court judgement that UK prime minister Theresa May must seek parliamentary approval before pursuing her Brexit strategy. But for London’s legal community the decision was not unexpected. Many senior lawyers had predicted that the ruling would go against the government, if only because its case was so poorly presented by the Attorney General, who was forced for political reasons to concede the...
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Gavekal Research
Anatole Kaletsky
Jul 28th 2017
The Battle Of Brexit Is Over
Judging by statements made by two of the most fervent Europhobes in Theresa May’s cabinet, Soft Brexit has emerged the victor over Hard Brexit. While this means the UK's exit will be postponed during a transition period, and possibly beyond, Anatole argues this comes with its own drawbacks and risks. Things are likely to get worse before they get better.
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Gavekal Research
Cedric Gemehl
Sep 19th 2016
The EU’s Post-Brexit Paralysis
It was billed as a show of post-Brexit unity of purpose. Without the fractious Brits to obstruct progress, leaders of the remaining 27 members of the European Union would come together to affirm their unshaken commitment to the goal of “ever-closer union”. Unsurprisingly, the reality of the weekend’s Bratislava gathering failed to live up to its billing. Without the presence of the habitually adversarial British to unite them in antagonism, the...
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Gavekal Research
Louis Gave
May 26th 2020
Hong Kong Q&A (Part III)
China has responded to prolonged political dissent in Hong Kong by proposing a tough anti-subversion law that threatens the city’s role as an international financial center. It remains unclear how this will be imposed on a common law-based legal system with a polar opposite jurisprudence to that on the Mainland. Louis tries to answer some of these questions.
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Gavekal Research
Anatole Kaletsky
Jun 21st 2016
Brexit Tail Wags The Dog
If anyone still doubted the claim expressed here on May 25 that politics is now driving global financial markets far more than economics (see The Brexit Vote As Harbinger Of A Populist Age, Or Not), those doubts should have been dispelled by Monday’s trading. From the moment that currency trading started in the New Zealand morning, through the Nikkei and Hang Seng openings in Asia, to the main forex business in London and finally the stock...
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Gavekal Research
Anatole Kaletsky
Oct 03rd 2016
A Hardening Brexit And Softening Sterling
The second phase of the post-Brexit sterling devaluation probably started this weekend. Theressca May's announcement of March as the deadline for Britain to launch the “Article 50 process” of formally withdrawing from European Union achieved its immediate objective of averting a battle between the Hard Brexit and Soft Brexit factions at this week’s Conservative Party Conference. Unfortunately, May’s party management success is likely to...
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Gavekal Research
Charles Gave
Apr 15th 2020
The Revenge Of The Little Grey Men
There is a strange contradiction in most developed economic systems as they have been driven by freely assembling entrepreneurs who operate on the basis of money, which is the ultimate tool of state coercion. Charles is worried that the private, risk-taking element of our economies may be fully extinguished by responses to the Covid-19 crisis.
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Gavekal Research
Anatole Kaletsky
Jul 18th 2016
Why Brexit Still May Not Happen
With a newly installed British prime minister gravely intoning that “Brexit means Brexit” and having just appointed a cabal of Brexiters to run the UK’s exit strategy from the European Union, it would look to be game-over. Anatole would beg to differ and explains why there remains a strong likelihood that the UK government will change tack in the face of different circumstances than prevailed at the time of last month’s referendum.
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Gavekal Research
Anatole Kaletsky
May 03rd 2017
The Flip Side Of A Hard Brexit
The pound has rallied strongly since Theresa May announced an early UK general election on April 18 and may soon break through US$1.30, opening the way for a rise back to levels not seen since last summer. This move has mostly been driven by politics in France, rather than Britain, but this may be about to change.
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Gavekal Research
Jul 01st 2016
Conference Call: Investment Scenarios After Brexit
Gavekal partners Anatole Kaletsky, Charles Gave and Louis-Vincent Gave detail their investment scenarios following last week’s Brexit vote.
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Gavekal Research
Tan Kai Xian
Jun 16th 2016
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...
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Gavekal Research
Will Denyer, Nick Andrews
Apr 06th 2020
The Atlantic Divide
Second order economic effects from the Covid-19 outbreak are ripping through industrialized economies, with soaring unemployment, shuttered industries and a fall in corporate profits. While China has eschewed large-scale government support, Europe and the US have adopted massive fiscal and monetary responses. These Western initiatives do, however, differ in key respects and when lockdowns finally end, one or other approach will likely have...
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Gavekal Research
Nick Andrews
Mar 28th 2017
Yes To Brexit, No To Rate Hikes
Tomorrow should see the UK initiate its departure from the European Union by triggering Article 50 and starting the clock on a two year exit negotiation. Yet far from anxiously counting down the days, investors have spent the last week bidding sterling higher, largely on the belief that a robust UK economy may soon spur tighter monetary policy. That is probably a bullish interpretation too far, and the pound’s next significant move will probably...
