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In his latest Strategy Monthly, Louis-Vincent Gave writes...
Investors will be happy to bid farewell to 2018, a miserable year in which all assets underperformed US dollar cash.
Gave - Year - Questions
But, Gave notes that for next year, three questions are critical:
1) Will the US-dollar liquidity squeeze ease?
Slow-motion - Unraveling - Chimerica - Synergy - US
3) Are we witnessing the slow-motion unraveling of the “Chimerica” synergy between the US and China?
And what they imply is critical:
Does - Oil - Chain - Reaction - Fed
Does oil start a chain reaction leading to an easier Fed?
Despite record-high tax receipts, the US budget deficit once again expanded in 2018. This is unprecedented. We have never seen consecutive deficit expansions outside of a recession.
US - Government
So what happens next? Will the US government:
3) continue to expand deficits?
Money - Mix - Era
And if so, then will easy fiscal/easy money mix end the deflationary era?
This would have massive consequences for portfolio construction - long bonds did terribly, and equity portfolios were best hedged by gold.
Option - End - Chimerica
Option 3: The End Of "Chimerica"
This year's single most-important event has been the rise in China-US tensions. Are these tensions:
Consequence - Fact - Trump - Advisors - China
2. The direct consequence of the fact that so many Trump advisors see China as a long-term threat to the US and want China cut down to size through an economic cold war?
China remains highly...
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