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“The age of chivalry is past. Bores have succeeded to dragons.” – Charles Dickens
Watching with interest the mesmerizing Santa Claus rally, from TECH to US High Yield CCCs as well US Treasuries thanks to “positive correlations”, when it came to choosing our title post analogy and in the continuation of our very first post of the year 2023 relating to the Chinese Zodiac, we decided to go for “The Year of the Dragon”. It is not only the only mythical creature of all the animals in the Chinese Zodiac but, it represents unprecedented opportunities, strength, and health. 2024 marks the start of the year of the Wood Dragon on February 10. Being a movie buff, our title analogy is yet another “double entendre” given it is also a reference to 1985 movie thriller (controversial for some) by Michael Cimino starring Mickey Rourke. In this movie, the most decorated police captain Stanley White played by Rourke makes it a personal mission to crack down on Chinese organized crime. Given the continuous tensions between China and the United States, and current “low valuations” of the Chinese markets relative to the United States, we thought it would be interesting. On a side note and as a historical fact which has been largely ignored, Chinese were excluded from American citizenship up until 1943. Chinese individuals could not bring their wives to America. The Chinese Exclusion Act was the first and only major U.S. law ever implemented to prevent all members of a specific national group from immigrating to the United States. In 1943, the Exclusion Act of 1882 was finally swept away due to pressures from wartime labor shortages and popular sentiment via the Magnuson Act and only allowed 105 Chinese immigrants per year. However, in many states, Chinese Americans (mostly immigrants but sometimes U.S. citizens) were denied property-ownership rights either by law or de facto until the Magnuson Act itself was fully repealed in 1965.
In this conversation we want to look at the performance of various markets in 2023, the recent weakness seen in early 2024 and what it entails for what promises to be a volatile year in the current complicated geopolitical context with numerous elections (40) taking place in various parts of the world in 2024.
Wishing you all the very best for 2024. May the Year of the Dragon provide you with opportunities, strength, and health.
• Closing on the year of the Rabbit
Thanks to the Fed pivot narrative, the last quarter of 2023 was a boon for “high beta” in general and US High Yield in particular. CCCs lead the race and closed 2023 with a Total return performance of 17.40% CAGR, versus 9.43% CAGR for BBs (one year chart below):