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Gavekal Research
Anatole Kaletsky, Will Denyer, Louis Gave
Sep 05th 2019
Audio & Transcript — Gavekal Research Call September 2019
In yesterday’s conference call, Anatole Kaletsky, Will Denyer and Louis-Vincent Gave outlined reasons for recent dramatic moves in bond markets and made arguments for what comes next. Anatole also addressed Brexit developments and Louis discussed the situation in Hong Kong.
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Gavekal Research
Nick Andrews
Feb 12th 2019
The UK's Limits To Growth
For the British economy, it has been a case of “mustn’t grumble” since the 2016 Brexit referendum. However, the effect of a weak fourth quarter GDP report was to debunk any illusion that Brexit uncertainty has been weathered. Such a reckoning was inevitable with or without Brexit, as the UK has in effect hit limits to its growth.
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Gavekal Research
Anatole Kaletsky
Mar 30th 2020
Too Early To Buy Equities, But Time To Sell Dollars
After the biggest weekly gain in the Dow and with the US government having just approved the biggest-ever fiscal stimulus, how should investors react? While unrepentantly bullish in the long term, Anatole still believes that it is too early to buy equities. But for two other asset classes conditions do seem to be more propitious to call a bottom.
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Gavekal Research
Anatole Kaletsky
Feb 22nd 2016
Why Brexit Won't Happen
Among the multiple existential challenges facing the European Union this year—refugees, populist politics, German-inspired austerity, government bankruptcy in Greece and perhaps Portugal—one crisis is well on its way to resolution. Britain will not vote to leave the EU.
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Gavekal Research
Anatole Kaletsky
Dec 13th 2016
Between A Rock And A Hard Brexit
Sterling has gained almost 7% against the euro this month, partly because of comments from British ministers hinting at a softer version of Brexit than the sharp and rapid break implied by Theresa May’s early speeches. For example, sterling’s rebound through US$1.25 and from £0.90 to the euro was directly caused by a parliamentary answer from David Davis, the minister in charge of Brexit, suggesting that Britain might continue to make...
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Gavekal Research
Nick Andrews
Dec 10th 2015
What A Brexit Means For Markets
This week David Cameron has been on the road in Eastern Europe arguing that British voters will vote for “Brexit” unless it gets a new deal with the European Union. As polls suggest that Britons are pretty much split down the middle on the issue, the prospect of the UK bidding adieu to Brussels is getting more real by the day. Indeed, with the negotiation expected to reach a head early next year, the question of a British exit is likely to...
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Gavekal Research
Anatole Kaletsky
Dec 15th 2017
No Full English Brexit In The EU’s Roach Motel
Full English Brexit is off the menu. When Theresa May rushed into the Café Berlaymont at 6:00am last Friday, all that was left on the menu was an over-priced double espresso with a side of Irish bacon. When she returned to Brussels yesterday, after losing a crucial parliamentary vote on her Brexit policy, the only new item on the menu was a large slice of humble pie.
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Gavekal Research
Anatole Kaletsky
Oct 08th 2019
To Impeachment And Beyond
What will determine whether the global economic expansion and equity bull market will continue in the year ahead? The political upheavals which dominated in the past three years, such as the trade war, Iran oil sanctions and Brexit, have seemed to subside or become priced in. But new political noise is being generated by the threatened impeachment of President Donald Trump.
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Gavekal Research
Anatole Kaletsky
Apr 11th 2019
Brextension And The Gilt-Edged Opportunity
The latest act of the Brexit tragicomedy has played as expected—and market reactions should follow, as the risk premium on sterling and UK assets is substantially reduced. The six and a half months remaining between now and the new Brexit deadline is plenty of time for Britain to decide between the three possible outcomes I have repeatedly discussed.
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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
Charles Gave
Mar 20th 2017
The UK Nine Months After The Brexit Vote
With Theresa May’s government set to begin the formal exit process from the European Union, Charles reckons now is the right time to step back and see just how the UK economy has fared in the nine months since that fateful referendum. In this concise chartbook, he tours Britain’s economic and market landscape and finds that value is to be had across multiple asset classes.
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Gavekal Research
Louis Gave
Mar 04th 2020
Exponential Optimization
The bull market of the last few years has been built on the twin assumptions that globalization will continue, and that interest rates will remain low for years to come. These convictions have propelled an exponential wave of optimization. As the coronavirus calls key assumptions into question, the worry is that the giant bubble which sits at the heart of the system may be about to burst.
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Gavekal Research
Anatole Kaletsky
Sep 02nd 2019
‘Do Or Die’ Boris Is Bullish For Sterling
Considering the political chaos that will descend this week on the UK, it may seem surprising that the pound has bounced back to its trade-weighted level just before Boris Johnson became prime minister. Or maybe it is not too surprising—if a “No Deal Brexit” is the only possible scenario that would justify a further weakening of sterling and other UK assets.
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Gavekal Research
Anatole Kaletsky
Feb 14th 2020
The Downing Street Putsch
Ever since turning negative on sterling and the UK economy when Boris Johnson dropped his post-election bombshell announcing a new “No Deal” deadline of December 2020, I have been waiting for a chance to double-down on this bearish position. On Thursday, Johnson provided such an opportunity to extend short positions in sterling.
