Investing in stocks has historically yielded relatively “healthy” annual returns, averaging 31%, when their market warning indicators fall to current levels, Citi strategists said.
Citi’s strategists say now is the time to hunt for dips in equities, especially in Europe and emerging markets. These stocks are trading at attractive valuations after the global stock market slump.
Citi strategists led by Robert Buckland said in a report on Thursday that of Citi’s 18 bear market warning signs, only six are now present, compared with 13 before the global financial crisis, the 2000-2003 sell-off. 17.5 times. In the past, when market warning indicators fell to current levels, investing in stocks yielded relatively “healthy” annual returns, averaging 31%, they said.
Citigroup is more worried about a U.S. stock rout than at the peak of last year’s global stock rally, making strategists favor Europe and emerging markets, where valuations are lower. In dollar terms, the S&P 500 is down about 16% this year, Europe’s stoxx 600 is down about 11% this year and the MSCI Emerging Markets index is down 17% this year.
The strategists wrote:
For investors worried that it’s too early to invest in U.S. markets, perhaps buying the dip in Europe and emerging markets is a safer bet.
Global stock markets have been volatile this year amid fears that a hawkish turn by central banks will tip the economy into recession amid soaring inflation. Strategists are divided on whether it is time to return to stocks. Institutions such as Morgan Stanley and Bank of America said more losses could lie ahead, while BlackRock Investment Research downgraded developed-market stocks to neutral this week.
JPMorgan’s chief quantitative analyst, Marko Kolanovi, is still tirelessly calling on clients to “buy the bottom” despite being “slapped in the face” for decades; Goldman Sachs chief global stock strategist Peter Oppenheimer also emphasized the buying opportunities after the stock market fell sharply. Said that the stock is starting to become attractive for medium and long-term buyers. While downside risks are still lurking, all of them have been absorbed by the market.
However, Citi strategists also believe that investors may need to be patient, as the signals listed by Citi are not indicators of market timing. In addition to these warning signs, Citi listed other factors including valuation, credit spreads, analyst bullishness, corporate profitability, IPO and deal activity, and more.
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