Videos

A range of cyclical and structural factors have conspired to hit US auto sales in recent years. But with the US labor market remaining in rude health and US monetary policy being loosened, that may be about to change. The impact could be positive for US growth and for risk assets, argues KX in this interview.

Taiwan goes to the polls on Saturday in a presidential election where pro-independence incumbent Tsai Ing-wen looks like a shoo-in against the more China-friendly Kuomintang candidate. Tsai is unlikely to push China’s red lines and cross-strait relations should not be imperiled. Vincent also addresses the related issue of Beijing replacing its top representative in Hong Kong with a senior apparatchik.

India’s economy has slowed down dramatically from around 8% growth a little over a year ago to 4.5% in the most recent quarter. Udith reckons the primary causes of this are domestic factors, as the financial system has continued to struggle while the policy response is too weak to be effective. The risk for the rupee is to the downside.

Ever since the European debt crisis Germany has outperformed the rest of Europe thanks to booming external demand, while the rest of the continent suffered from a restrictive policy mix. However, lately these conditions seem to be reversing, with Germany suffering from a collapse in its crucial auto industry. Cedric discusses this shift and outlines the implications for investors.

Despite on-again, off-again talks, there are hopes that the US and China can reach an accommodation to avert a full-scale trade war that causes global production chains to be upended. Since the Federal Reserve is again in easing mode, leading to a weaker US dollar, Vincent explains what these developments mean for Asia.

For the last five years, the world has lived with a strong US dollar. That may be about to change. Not only has the Fed turned dovish, its return to balance sheet expansion means it is now printing more money each month than its central bank peers, such as the ECB. This liquidity splurge, coupled with a diminution of dollar-supportive international risks may point to a period of US dollar weakness.

New European Central Bank boss Christine Lagarde has called on European governments to do more on the fiscal front to support eurozone growth. Only Germany has wiggle room within the EU fiscal straitjacket to launch a significant stimulus program. However, political resistance in Berlin to opening the spending taps remains formidable, and may be insurmountable.

Chinese credit growth picked up in September, which is good news at the margin for private sector liquidity. However, a continued crackdown on shadow finance and private firms’ difficultly rolling over bond obligations will retard capital spending and lead to more bond defaults into next year.

Having inverted over the summer, the US yield curve has steepened sharply. In the past such a move has often presaged recession—but not always. Twice since the 1960s an inversion and steepening was not followed by recession. Then, as now, the return on invested corporate capital was higher than the cost of that capital.

For the past few years, US treasuries, the US dollar and the oil price have all broadly traded in a range. In fact, the only bankable trend for investors has been the outperformance of US equities, without which global stock indexes would still be trading at 2006 levels. However, there are signs that the investment environment is changing.

London Seminar—April 2016

What sort of country is China, and what sort of power does it want to be? In this presentation to our seminar in London, Tom Miller explains how to understand the signals China’s leaders have been sending. China wants to pursue great-power status, a process that may alienate its neighbors and will require adjustments from the US.

These are the London Seminar presentation slides from October 2015

We held our main fall seminar on October 27 in London, where Anatole Kaletsky, Francois-Xavier Chauchat, Neil Newman, Tom Miller and Louis-Vincent Gave presented their views on the global economy. Anatole discussed the implications of recent developments in financial markets; Francois examined Europe’s resilience to global headwinds; Neil outlined three major investment themes in Japan; Tom explored China’s regional foreign policy ambitions, and Louis asked whether the world is facing a solvency crisis, or a liquidity squeeze. As ever, their presentations were followed by a lively question and answer session.

Excerpt From Anatole Kaletsky's Hong Kong Seminar Presentation

What is the best way to sort through the complexities of China’s enormous, continent-sized economy? In this presentation to our seminar in Hong Kong, Andrew argues that if you understand what’s going on in the housing market, then you know pretty much everything you need to know about the Chinese economy.

This is the full recording from Gavekal's October Hong Kong seminar featuring Joyce Poon, Andrew Batson and Anatole Kaletsky as well as a Q&A session.