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Gavekal Research
Nick Andrews
May 15th 2017
Why A Brexit Deal May Not Be So Hard
European Union membership entails four core freedoms—goods, services, capital and people. To keep the first three, but not the last one as the UK wants has been dubbed “having one’s cake and eating it”. The UK also wants to be exempt from the European Court of Justice’s control and to exit the EU customs union, opening the way for free trade agreements to be made elsewhere. The assumption is that these demands will ensure the UK ends up with a “...
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Gavekal Research
Nick Andrews
Feb 06th 2020
Just When Things Were Looking Up
It seems the European economy can’t catch a break. After a grim year in 2019, especially for the manufacturing sector, the old continent entered 2020 with reasons for cautious optimism. Survey-based indexes of business optimism appeared to bottom out late last year. Then the Wuhan coronavirus hit China.
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Gavekal Research
Anatole Kaletsky, Charles Gave, Nick Andrews, Cedric Gemehl, Neil Newman, Joyce Poon, Udith Sikand
Jul 01st 2016
The Gavekal Monthly: Life After The Brexit Vote
The world is now a considerably more uncertain place than a month ago. Following the UK’s referendum vote in favor of Brexit, a near-term recession in the UK is more likely than not, the European Union faces the possibility of a renewed economic slowdown, and investors find themselves forced to reassess the probability that Donald Trump will win November’s US presidential election. In this edition of the Gavekal Monthly, our analysts set out to...
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Gavekal Research
Nick Andrews
Jul 31st 2019
Sterling’s Information Void
Since Boris Johnson became prime minister, the UK government’s promise of a “do or die” Brexit has caused sterling to slump -2.9% against the US dollar to about US$1.21. While the chances of Britain actually leaving the EU without a deal remain small, this outcome will remain unclear for some time. That presents risks, but great opportunities for those dealing in sterling.
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Gavekal Research
Anatole Kaletsky
Apr 25th 2016
Time To Bet On Sterling And Against Brexit
If Britain votes to remain a member of the European Union, the moment when the tide turned against Brexit will probably be remembered as Barack Obama’s London press conference on Friday. With a single phrase Obama demolished the Brexiteers’ most powerful economic argument when he noted, with a friendly but remorseless grin, that if Britain chose to detach itself from Europe it would wait “at the back of the queue” for any special US trade deal....
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Gavekal Research
Nick Andrews
Feb 13th 2020
Paying Your Way In The UK
A triumphant Boris Johnson is set on consolidating a new electoral coalition through big infrastructure projects that help “level up” forgotten regions, but he faces a weak economy and tough negotiations with the European Union over Britain's trading relationship. The worry is that investors begin to balk at funding a gaping current account deficit.
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Gavekal Research
Nick Andrews
Aug 01st 2019
Video: Enter Boris
In the last week or so, the pound has fallen sharply to a two-and-a-half-year low against the US dollar. That’s all down to the new British government, headed by Boris Johnson, and his "do or die" Brexit campaign. But when a deal is finally struck, Britain’s strong economic fundamentals mean it is well placed for a boost in growth, along with the pound.
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Gavekal Research
Nick Andrews, Cedric Gemehl
Jan 24th 2020
Playing The ECB Strategic Review
When a government agency announces a “strategic review”, the presumption is that some knotty issue is being kicked into the long grass. That was the vibe yesterday when Christine Lagarde kicked off the European Central Bank’s year-long navel gazing exercise. In this case, however, investors would do well not to check out entirely from ECB watching.
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Gavekal Research
Anatole Kaletsky
Jan 09th 2020
Ten Bears That Could See Off Goldilocks In 2020
With interest rates low, and growth that is neither too hot nor too cold, Anatole remains firmly in the “Goldilocks lives on” camp. But while a continued bull run is the most probable outcome for 2020, bears still lurk in the shadows. In this paper Anatole identifies the 10 main macroeconomic, political and sector risks that could derail markets in 2020.
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Gavekal Research
Louis Gave
Jul 14th 2016
The Post-Brexit Rally: Head Fake Or Game-Changer?
Let’s face it, few expected the rally in global risk assets of the past ten days. Even investors who, like Charles, believed that Brexit was a fundamentally positive development did not expect positivity to erupt quite so suddenly. Yet, here we are, with the Nikkei up 10% since its post-Brexit low, the S&P 500 breaking out to new highs and the Shanghai benchmark above 3,000. Will it last?
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Gavekal Research
Cedric Gemehl, Nick Andrews
Jan 13th 2020
The European Recovery Lives, Just
On the face of it, Germany’s industrial slump is still worsening. The worry has been that a cratering of Europe’s industrial economy proves bad enough to reverse the “internal” recovery spurred by super-easy monetary policy. In fact, such a contagion is unlikely in 2020 and the eurozone should see overall growth stabilize at around its potential level.