Citi downgrades view on U.S. stocks to neutral, citing recession risk
Matteo Colombo
After the strong rally Wall Street observed during the first half of the year, Citi has taken a cautious outlook, downgrading its view on the U.S. to Neutral.
The bank outlined that its economists still anticipate a recession to take hold at the beginning of the fourth quarter. The firm pointed to lagged effects from the Federal Reserveâs tightening policy and the potential for sharp and non-linear downturns.
Citiâs research team stated: âWe continue to forecast a 5% global EPS contraction this year and a modest 5% expansion in 2024 (vs. bottom-up consensus of 0%/11% in 23/24). Our forecasts imply a modest EPS slowdown, rather than a full EPS recession.â
On a sector basis, last quarter, Citi upgraded info tech both U.S. and globally to overweight. âAfter an impressive run, we downgrade both to Neutral. Our US Strategy team thinks megacap Growth is set for a pullback, while US recession risks could still bite.â
Some of the megacap tech names that experienced a significant run in 2023 include Nvidia (NVDA), which has exploded higher in 2023 by 193.4%. At the same time shares of Apple (AAPL) and Microsoft (MSFT) also jumped 50.2% and 37.8% year-to-date.
Citi is not the only financial institution to express near-term caution about U.S. markets. JPMorgan also said on Monday that it is underweight U.S. markets.
In Monday's intraday trading, the S&P 500 (SP500) was basically flat, holding around 4,400.
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