Chart of the Day - Gong Xi Fa Cai
I talked about this a lot in my weekly Stay Vigilant Substack (Gong Xi Fa Cai - by Richard Excell - Stay Vigilant ( but to those who are starting the Lunar New Year Celebration I wish you a prosperous and healthy new year.

I recall many of the traditions of the celebration particularly the hongbao (little red envelopes) that were given. One that I also remember is the cleaning of the house so as to not bring old dirt into the new year.

Per the Singapore government website: "The Chinese word for “dust” is chen (尘), which is homophone for the word “old”. Hence, the act of cleaning and sweeping away dust is symbolic of getting rid of bad luck and old things to usher in the new year."

Investors do the same thing in their portfolios at the end of an old year/beginning of a new year. They consider the performance the previous year (hopefully in risk-adjusted returns) & compare to their outlook going forward.

For the past 10+ yrs, in this process, investors have consistently chose US stocks over all others in the rest of the world. From the lows of 2008 to the highs of 2022, the US outperformed EAFE by 260% in a steady move higher from the lower left to the upper right.

That may have started to change in the past few months. As we can see in today's chart, since the end of October/Natl Party Congress, China has beaten the us by 50% with EM and EFA beating by 20%.

In spite of these recent moves, you can see across the board there could be more room to run. On the relative rotation graph I showed last week, FXI, EEM and EFA are all in the leading category of global asset rotation now.

With investors sweeping out the old dust from last year, & starting to focus on the new, will their focus shift to investing outside of the US for the first time in more than a decade?

While one needs to be careful to normalize for sector & size when looking at cross country multiples, suffice to say the US is still above its long run mean while China is below it and the rest of the world is at or near it.

US profits are starting to sag, the magnitude of which is a big debate. However, in Europe, profits have held up better than many expected. We will be getting earnings news from Asia post the holiday.

In addition, with the Fed higher for longer, but the PBOC & BOJ much easier, the headwinds may not be as strong. All of EM started hiking much earlier than the US so may be closer to the easing mode.

Valuations, earnings, catalysts, technicals. Many potential reasons for investors to sweep out the old US dust & not carry it into the new year.

Stay Vigilant
#markets #investing #economy #gongxifacai

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